Semiconductor Assembly Innovations: A discussion with Kazunori Hosoi, President of Tokatsu Industry

The current economic environment in Japan, characterized by supply chain disruptions, US-China decoupling, and a historically low Japanese yen, is viewed as a unique opportunity for Japanese industries in the international market. Many international companies are actively seeking to diversify their supply chains and locate new suppliers. Japan is well-regarded for its reliability and high technology. Do you share this perspective, and what specific advantages do Japanese firms possess in the current macroeconomic environment?

The current situation may indeed be advantageous for Japanese companies to expand abroad. However, our company faces resource constraints, making us hesitant to enter the overseas market, despite recognizing its potential. This doesn't mean we have no international business, but rather, we collaborate with Japanese companies that already operate overseas and with whom we have domestic partnerships.

We used to have a base in Shanghai, which has since closed. We have merged our hose processing and metal processing operations into a joint venture in Ningbo. My predecessor was quite active in our Chinese operations. Since I took over, I've been involved in determining our company's direction in China and have been making frequent visits to the region.

Japan is currently confronting a demographic situation with the world's oldest population. This poses two significant challenges for Japanese companies. Firstly, it results in a smaller domestic market. Secondly, there is a reduced pool of graduates available for recruitment and a potential gap in the transfer of manufacturing skills from seasoned employees. How is your company addressing these demographic challenges?

The current situation has led to a labor shortage and a decreasing working-age population in Japan. In our case, we specialize in customizing low-mix, high-volume products for our customers. Since we have a low percentage of mass production, we can't easily automate the process to compensate for the manpower shortage. What we have focused on is cultivating a work environment in our company where employees are diligent and dedicated to their work. This commitment to excellence helps maintain the high quality of our products. This tradition and work atmosphere are embraced by both our existing employees and new hires who join our company.

Your company was founded in 1982 in Katsushika, Tokyo. Could you provide a brief history of your company and highlight the most significant milestones in its evolution over the years?

The company was founded in 1982 by my father, who was working at Technoflex, a specialist in stainless hoses. Later, he became independent and began selling Teflon and stainless hoses. I joined the company 28 years ago when it was relatively small, with an annual turnover of about 300 to 400 million. The major turning point came around 20 years ago when we established a direct account with a semiconductor production equipment maker and entered the semiconductor industry.

While we maintain ongoing relationships with various industries such as food, cosmetics, medical, automotive, and steel manufacturing, our most significant growth came from the semiconductor industry, which we entered two decades ago.

The semiconductor industry is currently facing a significant downturn. Nevertheless, experts concur that semiconductor demand is expected to increase in the next five to ten years, leading to substantial investments in production expansion. What opportunities do you envision for your company in light of this trend, and what products are you planning to develop to meet the growing semiconductor requirements?

In the semiconductor industry, there are three main categories: memory, logic, and power. Our primary focus is on memory semiconductors, with a smaller portion dedicated to logic, particularly in our business with a semiconductor production equipment maker. To fully leverage the opportunities in the power semiconductor sector, we need to see an expansion in the demand and production of memory semiconductors.

There have been recent discussions about memory manufacturers entering into logic production. If this happens, it could potentially lead to increased demand for our products. Presently, we are actively engaging with a semiconductor production equipment maker to encourage greater adoption of our products as part of their diversified supply chain strategy. We aim to replace products from other manufacturers with our own wherever feasible.

Various range of Assembled Hoses

R220 PTFE(T-62) Convoluted Hose

Custom Thermal Hose

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Can you provide a technical description of your products designed for the semiconductor field and highlight their distinctive characteristics?

I want to emphasize that we are an assembly company, not a production company. Our core strength lies in our ability to offer a wide range of assembled hoses. For instance, in our collaboration with the semiconductor production equipment maker, we don't just recommend Teflon hoses but can also provide various hose types tailored to different chemical requirements. We excel at meeting customer-specific needs by customizing hoses to precise conditions and specifications. In the chemical sector, even a minor detail like a fingerprint on a hose can impact the purity and quality of the chemical. Our meticulous quality assurance is a distinguishing feature of our company. We also serve other industries and we are actively working on diversifying our product portfolio.

As you look to the future, which other sectors or applications do you believe hold the greatest potential and will be the focus of your company?

Expanding into other sectors and industries may not align with our current business operations. The semiconductor industry has great potential, and there is a substantial customer base we can target with our products. Our focus is on dedicating resources to this sector and enhancing our presence within it.

The Chinese semiconductor market is growing, and we have a joint venture there. We aspire to enter this market; However, we are currently in the process of establishing the internal framework to enable us to offer our products to clients there effectively. Currently, Chinese semiconductor companies rely on importing manufacturing equipment from abroad, but they are gradually transitioning to domestic production. Once China reaches that phase, we will have the opportunity to increase our local market share. We believe that there is still some time before this transition occurs, so we are getting ready by building a robust sales team for the Chinese market.

Are there other countries you are contemplating for expansion, in addition to the Chinese market?

We have been conducting business with a local company in Korea for over a decade. Our shares in this business are growing annually, particularly in Korea's Semicon factories, which is a source of satisfaction for us. However, it has come to challenge entering the Taiwanese market. Taiwanese factories are not opting for our hoses in their operations. To break into that market, we may need to establish a base in Taiwan to better cater to their needs.

Looking ahead to your company's 50th anniversary in the year 2034, what specific goals do you hope to have accomplished by then as president of the company?

As the second generation of this company, I have a four-year-old son who I hope will succeed me one day. My goal is to lay a strong foundation for the company and eventually pass the baton down to the next generation. I plan to continue innovating and expanding into the overseas market until 2034, ensuring that we have a solid foundation for the next generation of this company.