The ferrite magnets that attract loyal customers worldwide

There is a trend where emerging competitors in places like China, Malaysia, and Taiwan have managed to replicate the Japanese manufacturing process to create cheaper products at a lower quality. Yet, Japanese firms have managed to stay competitive especially in niche fields. In your opinion, can you tell us how they have managed to stay competitive and survive despite this international competition?

Yes, certainly our main competitor is from China. The Chinese companies have grown very big. But as a result of that it seems that they have become less interested in doing small business. As a small company, we can do small-scale production and stay ready to answer every request from our clients. This is one reason we survive besides the quality of our products.

What are high-quality ferrite magnets? One might say that Japanese and our foreign competitors firms make the same product with the same quality. However, from the client’s point of the view, the difference is that our competitors usually produce a better product at the beginning of production. Once it has passed their test, the quality gradually decreases, which results in defective products. Defective products stop the production line of our customers, and it is not something that our customers want to happen in a factory. Stable quality is a result of attentiveness of the workers, which is not a strong point of foreign manufacturers. While it is true that they can produce a lot of things at a cheaper cost, it is sometimes difficult for them to guarantee 100% quality all the time. This is the reason why some clients still prefer to buy from Japanese manufacturers like us. Our cost may be much higher than our Chinese competitors, yet our customers stay very loyal to us. They come back to us every time they have a new product, which has allowed us to survive.

One of the distinguishing features of Tokyo Ferrite is that you do small-scale production as well as large-scale production, allowing you to provide prototyping and samples, and manufacturing plastic, rubber, or ferrite magnets in different shapes and small quantities.

Yes, we do small ops. Of course, small ops are not always financially rewarding because we use a lot of energy and continually make changes. It is not very profitable, but we must stick to that area in order to survive. Small lot production is a distinctive feature of our company as it addresses a precise need. As few companies are willing and able to offer small-lot production, we are able to fill that hole in the market.

Ferrite magnets produces by Tokyo Ferrite Mfg.

In the next 15 years, it is expected that one in three people in Japan is going to be over the age of 65, which creates various challenges and consequences. One of which is a labour crisis where hirers are competing for the ever-shrinking pool of talented new graduates to replace seasoned workers. On the other hand, fewer people and consumers mean a shrinking domestic market. What is the effect of Japan’s demographic change on your company? How is Tokyo Ferrite overcoming those challenges?

The average age of our workers is very high. the majority of them are within the age range of 45 to 55 and about half of our employees are over 50. Our retirement age used to be 60, but now we’re asking them to work longer and stay with us until they are 65, or sometimes even older. We cannot let them go. At the same time, we are starting to employ younger people. You said that it is difficult to find new graduates, yet somehow, we get three or four high school graduates every year. This is possible because our main factory is in northern Ibaraki. We can employ the local people who do not want to go to Tokyo or those who had worked in Tokyo but opted to stay in their hometown. It is a very nice location for us in terms of recruiting young people.

SMEs are the core of the Japanese economy and industry and represent 90% of employment, 95% of companies, and around 50% of the added value manufacturing output exported out of Japan. In your point of view, what is the role of SMEs in the Japanese supply chain?

Throughout Japan’s long history, there is a tradition of monozukuri.  Our museums boast abundant handicrafts and fine arts that go all the way back to the Edo era, centuries ago. These demonstrate that production by hand has always been a part of our tradition, and craftsmen that produce these things were always respected. This has extensively influenced the small production that we now have in Japan. I think the tradition of craftsmanship is better kept in SMEs than in big companies. This is because SMEs cannot make huge investments in automated production lines. I have to admit that the production of ferrite magnets in our factory also rely heavily on the craftsmanship of our workers. Earlier I explained that we do small lot production and I hope you can easily understand that it has been very difficult to automate it when the production lot is small.

Among the principal values instilled by Japanese parents in their children two of the biggest are being industrious and studying hard. I believe that this foundation significantly contributes to our factories in rural areas because our employees truly possess these values. SMEs have their primary roots in the great craftsmanship and handiwork of the old days.

Why did the founder of this company build its factory in Ibaraki? It was because Ibaraki was an area with many coal mines until the 1960s or 1970s. As the coal mines closed, there were many people who lost their jobs. However, it was a very good fit as those people could work in a new company like Ferrite Manufacturing. Since then, it has been running for about 60 years and it is now a part of the community.

When I joined, it was, of course, my first experience working in a SME. I thought to myself, “This is a SME but still operates in an international market. It may be interesting to see how they do so.” One of the things that I have noticed is that the craftmanship of manufacturing is extremely unique. If something happens in the factory, big companies usually collect and analyse data and conduct simulations to pinpoint the problem; in contrast, SME learn from experience and progressively make the necessary adjustments until it works. It is a method that works and has helped us to survive. On that note, the challenge is that our employees are getting older and maybe in the next 10 years, we will have to shift all this craftmanship to the younger generation; they may not perform completely the same as the previous generation. I am encouraging the young generation to study and apply digital transformation in our production system. I believe this is the way forward.

At the manufacturing Expo, CWIEME AMERICAS held in Chicago two years ago, you talked about the new applications of your ferrite magnets, especially pertaining to the automotive industry. Can you tell us in a little bit more detail about those new applications?

