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The finest agents protecting people and the environment

Interview - November 5, 2021

Daiwa Chemical Industries is engaged in the development of safe and eco-friendly products, such as antiviral, antimicrobial, antifungal agents and insecticides. President Hiroto Tanaka shared with us the company’s R&D strategy, and their plans to expand into other industries, as well as the silver linings in the covid-19 pandemic, including being accredited by the JNLA.

HIROTO TANAKA, PRESIDENT OF DAIWA CHEMICAL INDUSTRIES CO., LTD.
HIROTO TANAKA, | PRESIDENT OF DAIWA CHEMICAL INDUSTRIES CO., LTD.

In the last 25 years, we have seen the rise of cheaper competitors such as China, South Korea, or Taiwan, who were able to replicate the Japanese monozukuri process at a cheaper cost; therefore, providing cheaper products at a lower quality. Why do you believe that Japan has been able to maintain its leadership when it comes to high-technological and niche fields, and what role does monozukuri play?

I think that the quality of the best products made by Japan should be almost the same as those from China, South Korea, and Taiwan. However, I would say that the quality of our average best products differentiates Japan. Japan remains competitive in many fields because there is little variance in the high specifications or the quality of products, unlike other countries that tend to compromise the variance in the specifications. In terms of innovation for technology, I believe that most Japanese companies have kept improving the quality of service and products in response to their customers’ needs. Although the existing products are good enough for the customers, Japan has never compromised on the quality or the functionality of products. We keep improving, which led us to further innovation and made us maintain our leadership in the quality of products.

How are you able to maintain the same quality of your products in your manufacturing plants in Japan and China?

The plant in China is a joint venture with our Taiwanese partner. I think that the most important thing in the quality control of production is the education of workers. Our goal is to educate our local employees at our Chinese plant to have the sufficient skills and experience to keep producing the same quality of products. By doing so, we can leave the production of some types of products at that plant without any worries. We would like to increase the types of products manufactured there in line with the assurance that they are able to produce the same quality. Furthermore, there is a need to check the quality of the raw materials, especially those that are procured in China. Based on the quality of the raw materials, we make adjustments to the production line. That is how we are controlling the quality of our products in both plants.

 

According to experts, the chemical industry in Japan has been booming in the last five years; last year, it has grown by 10% despite the Covid 19 and Japan not being rich in raw materials.  Could you please talk to us about the chemical industry in Japan and its competitive edge?

Almost 100% of the raw materials are imported in Japan, and from these, we make chemical or composite products. In the last five or ten years, I don’t really have the impression that the chemical industry has grown much in Japan.

 

 The global chemical industry is expected to grow in the upcoming years by up to 7% from chemical applications in many industries, such as clothing, automotive, and semiconductor. The main growth will be in Southeast Asia, China, and North America. As a company that aims to be a global company, how are you planning to take advantage of this global growth?

When we look at the global market, the chemical industry is indeed growing along with the worldwide population. The standard of living has been improving, which has concurrently increased the need for chemical products. What we are supplying to the market is not finished goods, but the value-added to those goods. The value supplied through our products and agents includes comfortability, safety, or a sense of security. There used to be a huge demand for such added value in the Japanese market, but recently, we are seeing stronger demand from China, Southeast Asia, or other regions. We thereby opened a plant in China five years ago. At this moment, we have three plants located in Tokyo, Osaka, and China. Through the monozukuri process in these three plants, we would like to expand our market share in the regions where there are needs for our products and expand the supply of our agents to such markets.

 

Is there any specific country or region that you would like to enter? 

I think right now, that would be China, Southeast Asia, and North America.

 

As the President of Daiwa Chemical Industries, what would you say is your main competitive advantage, and what solution can you provide to your customers?

Our main competitive advantage is we are trying to meet the needs of our customers by supplying the agents that match those needs. Besides that, we always check whether our products are performing as we planned or as expected by the customers. We create a proposal according to the performance of our products for the better use or functionality. I think that is our competitive edge.

 

In addition to the great efforts that your company has put into developing antimicrobial agents, antifungal agents, and insect repellent agents, how have you been able to convert the Covid 19 situation as an opportunity for Daiwa Chemical?

