Danichi eyes global growth while shifting focusing to semiconductor industry

Since Japan’s private sector rose to prominence in the post-World War II period, Japanese monozukuri has often been spoken about but widely misunderstood. In recent years, a number of regional competitors in China, Korea, and Taiwan, have replicated Japanese monozukuri processes and took advantage of economies of scale to provide the world with cheaper yet inferior quality products. What is the advantage of Japanese monozukuri when it comes to manufacturing? What is the essence of monozukuri?

We are facing fierce competition, especially in the Southeast Asian region. It is very difficult to compete in this current environment. The amount of product we are exporting to the overseas market is small. We have tried to standardize or simplify the products so we can compete on the price point. That is our strategy when referring to pricing.

We are entering a crucial phase in this twenty-first century, the fourth industrial revolution. Increasingly, automated technologies such as AI (artificial intelligence), IoT (Internet of Things), and Big Data, are becoming crucial for not only social life but also on the production line. How are you adapting to this fourth industrial revolution? What technologies are you integrating into your products?

As previously mentioned, we produce order-made machines for different clients, different machines for different clients. Sometimes the order is very small, and we therefore end up producing a smaller lot of machines. We do not, however, treat the small lots any different than the large lots of say ten thousand. Overall, the goal we strive to accomplish is to create a product that cannot be done by IoT. Thus, we have order made machines.

The order made products are our new products. We are often producing very large machines with supporting capacities of seventy tons. A very large machine like that, we do not want it to be simply replaced when broken. We place high sophistication on our repair work and for our machines to have longevity; to be used for generations to come.

Repair work cannot be automated. There are simply too many different types of machines. Diagnosing the problem requires human skill. Replacement parts require an engineer for scraping and/or processing; this cannot be automated and must be done by engineers.

There are many small to medium sized companies doing similar heavy machinery but what differentiates you from your competitors is the added value you provide through maintenance service and repair. Can you expand on the value-added services that you provide clients and why it makes you the go-to partner when it comes to machines?

AI can, to some extent, repair a machine, but if it requires a quality of level ten to twenty microns, a human is needed. No matter how advanced AI is, there are some things it cannot do. For those situations, engineers are what is necessary so they can better diagnose and fix the problem, and this is where Dainichi after service sale comes to the fore as it reassures customers that even when they cannot repair their machine, we are just a phone call away. This is the added value that Dainichi provides. We are not looking to mass produce to be the number one seller, instead we aim to be a top niche leader for our machines and a trusted partner that customers can always rely upon.

This combination of the ability to machine manually as well as automatically is quite unique to your company. Is this something that distinguishes your company from the competition?

Most of the customers want automatic and manual-based solutions with their lathes. Our competition has only automatic or manual machines available separately. With our multifunctional machine, a dual automatic, semi automatic and manual machine, the customer can make unique pieces. It is very useful for small quantities yet high precision pieces. It is very precise, yet easy to operate.

Can you tell us more about your R&D efforts and what products are you planning on developing at the moment?

We have recently been working on an automatic machine that can slender shaft process long pieces of work. It is very difficult to process such objects.

Can you tell us, what role does co-creation play in your business? Are you looking for co-creation partners at the moment?

At this moment we are not working on co-creation with foreign partners. About 90-95% of our products are distributed in the domestic market, therefore we are focusing on product development for products that are suitable for Japanese clients. We also do not engage in mass production; we do small lot order machines. A lot of our customers are SMEs and 80% of our users are repeat customers. Thus, we focus on meeting the demands of those repeat customers.

How long does it take to produce a machine and how many do you actually manufacture per year?

It takes four to five months to manufacture a machine and we can manufacture around two hundred and fifty per year. This includes small machines as well as large machines. It is not a standardized production line. Machines are produced on order from customers. The process starts with creating drawings for the customer. Then all the necessary arrangements are made to start manufacturing. This all takes more time than is usual. 

Your company is in a very important stage. You have just finished building this new facility and you are also celebrating your 90th anniversary this year. Your company motto is “to overcome boundaries, national borders and limits and to continue to pursue something new rather than the status quo.” Can you tell us more about your midterm business strategy? What are your sales targets and how will you continue to grow your company?

Our midterm strategy is to continue to focus on order made machines and our clients’ needs. Our client's orders are not only baseline machines, but also special purpose machines. We strive to produce a machine that meets the customers’ requirements. We will stay in the niche field and be an expert in that field.

You said that you might expand further with your universal machine. Can you tell us what industry represents the most growth potential for that machine?

So far, we have been focusing on the heavy industries such as steel mill companies, paper mills companies, shipyard companies, or heavy machineries. Those are the main streams for our company. Going forward, we would like to shift our focus to the semiconductor industry or film processing. Those are the targeted industries. To process film, you need combined rolls, two to three rolls, for the processing. As the work passes by the rolls, you can change the thickness or do surface treatments. Those types of machines are ones we would like to focus on going forward.

What strategy will you adopt to tailor to these new customers in the semiconductor industry?

Besides the size of the machine, we would like to put more effort on the peripheral devices for the machines to appeal to the customers. In regard to the earlier mentioned rolls, we are trying to produce a process that can do long size work. We would like to create more functionalities for cutting and grinding, or the automated functions that load and unload the work onto the machines. In doing so we would like to continue appealing to the customer’s needs. 

We know you have been present in Chicago since 1973, which is quite a long time. What is the function of your Chicago operation and what benefit does it bring to your company?

We went out to the American market in the time of the Vietnam War. The Americans needed a lot of lathes to produce the weapons. That is why we opened up the Chicago office. After the war, we continued to distribute machines there because many large companies and roll centers in the United States continue to apply our machines.

You said moving forward only 5% of your sales will come from the international market. We are increasingly hearing a lot from companies that, domestically, the Japanese market will come to a saturation point in the near future. Given the aging population, there is an increasing need to go overseas to expand the business further. As your company looks to further expand, what strategy will you adopt? Will it be a joint venture, will you open up another factory, will you do an M&A? Where will the strategy to further expand come from and where will you go?

In countries like Spain, China, or Taiwan, they typically use small size machines. However, there are companies out there that require huge machines. We have good partnerships with subcontractors of the joint heavy industry of Japan and local companies. We also have some distributors in the local markets. We are making efforts to expand our products through those sales representatives within those local markets. In addition, starting from this year, we have begun a promotion of the DL series in the overseas markets. 

Before COVID-19, the domestic market took up our full production capacity. We didn't have room to respond to overseas needs. Starting this year, we have started some activities to promote our products to the overseas market.

Imagine we come back in two to three years to interview you all over again. What would you like to tell us? What are your dreams for the company? What would you like to have accomplished by then?

We try to get a sense of accomplishment through our work every day. Different customers have different requests and demands, but we strive to meet those different demands one at a time, for the customer’s happiness. Our mission is to attain that sense of accomplishment from meeting those demands. This is represented in the words of our mission statement “fit the machine”; fit the machine with the customer, that is our mission.