The sensor field is I think promising for us, so we are studying that market right now. We are also trying to find new customers and, in order to do this, we have to go abroad. Our big sensor business with a European Tier one company is ongoing. To tell you the truth, we are not an originator of new technologies, but our clients who have new ideas and new technologies consult with us. For example, they seek us out whether we can create products such as magnets for sensors. We need to be ready to respond to our clients quickly and precisely. So, while we do not invent new applications directly, we enable others to do so.

What role does co-creation play for your company?

As I said earlier, we have to be ready whenever and for whatever comes our way. We want to be known to those people who need our help. We have made a video for our homepage, and I think it will be very good for us to see our name in Newsweek magazine. Moreover, we are also working on search engine optimisation. Co-creation means that when clients come and ask, “Can you do this?” we strive to respond to their requests. Of course, it usually does not go well the first time. We must do various trials in order to meet their needs. Usually, it takes years before a new product can be launched, and not all the trials turn out to be successful. So, we are always following multiple projects.

Why do you think some clients prefer Ferrite magnets to stronger rare earth ones such as neodymium?

Ferrite magnets are cheap. Rare earth magnets are stronger but are very expensive. Now many people are considering replacing rare earth magnets with ferrite magnets. This is possible because although the magnetic field of ferrite magnet is not very strong, since they have improved the quality of the sensing device, they can use ferrite magnets for sensors. The efficiency of sensors is increasing each year.

Furthermore, in other field such as motor and pumps, we have been approached by electric-automotive companies who want to replace neodymium with ferrite, something for which we have already started to conduct trials. We are yet to be successful in this regard. Now they are using neodymium rare earth magnets, but we expect some of them to come back to ferrite magnets because it contributes to reduce the dependence on rare earth that we have to import.

There are two main incredible transformations in the automotive sector. One is the change to lighter materials to abide by environmental regulations, and the other is electrification. Magnets play a crucial role in moving parts and certain types of sensors in the electronic field. How is your company perceiving these changes in the automotive sector, and what are some of the solutions that you can bring to automotive transformation?

As I said, we are not innovators, but we stay ready all the time. When there is a new requirement from the automotive industry, we want to be consulted first. We do not do our own R&D, only the production, but we want to be as flexible as possible so we can promptly answer to new requests. That is our strategy.

Although the heart of magnet manufacturing is in China, there are five major players in Japan, of which the two biggest are Hitachi and TDK. Tokyo Ferrite is the biggest among the four smaller ones. In front of such big players, how is your firm able to remain competitive? What would you say makes your clients choose Tokyo Ferrite over the others?

For the big players, ferrite magnet is no longer their core business and I believe that especially production of small quantities are not profitable for them. That being the case, when the life cycle of a product comes close to an end, the volume usually gets very small, they prefer to rely on other manufacturers like us that will take over the responsibility to continue the supply of such products to their customers. Sometimes they even provide us the technology and machines. I think this example indicates well where we are and how we differentiate from others.

With regards to international clients, is there a particular geographic region or a type of company that you are looking for that you believe you can cater to best?

I think it will be difficult to be the best internationally, but I think it will be more advantageous for us to invest in Japan. As a matter of fact, we are already doing business with a lot of international clients. Our Japanese clients who do business internationally use our magnets somewhere else, like in Vietnam or China.

Today, you are the only specialised magnet manufacturer in Japan. Can you quickly run us through your history and some of the key milestones of your company since your foundation?

This company was founded 60 years ago. In 1959, Mr. Masakazu Hasegawa founded the company with only four very young co-workers (partners) who helped him set the company in motion. It was unbelievable. They worked every day and throughout the night. In the 1950s, everything was growing after World War II, so finding customers was not difficult for them. Mabuchi Motor, which was also then growing, was one of the biggest customers of this company. After that, the prevalence of video equipment such as VHS or beta systems brought us the highest sales in our history, about three times larger than right now. We had several parts for video equipment for sale.

Our company changed about 15 years ago when we faced a major problem. We made a significant investment and started up a new factory in China, which turned out to be a disaster. It was very difficult for a small company like us to absorb all the loss and as a result of this failure, we now operate only in Japan and sell to the international market from Japan.

 I am aware that some people, for example the British economist Atkinson says that the chushokigo model is not an asset, but a deficit to the Japanese economy. I admit that to some extent, what they say is true. For us it is imperative for the older employees to train and transfer our technology and craftsmanship to the next generation. But if we continue to rely only on the craftsmanship and diligence of our workers, it is very difficult to improve the productivity of them. That is why I am asking our young generation to learn from the old generation but also to study new technology.

Have you had a favourite experience since you have become the President five or six years ago? What do you love about Tokyo Ferrite?

My wife is the daughter of the founder. My wife and my father-in-law asked me to join the company after I retired from AGC. At that time, this company was not stable in every respect. However, I have found that we have great people here. They are experienced, skilful and they love producing ferrite magnets. I really enjoy working with them and I am proud to be a part of this company.

Imagine that we come back in 2029 to have this interview again. What accomplishments would you like to have achieved by then?

10 years from now, we will have fewer old people and more younger people compared to now. I want to see that the transfer of the craftsmanship from the old generation to the young generation to be completed by then. We will have more automated facilities and systemized production control system. But I believe the core of our strength will still be the craftsmanship that the young generation has inherited from the old generation. We want to be loved and respected by our clients as a magnet manufacturer who loves producing magnets and always willing to come along with the needs of the clients.