Striving to be a “Mobility Development Platformer”

Where do you see the competitiveness of Japan's industry coming from today?

I would say that my understanding of the Japanese industry right now is quite negative. The culture isn’t exactly in the best place right now. Most companies are no longer competitive in their markets, and they are focused on strengthening their development. If you look at countries like the US, a while ago they had some very strong companies with Google, Apple, Facebook, and Amazon (GAFA). China is super centralized by their government, and that government controls everything. Personally, I do not 100% agree with this system but it is very simple and is key to a huge market. Emerging countries like India and African nations see innovation changing their lives daily with companies like Kenya Electrical Transmission Systems leading the way. Europe will continue to be Europe, and those countries are driven by a history of empowerment and a need to buy premium brands. Many areas across the globe have their own strong culture, but in Japan, it is quite difficult to appeal to foreigners. Phiaro is a traditional Japanese company with most of our resources located in Japan. In my mind, Japan these days is fearful of competition. My strategy is very simple, Phiaro Japan must be super flexible, and we strive to be a “Mobility Development Platformer” and apply our innovation to the automotive industry in the same way as Amazon and Google have IT development platformers.

As you know, in Japan the population is decreasing, and in 20 years time, we are going to be facing some serious issues in the domestic market. Fortunately, Phiaro’s main business is now mainly development. Although our clients geographically range from domestic and international, they are mainly Japanese companies and their projects are for the overseas market. For example, 30 years ago companies like Honda and Toyota went to the US market, and they built many development centers and production facilities there. Nowadays development resources are coming back to Japan. Basically, we are seeing our clients keep the core R&D development in Japan and production in the local subsidiaries.

Local development is too difficult for Japanese companies, not only in the US but in other Asian and European countries too. Phiaro is a development company like no other in Japan. We have a long 80-year history, and our business covers a very wide net. We can separate our business into different projects. Research and development is our traditional business. Next, we have our engineering department, which is based on the development of new technologies. It focuses on providing services that are normally too difficult to operate in-house for our clients. This is one of Phiaro’s strong points, and in fact, we can provide anything you need for development. Over the past 10 years, Phiaro has put a particular focus on this area, and we have found that not only has our business in this area increased, but we have been quite profitable in this area with the CASE era rapidly approaching. For the past 20 years, we have considered how Phiaro can evolve to reach our current position.

What do you foresee as the impact of the automotive industry’s shift to EV and CASE on your business? What role do you think Japan will play in this transformation?

In the last five years, many companies have developed a CASE business. especially with EVs. Phiaro has many projects along these lines, but many companies have developed essentially the same technology. One example can be seen in the development of cabin space inside vehicles. These companies have taken the mindset that the cabin inside next-generation vehicles should be a comfortable space, especially when an AI is driving the vehicle autonomously. Even if they are tackling different aspects of the cabin, a lot of these projects are essentially the same. From my understanding, everyone cannot look at this as the ultimate answer for next-generation mobility. Customers now want to shift their thinking a little bit, and I think those end users hold the keys to the answers. The customers need to interact with the user interfaces and give their feedback. We have conducted demonstrations for customers not only to show those people the functions of the products but to also improve the user experience.

Phiaro can provide any core development product. We aim to provide users with better experiences and a greater variety of choices. As we now understand, it is not just enough to have a basic functional car, a car needs to provide a new one and only experience. Many car manufacturers are aiming to go that way. Their aim is to produce and introduce a much wider range of different applications and experiences.

Phiaro needs to change its current business and make investments in new technologies. Next year I’ve decided on a big investment for the company, one that will help us build a new facility that will function as a virtual production studio.

Not only do we make the concept and styled vehicles, but after design, the creators want to take these vehicles to surrounding use cases. Sometimes you use this system and experience an immersive experience. Of course, one of our main businesses is styling visualization, however, at the same time styling visualization systems are a very competitive market. This is just the first attempt of the company in this field of visualization, and usually, it is conducted by VR companies or CG houses for movie studios to do this kind of work. In order to illustrate the next step for the styling of cars we combine this visualization with driving simulators in order to attempt to create an immersive experience that is the first of its kind. This is a new approach to the industry that aims to better introduce the services that we provide to customers.

After the completion of a concept car, we can support the advertisement of the vehicle through our studio and movie shooting services. We have a partner company that specializes in shooting advertising movies for concept vehicles. 

Can you tell us more about your recent adoption of in-camera visual effects (ICVFX)?

In Japan, everyone knows this system because Sony is very famous. Many designers and creators already know about this, however, there is a chance that many people don’t have hands-on experience using this system. After starting this studio, I think that we might get many people wanting to come here. The goal right now isn’t necessarily about business, but rather the communication of exactly what we do here at Phiaro. Once our message is out there in the ether there is a real possibility that we might have companies approaching us to work together.

Ten years ago Phiaro mainly invested in equipment such as 3D printers and milling machines. That is in the past, the future is R&D driven in our estimation.  That requires investment in in-house technologies and expertise. Of course, in-house projects do not generate profits in the short term, but in the long term, the publicity generated can potentially be huge for the company. A company like ours requires balance to justify such investments, and it is the main reason that the structure of the company is very simple for Phiaro. Too many shareholders would disrupt the fine balance we have created, and it is true what they say about having too many cooks in the kitchen.

Earlier you mentioned how most of your work involves product development in Japan but production and sales overseas. Could you tell us more about the ratio of Japanese carmakers you work with and foreign carmakers that you work with? Are you looking to increase that ratio and work with more foreign carmakers?

