Sumitomo Chemical Engineering – a subsidiary of chemical manufacturer Sumitomo Chemical – deals in the full life cycle construction of various types of chemical plants, from feasibility studies to after sales and maintenance services, as well as offering additional solutions such as equipment for semiconductor manufacturing and environmental services. We spoke to president Hajime Tsukimori to learn about the company’s services and how the company operates as an owner-based engineering company under parent firm Sumitomo Chemical.
What is it about Japanese manufacturing that makes Japanese companies shine in sectors like chemical engineering, which is characterized by safety, reliability, and high quality?
In Japanese culture, we are used to creating the manuals and the basic standards and criteria for quality. We manufacture products according to those, and this culture has been there for a long time. Of course, we have some emotional attachment and passion towards the work, and we always maintain that.
This culture was not seen outside of Japan, but over the last 10 to 20 years, various countries have followed the Japanese way of manufacturing and doing business, so I think they have adopted the same Japanese practices all over the world.
What is your current assessment of the Japanese chemical industry? What are its strengths and weaknesses?
The main weakness of Japanese manufacturing industries, especially the chemical industry, is the lack of natural resources, but we make up for this with technological developments, but the development of the chemical field takes time. We are very patient in developing our chemical products. We are not seeking short term profit, but we're looking in the long term, and I think Japanese culture has such grounding.
With regards to R&D in the petrochemical industry, that sector has shifted to countries which have energy and natural resources, and we need to change the strategy. We have to create new chemical products and catalysts using new technologies. I think this shift has been occurring for the last 20 years, but this transition is not working well. Anyhow, we need to shift to new and innovative technology based chemicals and that's the way forward for us.
How are you helping to reduce carbon and other harmful chemical emissions in line with current consumer and legislative trends, and how is Japan progressing overall towards carbon neutrality?
Our technology to remove sulfur dioxide has been in existence for a long time. This process removes sulfur constituent from waste gas to make sulfuric acid. This is not an innovative technology - we've been working with this for a long time.
In terms of carbon neutrality, we are not a chemical company. Of course, our parent company is Sumitomo Chemical Co., Ltd., which is directly involved in carbon neutrality, and we are helping and supporting them to develop environmentally friendly processes.
Bigger engineering companies are developing environmentally friendly processes by themselves, but companies of our size do not have that capability to develop those processes, but our parent company is taking up those challenges and we are supporting their process development to create environmentally friendly products. We are creating new chemical solutions based on our planning, design, construction knowledge and expertise.
We are a so-called owner-based engineering company. There are different types of independent engineering companies.
Sulphric acid plant
You deal with the construction of various types and sizes of chemical plants, and deal with the life cycle of such projects, from feasibility studies to after sales and maintenance services. You also provide additional services such as equipment for semiconductor manufacturing and environmental services. What is the main focus of your business, and what is the typical project that you do?
We don't have a specific focus on any particular product. The size of our company provides a key strength of ours, which is that we are agile and flexible and we can respond to any product or process requirement from our customers.
In recent years, investments in petrochemicals decreased especially in Japan, but investments less than 100 million USD for other chemical plants increased.
It's difficult to develop chemical processes from scratch for a company of our size.
However, since we are an owner-based engineering company, we have resources and experience working in such an industry and we can provide support for basic design and planning too.
We used to do maintenance work in Japan, but now our thinking is that maintenance should be done by the owner’s side - the customer’s operators or the manufacturing company. The replacement of a large machine for maintenance purposes is a large project, and key decisions such as what equipment should be replaced and what the timing will be should be taken by a maintenance team. The manufacturing unit during day-to-day operations should make timely and effective decisions about maintenance work.
What synergies does having various companies bring to your business in terms of the benefits? How does that help you flexibly respond to customer demand?
This is not really talking about the synergy of benefits, but I think the separation of the company from the parent company happened because domestic investment has declined over the years and it's difficult to maintain the same amount of investment constantly. Although investment went down, we still needed to maintain our resources and technologies, so the company was separated.
