Since their invention, railways have been a crucial means of transportation to any society utilising them and Nisshin Electric Construction ensures that the signalling systems that help create a safe journey for trains are installed correctly. In this interview, President Hitoshi Oga gives his views on the Japanese railway sector, the implementation of DX in trains and the history of Nisshin Electric.
The last construction boom in Japan occurred more than 50 years ago prior to the 1964 Tokyo Olympics. Today, due to the demographic shift, there is a need for maintenance and upkeep in transport infrastructure, such as railroad level crossings and signals. On the other hand, there is less need for newer construction projects. What is your take on the current state of the Japanese construction market?
Our company is closely linked to transport infrastructure, and specifically railroad construction, so I cannot speak about the construction sector as a whole. We can only express our opinions about the railway signalling system as it is only partly related to the overall picture of the construction sector. We are not a manufacturer. We have our mother company, NIPPON SIGNAL CO., LTD., that provides equipment and building solutions for the railways. On other hand, our company provides solutions for the construction and installation of railway signalling systems. We operate in a niche market and we are experts at the particular work that we do.
The Japanese railway system has gained a lot of praise from all over the world. It is a very professional and highly reliable system, that was introduced by domestic Japanese companies. Our firm was one of the pioneering companies that introduced our unique techniques not only to Japan, but to other nations around the world too. Japan is an island country with confined space, however, there are approx. 200 Railway Operators (companies that operate railways) and 20 to 30 companies specializing in railway signalling system constructions, similar to us, Nisshin Electric Construction. Each of these companies have their own unique technical know-how that can be introduced to global audiences.
We have been living in a world of railway expansion and many solutions have been introduced in that sector over the years. The urbanization and expansion of large metropolitan areas was a blessing for our industry, as many more railway lines and stations were built and introduced. However, the Covid-19 situation resulted in a decrease of between 30-40% of railway passengers. The outlook was not so optimistic during at the peak of Covid-19. We expected it to rebound when the country reopened and more people came to visit Japan, however, it has still not fully recovered to the levels and numbers that we saw before the pandemic. This is one of the biggest problems that the railway segment in Japan is now facing. Nobody expected that the situation would have such a drastic effect on our domestic transportation systems. Many large companies have the same opinion. Before Covid-19, we predicted a future decline in passengers, but we did not expect the situation to come so quickly. The current state of things gives us the impression that we have used a time machine to go 20 or 30 years into the future. There are less passengers than before and these numbers are continuing to drop, with less and less people commuting to work, and instead working remotely.
Nisshin Electric Construction Co., Ltd. headquarters building (Saitama Prefecture)
We saw that JR-EAST are testing automated trains for passengers on the Yamanote line from October of this year. How will automated trains and digital transformation (DX) change the railway sector in the future?
Most of the major railway companies are introducing more DX solutions which will help them to decrease their fixed costs. If you break down the P&L sheet, you will see that the train running system itself is usually described as a fixed cost. The same equipment is utilized from year to year, and there is also the fixed cost of the drivers, as they have to be paid. Companies are now trying to decrease these costs by introducing automatic trains. Most companies are facing deficits right now, and they are also trying to find solutions to the decrease in numbers of passengers due to the pandemic. However, while this sounds like a good solution to the problem, there are laws in Japan that need to be applied, and there are legislative matters related to the introduction of new technologies and systems that need to be adhered to. Some new technological solutions that we have introduced are the Platform Screen Door (PSD) and Passenger Information Display System (PIDS). These are examples of the new technologies being introduced to the conventional transport system. Overall, there are many developments in our industry right now, as companies are coming up with bright ideas to help them navigate the current situation.
Equipment Carrying-in / Installation (Platform Screen Door)
When we spoke to the president of Takamatsu Construction Group, he mentioned the importance of partnering with tech-focused construction start-ups, in areas like California, as being key to accelerating digital transformation in the Japanese construction market. Is finding such overseas partners an area of interest for Nisshin Electric?
Yes. This is something that is believable and doable for our company, as in most cases, we cooperate with partners in the manufacturing industry, and it is they who come up with solutions which may later be applied to the operation of the trains. We act as a solution provider for the construction and installation of transport infrastructure, and we have a good track record of cooperating with manufacturing companies
We are open to working with construction and manufacturing companies, both domestic and foreign, to find better solutions to improve passengers’ daily use of the railways.
Your business can be divided into four main divisions: railway signalling system installation, installation of ICT systems, installation of traffic signalling and network information, and overseas projects. Could you tell us which of these divisions is your current focus? Which one do you believe has the most potential for growth in the future?
In the ratio of our current sales within the company, the installation of railway signalling systems is higher than the others. This is therefore the main focus of our business. The most promising area is the installation of ICT systems, and we are excited about what that business holds for us in the future.