Phiaro Japan right now is based in Japan and therefore is oriented towards development projects conducted in Japan. I think the percentage is around 70% right now. Unfortunately, however, right now the JPY is pretty weak, so Phiaro USA can get projects not only in the US but others as well. Phiaro USA’s projects are increasing year on year.

Our projects overseas are increasing, however, I would like that to increase at a faster rate. Japan being an island nation makes the location disadvantage not good. Capturing the overseas market for a business like ours is a challenge.

I think one of the most prevalent issues right now is the labor shortage, and this is a huge minus for Japan as a nation. It is a serious problem that requires solutions, and not only is it affecting our business but almost every business in Japan too.

Can you tell us a little more about how you’ve been using new technology to compensate for the shrinking labor force here in Japan?

If I’m completely honest, right now I cannot find a solution to the labor shortage, but I don’t think Phiaro is alone in tackling this problem. Multi-skilled workers are something we are pushing for, and not only in software or even hardware. Basically, we are allowing our engineers to pick up multiple disciplines in order for each engineer to add value to themselves. It is a simple, but effective solution that allows a single worker to complete many different tasks if needed.

As we have discussed, Japan’s industry in my estimation is not competitive. However, despite this, foreign people still like Japan. Many foreign people want to live here, and as a Japanese person, I am happy to hear that Japan still is attractive from foreign eyes.

We have a small office in Harajuku Tokyo and it feels like many foreigners dream of working there. Phiaro now has engineers from Korea, Taiwan, India, European, Thailand and many other nations. I really think we will see more and more foreign engineers in Japan as the years go by. 

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As you said, there will always be an interest in Japan from foreigners, and it is interesting to hear about the channels you have been using to attract foreign talent. Would you say that attracting skilled workers from overseas is important for your company?

Yes, I would say that is a very true statement right now.

How do you envision the future of automobile design? How do you think cars will look 20-30 years from now?

I personally like electric vehicles, and many people are now purchasing EVs. To answer your question however it is hard to say, and quite frankly we don’t have an answer for that. People’s needs are so diverse, and for that reason, people need different vehicles. Even big giant companies are trying to diversify, and we are sure that in the future you are going to see a lot of different cars and different models appearing in our industry. Of course, the technology will evolve, and eventually, we will see autonomous cars as well as the CASE era. These technologies will step in and take charge; replacing conventional internal combustion engines. In fact, we are already seeing this start to happen and I think we will continue to see a strong push toward hybridization.

The shape, structure, and interior of the car will change dramatically and I am sure that we will see more different types of cars with much more sophisticated designs. Another tendency we are seeing is structure optimization, which means that fewer parts will be used to achieve the structure of next-generation vehicles. We will see the miniaturization of new technologies with a particular focus on eco-friendliness. Additionally, lightweight materials are another key aspect, and not only are the weight of components going to decrease, but also the weight of the overall vehicle. A lot of things are going to happen and that is why it is so difficult to answer this question at this point in time.

Japan has been very well regarded as a part maker in the world of automotive; having specialized, niche, and cutting-edge technology to create all of the individual parts that make up a car. How do you think Japan’s role in the automotive sector will change corresponding with this transformation that you have described?

Competition is intensifying not only in Japan, but all over the world. My feeling these days is that there are too many automotive parts suppliers. Of course, you also have to consider that a number of big suppliers are overseas in countries like China. SMEs are strictly situated in Japan, and the issue there is as we have discussed earlier; the domestic market is shrinking. If it is just about making parts, many other countries can do that while maintaining a good price and good quality. 20 years ago the quality wasn’t quite up to par, but now it is more than good enough.、

Earlier you were explaining the strengths and competitive edge of Phiaro. Could you continue explaining that to us?

After the COVID-19 pandemic first hit Japan in around March 2020 we didn’t have much productivity for several months. At this point, everyone in the industry knows that Phiaro is a modeling company and I feel we no longer need to prove our expertise anymore.

It is for this reason that our future goals focus on projects that integrate both conceptual design and advanced studies. Connections are something that is important to all of us humans, and in order to create those connections we place an emphasis on customers experiencing those connections for themselves. Once those customers create a connection with Phiaro, orders come in because they enjoy the experience that only a company like Phiaro can provide them.

Phiaro USA attended  the consumer electronics shows (CES) in Las Vegas in January. These kinds of consumer expos give us the perfect opportunity to connect with suppliers and potential customers. As an independent company, we are free to talk about a wide range of other enterprises, and I think that gives us the chance for some pretty exciting business opportunities.

To what degree are you trying to establish a global platform? What is your strategy to further internationalize your business?

Of course, here at Phiaro, we want to be a global platform, and at this point in time, we have more than 35 years of experience in the US to draw from. We have strong connections in the US and China, and now my eye is shifting over to Europe. The European market is considered quite difficult for Japanese companies to crack. I am often contacting companies in Europe with impressive technology, and we have now started collaboration in an engineering business with a company in Europe. Communication flows freely and doesn’t suffer the same problems as the US. I really want to invest more, but I’m not looking to invest in big factories here in Japan, rather I would like to make investments in talented and skilled human resources all over the world. For future projects, it is very important to find smaller companies with new and interesting technologies.

Imagine that we come back on the very last day of your presidency when you are about to pass the company to the next generation, and interview you all over again. What goals or dreams will you hope to have achieved by then?

My next target is to develop a new custom EV using the current Phiaro technology. Of course, with this, I mean a drivable vehicle to take to Goodwood Festival of Speed. I know it is a simple answer, but this is my current target that is taking up my focus right now.