Since its foundation in 1951, Sanyo Metal Industries has provided critical cold-drawn steel bars to automotive customers around the world.
In the past decades, Japanese firms have seen the rise of regional competition. Nevertheless, when it comes to niche fields characterized by high-mix low-volume production, many Japanese firms are still the technological leaders or they maintain a huge market share. How have Japanese firms like yours been able to maintain their competitiveness despite the stiff price competition from close Asian neighbors?
Japan dominated the world by manufacturing a wide variety of home appliances including the Walkman and the Panasonic TV. Japan is good at inventing new technologies and products that contribute to society, including smartphones. Japanese firms were able to commercialize these ideas and these inventions. Japan did not lose its ability to commercialize what it invented. Japanese companies have become very good at commercialization, especially marketing domestically. However, when we market these products in overseas markets, there is a need for a bigger supply capacity. Many companies hesitate to make big investments to cater to a bigger market. I think this is one of the reasons why Japan struggles to remain competitive.
One of the biggest challenges facing Japan today is its demographic situation. Japan is not only the oldest society in the world, but it also has a shrinking population. What challenges and opportunities has Japan's unique demographic situation created for your company?
The aging population and the declining birth rate are very big issues in Japan. The automotive sector is a sector we need to pay attention to. Due to the declining birthrate, the number of car buyers is expected to decrease and car production is also expected to decline. Our average life expectancy has become higher recently. It is said that living to the age of 100 in Japan will become even more common, so we should be prepared for the coming aging society. As people get older, their physical abilities decline. In a 100-year life expectancy, there are still many activities in life even though physical abilities have diminished. We have seen accidents caused by aged drivers. In Japan, when you lose your physical ability to drive, you are supposed to return your driver's license. However, a measure to deal with this situation is cars with more safety features. These kinds of cars are going to be developed in the future to support older people who still want to be active in life. In Japan, cars are a very important means of transportation. People still prefer to travel by car, so instead of suppressing their desire to travel, we want to support them by incorporating technologies in cars that can help them. From the manufacturer's standpoint, we believe that with the expected aging of the workforce, it is necessary to promote automation of factory operations and eliminate heavy-duty work as much as possible. We believe that this will also create new opportunities for women as factory workers.
One big change we are seeing in the automotive field is the transition towards more fuel-efficient or electric vehicles. Due to government regulations, car manufacturers are trying to make vehicles that are lightweight. The use of heavy ferrous metals is decreasing whereas lightweight alternatives such as aluminum are increasing. As we transition to electric vehicles, the number of parts inside the car such as the engine, steering and transmission parts are expected to decrease. What technologies is your firm developing in this changing field of automotive?
We understand that the automotive industry is transitioning to lightweight materials such as aluminum and carbon and is being driven by the shift to a carbon-neutral society. They are promoting the electrification of cars which leads to the transition from engines to motors. JTEKT, one of our customers, is a world leader in steering manufacturing. We supply the rack bar needed for the steering system. Even when cars transition to EVs, the handles are still needed, so the demand for our products will not be affected. The three basic vehicle functions are driving, turning, and stopping. Our product parts contribute to the turning function of the steering. The driving function will be affected due to the electrification but turning is still a necessary function for cars. Regarding fuel efficiency, we need to look at the EPS (Electric Power Steering) system. In conventional power steering systems, engine power was used to drive the hydraulic pump and it consumes 3% of fuel. EPS has been adopted over 20 years and has evolved constantly. This advanced Rack Parallel EPS uses a motor to assist and move the rack bar more directly. This is a new system that is applied to Lexus, Toyota Crown, and Camry model cars. This new system is effective for ADAS (lane keeping assist) and is one of the necessary advancements for autonomous driving. When the driver uses the handle, the steering system rotates. Power steering is a mechanism that assists a driver to steer. The rack bar is an actuator that converts the rotational movement of the steering wheel into a linear movement. Even though the steering system type or the power used for the car will be changed, the rack bar is still a necessary component for the steering system.
Your firm specializes in secondary steel processing. You have your very own cold-drawn steel technique to manufacture steel bars. The material is formed into the shape of the holes (dies) by passing it through a tool with high-precision holes. What are the advantages of this technique in comparison to the hot-rolled method?
A cold-drawn finished steel bar is created by using some metal processing technique which involves plastic forming of steel material that changes its shape when a force is applied. In the process, steel material is put through a high-precision tool called dies, by which the cross-sectional area of the material is reduced, and its shape and dimensions are changed. For example, let’s say you want a square bar of a certain length. With conventional methods, you will have to carve four sides out of the material to make it. However in the drawing method, you just pass the material through dies with square holes. There are more excess waste materials in the conventional way than in the cold drawing method. This minimal waste increases our product yield. It is easy to manage and yields higher precision with an allowance of 0.01 mm which is thinner than hair. The drawing method also contributes to attaining lighter materials in the automotive field because it enhances the strength of the material. If we can strengthen the materials, we can make the parts smaller.
Looking at the future, are there new applications or fields that you are targeting?
Five years ago, we began insourcing the process before and after the drawing. This includes both the heat treatment required before drawing, and the cutting and polishing work required after drawing. Conventionally, we have been outsourcing the pre- and post-processes to specialized companies. However, having the entire process in-house helps us master the pre- and post-processing techniques and also gives us the opportunity to come up with new ideas.
In your international business, you have a joint venture located in China which also has production capabilities. Looking at the future, are you looking for similar partnerships in terms of M&A or co-creation? Are there any particular regions you would like to expand into?
The Japanese market has already reached its maturity and its peak, so if we want to expand our business, we have to consider the overseas market, so we opened a factory in China. We will do our best to support JTEKT and other customers in solving problems with precision shafts around the world. Discussion is currently suspended due to Covid-19 but we have some ongoing negotiations to establish a business alliance in India. And we believe that being featured in Newsweek would help to increase our recognition in the world.
Our goal is to showcase technologies and Japanese monozukuri, but we also want to know the face behind the business. If we come back to the last day of your presidency, is there a certain goal or personal ambition that you would like to have achieved by then as you pass the baton to the next generation?
It would be something related to the aging problem in our society. I would like to have older employees and female employees work happily at our factories. Right now, we are working with Japanese, Chinese, and Vietnamese employees. By the time you come back, we want to become a more multicultural company.