One of the positive impacts of Covid 19 is the sales growth for the antimicrobial and antiviral agents. There has been considerable growth in industries like textile, resin, and paint. We received orders related to these products from numerous new customers in the second half of last year. The number of orders is still growing. Another positive thing is that we were accredited by the JNLA*, specifically about the assessment capability for antimicrobial or antifungal agents. This accreditation brought forth several requests from the customers for evaluation. The request for the assessment for the antiviral agents is rapidly growing. In contrast, the pandemic has caused a significant drop in our sales in the automotive and textile industries. We are supplying the agents for these two industries, in which the sales dropped by 30%. But with the rise in demand for antiviral and antimicrobial agents, we were able to recover.

* JNLA stands for Japan National Laboratory Accreditation System, which is a third-party testing organization accreditation system based on the Japanese Industrial Standards Law.

Your company was able to supply chemicals to different types of industries such as the antimicrobial, automotive, textile, plastic, and construction industries. Could you please give us an overview of your business model?

We have a large share in the textile, plastic, and painting industries with products such as antiviral, antimicrobial, or antifungal agents but we would like to expand our supply in the construction or housing industry moving forward. Mainly we are supplying antiviral or antifungal agents. Flame-retardant agents are mainly supplied to the automotive industry, but now we would like to expand the supply of this particular product in the construction industry.

 

We know that R&D for your company means continuous corporate growth and customer satisfaction. Can you please tell us about your R&D capabilities?

In terms of our resource volume, a third of our total employees are in the R&D section. We have around 100 employees, so about 35 of them are in R&D. They are contributing to customer satisfaction, assessment of the performance of our agents, strengthening of our measurements, and development of our new products. As chemical makers, we would like to continue to meet our customers’ needs and continue to provide safe and secure products to our customers. The function of R&D is indispensable for our company to achieve this goal, so we would like to keep our R&D resources at the same level or even increase it.

 

As a company that has an R&D that plays a major role in satisfying your customers’ needs and as a company that is looking to compete globally, are you looking to find any co-creation or joint development partners?

At this moment, we do not have any plans of looking for co-creation partners overseas. However, something might trigger such collaboration in the future. What we are trying to do is enable the Chinese base to perform the assessment of the products that we are doing in Japan, and we are trying to do that in the production plant that was made by the joint venture with a Taiwanese company. We have established a subsidiary branch office for that plant that can perform the assessment for the antimicrobial agents. We have sent some representatives and have just started the assessment work there. In the future, we would like to establish an R&D section overseas.

 

Today marks 63 years of your company being established. Looking towards the future, how do you plan on continuing your corporate growth, and can you please tell us more about your midterm strategy called “Daiwa 2027”?

Our main demand is in the Japanese market for Japanese companies. We supply raw materials for Japanese companies, which are processed into different finished products and sold to various markets such as Japan, Europe, and North America. We would like to continue growing domestically, but we would also like to sell our products overseas and enter the global market. We are mainly looking into Asian countries in expanding our antimicrobial and antiviral agents for the textile and resin industry. In the construction industry, we are about to launch a product that we have developed, which is incombustible hard resin insulation, and we are hoping to sell this product in the North American market.

 

Which strategies fit your company better when it comes to your goal of global expansion?

Daiwa Chemical is a subsidiary of the company called OG Corporation, which is a trading company for chemical products. OG Corporation has a lot of offices around the world. We would like to use those offices to expand our sales in the global market. In North America, there is an OG office in Portland that we could use to expand sales there. In October this year, there will be a Polyurethane Technical Conference in Denver, Colorado in the US. We would like to participate in that conference with the paper for our newly developed product which as I mentioned earlier was a hard insulation urethane foam. For the resin, construction, and plastic industries, we will utilize the OG offices overseas. For textiles, we want to use the offices of OG Nagase Colors & Chemicals to enter the global market. In the textile industry, we have capital relationships with the trading companies, so we will pursue these relationships to further expand our company in this industry. Mostly, their offices are in Asia.

 

If we come back in two years and do this interview all over again, what would you like to have accomplished by then?

We are currently developing a few business ideas. One idea is an insect repellent agent. We are making a lot of effort to research insect repellent agents. We have certain insects in our lab that we are feeding and growing to conduct more research. Another idea is a biological pest control using natural enemies. We are working on its development and are targeting to set up a new business with natural enemies in two years’ time. In two years when you come back, we hope to have announced the launch of this new product.

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