Left: Railway Signaling System indoor installation (Computed Based Interlocking) | Right: Railway Signaling System outdoor installation (Automatic Block System)
Many people believe that installation is an easy process, however, it can be a lot more complex, as it requires specialized knowledge and skills. What are some of the strengths your firm has over your competitors when it comes to the installation of equipment in public infrastructure?
Installation is the biggest cost consuming activity when introducing any kind of equipment or solutions to the conventional railway infrastructure. There are usually two types of certifications that are needed. National certification is required for the engineers and technicians before they are allowed to go into the field and perform the installation. Also, there may be certification required from inside certain companies before their engineers are allowed to go to the installation site. We are proud to say that our engineers and technicians have both types of certifications and are fully qualified to perform the installation of our technology for the railway infrastructure. That is one of our biggest strengths.
We are seeing around Tokyo that a lot of companies are removing their level crossings in favor of grade separation as a solution to prevent railroad crossing accidents. What other solutions are there to preventing level crossing accidents?
I cannot give my opinion on individual accidents, but in general terms, accidents in railways are not possible to forecast.
One solution is to implement automated systems to help train drivers to make decisions. Some Train Operators (companies) have implemented these automated systems, but the final decision should be made by the train driver who must judge the situation and act accordingly. How to combine DX solutions, such as automation, with traditional train operating methods to increase safety and reduce accidents is an important issue.
Also, removing level crossings requires a lot of time, effort, and money, and I believe that in the end, the best solution is to separate the tracks from the road, by removing the level crossing altogether and creating an overpassing.
We are seeing in recent years that Japan is increasingly getting involved in major metro projects across the Asian region. Examples include Manila in the Philippines, Ho Chi Minh City in Vietnam as well as Bangalore in India. We also know that your company was involved in the construction of the railway signalling system for the Dubai metro. Looking forward to the future, are you looking to contribute more to these types of projects across the Asian region?
In this matter, we are truly reliant on our mother company Nippon Signal, who are implementing overseas foreign projects and introducing solutions to railway systems in foreign countries. If Nippon Signal are implementing a project, of course we would want to be a part of it, and accompany them to overseas markets
Japan has to face many natural disasters and this has resulted in many Japanese firms developing unique technologies in the area of disaster prevention. These have been applied to buildings, railways and other infrastructure. In your specific case, we know that you have developed the installation of a complete antenna system used for disaster prevention management. Can you please tell us about this unique technology that you have been able to develop in this field?
Japan is very vulnerable to disasters such as earthquakes and floods, and domestic Railway Operators have to take key measures whenever they are applicable. We perform installations according to the requirements of those customers.
As you mentioned earlier, Japanese Railway Operators are facing a shrinking of their market due to the Covid-19 pandemic. If we look abroad, we can see that Southeast Asia has a USD 11 trillion construction industry. There will be a demand to build new railways there as the construction industry in that region expands. What are you doing to overcome the challenges of the shrinking domestic market?
We are optimistically looking at the Southeast Asian market but currently our biggest source of profit is the domestic installation and renewal of signalling systems on railways that are currently in operation next to metropolitan areas.
On the other hand, the railway infrastructural systems in Southeast Asia are currently being built. In the coming years, modifications or renewal is needed for existing railway systems. Implementing solutions to existing railway signalling systems is our area of expertise. If Japanese technology signalling systems are required in other countries, of course we would like to provide services overseas to support their installation or renewal as well.
Mr. Oga, this is your last month as president, and this year your company is celebrating its 61st year anniversary. Now that you are passing your legacy to Mr. Muto, what vision would you like to see for this company in the next five years?
The assignment for the next president is to get the company into better shape by achieving higher fiscal results. That is not to say that the company is failing. We have been reaching the expectations of our P&L sheet, but as I have mentioned earlier, the Covid-19 situation has caused many difficulties in our industry, such as the decrease in passengers using the railways. I have been the president of this company for eight years. Before that, I worked for a long time for our mother company. Our company’s fiscal results are gradually returning to our pre-Covid-19 numbers. The next president's goal is to develop new businesses, achieve even greater business results, and further develop our company's potential.
Mr. Muto, next month will be your first month as president. Imagine that we come back four years from now for your company’s 65th year anniversary and have this interview all over again: what would you like to tell us? What are your dreams for this company and what goals would you like to have accomplished by then?
Currently the situation with the Covid-19 pandemic and the lack of tourists coming to Japan, as well as the fact that country has an aging society, has had a bad effect on railway system operations. More investment has to be introduced in order to provide DX solutions to reduce the fixed costs of existing conventional railway systems. We will actively work to improve the existing railway signalling systems and develop new technologies as well.
My goal is to guide the company to improving our major capabilities of accomplishing extremely safe construction, with capabilities compatible with the new platform. We will be a company that can bring satisfaction with smiles to all stakeholders.
Executive Director Toru Muto (Currently Representative Director and President)