What was the benefit of this? Of course, we should undertake all the Sumitomo Chemicals work as much as possible because we are a 100% subsidiary. However, we must also undertake works for other customers so that we can maintain our resources and benefits even when our mother company’s demand is low.
Semiconductor manufacturing is an industry set to boom. There's a demand that can't be met, but Japan is immensely successful when it comes to supplying equipment such as CMP equipment (Chemical Mechanical Planarization for polishing semiconductor wafers). What are you looking to do in order to keep pace with this demand? How are you catering to this industry?
We aren’t producing equipment for CMP, but producing CFS - Chemical Feeding Systems. We are providing incidental facilities for CMP or cleaning PCBs (Printed Circuit Boards), for example, facilities to supply cleaning chemicals such as IPA (isopropyl alcohol), high purity ammonia and sulfuric acid, and so on, into the process.
As part of your international operations, you’ve recently launched the Singapore Plus One project, which is aiming to gradually increase sales overseas. Can you tell us more about this project? What are your goals with that project?
We created it because Japanese customers wanted to develop overseas plans. To support them and provide solutions, we established our local subsidiaries in Saudi Arabia, China, Malaysia and Singapore so far.
However, after the specific projects are finished, it’s difficult to maintain the local subsidiary because there is no more work. For this reason, we have recently completed procedures to close down our subsidiaries in China and Saudi Arabia. The Malaysian subsidiary is still currently there, but they don't have much work to do, and Singapore is remaining open because we have received a lot of work there.
With Singapore Plus One, it isn’t a temporary operation because we’ve been running it for more than 35 years and we want to maintain it. That's why we are thinking of establishing another subsidiary or legal entity in another country to expand the project to support the Singapore subsidiary’s operation.
Is there any specific country that you believe your technology can contribute to in terms of fitting in with and complementing their technology? Is there any specific country that you're looking to tackle in Asia?
In Japan, most companies have a midterm plan covering the next 3 to 5 years. When we studied the previous midterm plan, we listed several candidate nations whose markets we were looking to enter. However, during the COVID-19 pandemic, we couldn't draw up a shortlist, but recently we narrowed it down to India, Vietnam and Indonesia.
Left: Sumitomo Chemical Engineering Co., Ltd. (Head Office in Chiba) | Right: Sumitomo Chemical Engineering Singapore Pte. Ltd. (SCES in the JTC Summit)
As a result of Japan’s aging population, Japanese companies that diversify can't rely on other domestic manufacturers when they go overseas looking for international customers. Is that something that you have taken into account, and are you looking elsewhere besides just Japanese customers?
The Singapore Plus One concept is not a subsidiary of Sumitomo Chemical Engineering Co. Ltd. (SCEC), but a subsidiary of Sumitomo Chemical Engineering Singapore Pte. Ltd. (SCES), so this new subsidiary is controlled by Sumitomo Chemical Engineering Singapore Pte. Ltd. (SCES). The managing director should be Singaporean or somebody working in the Singapore subsidiary. They're not only looking for Japanese customers, but also overseas customers, and that is their first priority.
Is that model of business something you would look to replicate elsewhere? Can it be applied in multiple other markets?
Yes, we are going to replicate the same model across different countries, but we cannot do it all at once, so we want to roll it out one country at a time.
Let's imagine that we come back 7 years from now for the 65th anniversary of your company and have this interview all over again. What do you dream for this company? What goals would you like to have accomplished by then?
In order to operate our engineering company stably, both of our mother company’s projects and external customer’s projects are very important and the both are like the two wheels of a cart and inseparable, so we need to follow up the both.
However, it can be never said that we could follow up the both enough at present.
So we need to scale up at least 1.5 or 2 times in size in the domestic market so that we can maintain the work from Sumitomo Chemical Co., Ltd., as well as for other customers. As for the overseas market, if we are successful with Singapore Plus One, we'd like to come up with Singapore Plus Two, which could be starting in a few years.