Revolutionizing Filtration Through Innovation

In the current landscape, Japan faces a series of challenges, such as supply chain bottlenecks and rising input costs. Still, there are also a series of opportunities as a result. Japan internationally has a reputation for its high quality. Since countries are looking to reduce country risks and because the JPY is at a historical low, Japan has never been more cost-effective. Is this the case, and to what extent can Japanese companies leverage the current macroeconomic landscape to their advantage?

First and foremost, I should preface my answer by saying that every Japanese company is different. It is hard to generalize Japanese companies as a whole because each has its own unique advantages and weaknesses. COVID-19 was a huge turning point, with the prices of steel, aluminum, and other metals all rising along with logistics costs. I would say, however, that the biggest impact on Japanese companies was the stay-at-home measures implemented by the Japanese government. COVID-19 greatly changed the work styles of companies, with people preferring to work remotely. It was inevitable that companies like ours needed to shift to this new, work-at-home style. At first, we were dubious, but the productivity has remained the same or, in some cases, even better.

With factory work and analysis work, you have to be on-site to use the machinery, but back-office and sales work can be done at home. The Internet has been the tool of choice for retaining communication. Our working hours pre-COVID were 9 am to 6 pm, but with the advent of COVID-19, we realized it is important to avoid crowds, so we have shifted our hours to 7:30 am to 4:30 pm. By making the working hours earlier, staff members are able to enjoy their time more after work, especially during the summertime when it is still bright outside at 4:30 pm.

There has been a sharp population decline in Japan, and the government is trying to encourage people to have more children with stipends, but I don’t think it is good enough. Their solution now seems to be that if they can’t solve population decline, just make everyone work twice as hard, which won’t work either. By introducing AI and IoT systems, it was inevitable for us to change our work style during COVID-19, and we quickly realized that our company is very adaptable to change. We see huge potential in the use of DX to solve certain issues that are apparent in the Japanese market. I personally feel that with the change in working styles, Japanese people are now much better equipped to tackle both their work life and their private lives. This is more needed now than ever with the aging population, and there are those who need to take care of elderly family members. Additionally, this benefits parent(s) who wishes to take care of their children while also advancing their careers.

Traditionally, Japan has had a large population and a large domestic market, but this is under threat due to the shifting demographics. As the market shrinks, the pressure placed on Japanese companies increases, with that pressure coming from a smaller domestic market and a labor crisis. To what extent do you believe Japanese companies will need to look overseas to secure new markets and attract new staff?

Currently, 39% of our company's turnover from construction machinery filters, based on invoice data, comes from the domestic market. But these domestic customers are international conglomerates, so they take our products overseas. Looking at things from this perspective, we can see that many of our products are widely used in overseas markets already. While the population in Japan is declining, overseas and globally, it is growing. As populations grow, there is a higher demand for construction and construction machinery, which we have the biggest share in the provision of our products. This has meant that we’ve seen growth in the products we provide.

Japanese companies are quite famous for their investments in R&D, which is something very relevant to your business. You have your Innovation Center, where you can conduct testing, analyze, develop filter performance, and perform many other tasks. What are the main strengths of your Innovation Center that allow you to conduct significant R&D in-house?

The key aspect that defines an excellent filter is the fine mesh that is able to capture particles in the filtered substances, but at the same time, a filter should be able to let the substances easily pass through, so there is an ironic or contradictory aspect to what makes a filter a filter. To further define a filter, I think it is a device that allows smooth filtration using a fine mesh, allowing the substances that are able to pass to penetrate the mesh smoothly since the smoothness of the transition impacts energy usage.

The biggest uniqueness we have is that common filter companies purchase filter media from vendors, whereas we develop our filter media from scratch. Imagine a ramen store. If you found out they were purchasing broth and noodles from a supplier, your opinion on how special they were would drop. Anyone can purchase the broth and the noodles and then make the ramen at home. This is why I believe that, as a filter company, you need your own technology. Our company has developed our own filtering media, and the big difference is that compared to Chinese or American filtration companies elsewhere, Yamashin has its own distinctive tastes and distinctive specialization.

If we go back 50 years ago, hydraulic filters were paper-based media, whereas, since the 1990s, it is now glass-fiber-based. Yamashin was the first company to introduce glass-fiber media into hydraulic filtration. For paper media, the cellulose was 30 microns, but glass fiber can have one-tenth finer filtration, basically having 3 micron-sized mesh. As a consumable, as the mesh gets finer, it can filter more. However, with the increase in the pressure drop level, you need to replace the mesh sooner. With the introduction of glass fiber over paper, we have doubled the usage of filters from 500 hours to 1000 hours. This has allowed for even more longevity in pressure drop. Conventionally, paper media were double the size too, so by using glass fiber, we can also reduce the size. Since the size has been reduced and the longevity has been increased, it is actually four times the performance. For now, all makers are using glass fiber, and we are now 34 years away from its first introduction. Since it has been so long now, we consider it time to move to the next generation of media. For the last few years, we have been developing nano-fiber media. This material is Yamashin Nano Filter®, which has a pore size of 0.2 to 0.8 microns, making it look like a spider web. This next-generation filter will also extend the lifetime of the material several folds, lasting for about 3,000 hours, a massive improvement on glass fiber. This is great for the environment since we are extending longevity and reducing garbage. In terms of cost, however, while we should be able to charge three times the price, customers will only pay about two and a half times. Another aspect I would like to mention relates to the number of lower-quality filters in the market made by Chinese makers. These would often boast 1,000 hours. While I cannot necessarily comment if this is true, when we mentioned 3,000 hours, customers should rush to change out for our reliable and pure filters. This should give us a boost in sales.

We previously experienced the same situation when we moved from cellulose paper media to glass-fiber media. There were discussions that we might have lost opportunities, but the truth was that we were able to acquire more business opportunities since more customers switched imitation products to the glass-fiber filters. The environmental contributions to customers are also a key point.

Interestingly, customers and I think our glass fiber is cooler looking. Functional beauty is something that we try to achieve, so it's a combination of both functions and aesthetics. This is also required for Yamashin Nano Filter®, so we need to balance function and style, achieving functional beauty. Additionally, an important element to achieving this functional beauty is ensuring clean production methods that do not allow any dust to occur.

Aside from the industrial applications, we saw in your mid-term management plan that you want to jump from being a manufacturer who specializes in construction machinery to a comprehensive filter manufacturing, and you’ve highlighted the flexible applications of your next-generation nano-filter technology in areas such as health care, apparel, automotive, and daily goods. What are some of the strategic steps you are taking to jump to becoming a comprehensive filter provider?

Our base business is for hydraulic filters for construction machinery, which is something we are looking to continue. We see huge potential in more horizontal applications in the construction machinery field. This includes oil, air, and fuel filters, as well as engine air filters. A few of our customers make their own engines, so we want to apply Yamashin’s filters in their products as air  filters for engines.

For example, a diesel engine produced by our customer is bigger than the room we are in today, and dump trucks feature even bigger engines. Just think about the power generators for giant freight ships. They feature colossal engines in terms of size. Yamashin’s filters are used in oil filtration in these engines. Those customers have so many lines of engines; I think it is around 10,000, so we are looking to penetrate their lineup with clean and long-life YAMASHIN Nano Filter®.

It isn’t just engine oil filters either, and we are looking to increase our share in transmission filters in bulldozers and wheel loaders. They corrode, there is abrasion, and the emission of metal dust occurs, meaning there is a need for a filter. We are trying to increase our presence in this application. By enlarging our scope and finding new applications, we can get closer to our goal of being a comprehensive filter company. The concept of a filter doesn’t vary, so we have an advantage in spreading across fields. Of course, it isn’t as easy as it sounds.

Our filters are used in emergency power generators in hospitals, which are devices that greatly impact people’s lives. For example, if things went wrong, people could die. Whenever we enter a new field, there are risks involved. I think this is why it is important to learn from our failures so that in these critical industries, the same mistakes don’t happen.

We also expect new business areas of apparel, heat insulation, and other industrial materials that we manufacture using our nano fiber technology. I will talk more about it in a different section.

Can you tell us more about your complementary products, such as your SWIFTROCK?

The reason why we developed SWIFTROCK was for visualization and preventive maintenance purposes. Construction machinery that utilizes hydraulics is used across the globe and even in remote places where it could take three days for a maintenance engineer to get to the machinery. Specialist manpower is required to replace the filters. With software, construction machinery manufacturers can monitor their machinery.

For humans, if you go to a hospital, you can have a blood test to determine if you have a risk of liver disease or kidney disease. Likewise, for hydraulics, oil is the blood that you can use to determine the condition of the machinery. By monitoring the oil, you can understand the situation and if the filters need replacing or not.

In achieving your goals, what role do partnerships play? Are you currently looking for any new partnerships in overseas markets?

For construction machinery filters, we are not looking for any agents since we already have our own direct sales network. In addition to our headquarters in Yokohama, our sales points are in Chicago, Brussels, Bangkok, and Shanghai, which allows us to have direct, face-to-face relationships with clients. The fundamentals of our business revolve around listening to the needs of our clients. Communication is the key. Our model works on an OEM basis, and while some say that having your own brand is more lucrative when we sell our own brand, there is a fixed cost that occurs through sales. When we compared selling our own brand and selling OEM through our customers, for example, we realized that the profitability didn’t have that much difference. Additionally, if we sell our own brand, there are certain fees. Yamashin’s business model now works together only with OEM customers, providing them with original and customized products for their company and then using that company’s network to sell filters as a replacement part. This model allows us to utilize the large sales networks of customers.

Are you looking for new OEM partners in the future?

Yes, of course. For example, we are working together with a joint venture, but that broke up a couple of years ago. After the broke up, we now have a customized filter specifically for one of the partners, separate from the other former joint venture partner who is also our customer. We see huge potential growth in this field as well.

Some of our customers  not only make construction machinery but also agricultural machinery, so for our next phase, we would like to expand into this field. We  provide large-scale engine filters to a customer overseas, and we are looking to take that into the Japanese market where we are trying to reach new OEM partners for those large-scale engine filters. Our company has achieved a high level that is cost-competitive globally, so right now, sales and marketing activities are the areas we are working on.

Imagine that we come back on the last day of your presidency and have this interview all over again. What goals or dreams do you hope to achieve by the time we come back for that new interview?

I’m the second-generation Yamashin Filter president, and my predecessor left behind the precious technology of hydraulic filtration. My mission is to expand this out of construction into various different fields and applications. This is all so that I can lay the path for Yamashin Filter to become a global leader in the filter business, driving rapid growth by leveraging its advanced development and technological capabilities.

I would like to emphasize that we are highly environmentally conscious and continue to be environmentally friendly by extending the longevity of our products. We are also reducing the amount of CO2 emissions at our factories.

Currently, in 2024, we have a turnover of JPY 19.3 billion, and the aim for 2028 is to achieve JPY 23.7 billion.

For more information, please visit their website at: https://www.yamashin-filter.co.jp/eng/index.html   

To read more about Yamashin Filter, check out this article about them