Optical manufacturers have played a very important role in Japan’s industrial development, with Seiwa Optical being one of the chief players in the industry for more than seven decades. In this interview, president Isao Okazak gives his insight into Seiwa Optical’s three main business segments -- optics, industrial equipment and environment -- and explains how the company has leveraged its excellent reputation for quality optical solutions in the semiconductor and industrial equipment fields to expand into life sciences.
Since the ending of WWII, Japan has garnered an excellent international reputation for its manufacturing based upon the monozukuri spirit. What, for you, is the meaning of Japan’s famous manufacturing spirit, monozukuri? How does it differentiate you from regional manufacturers?
The idea of monozukuri that is embedded in the Japanese spirit is to specialise in something specific and then collaborate with other companies to achieve something bigger. Tracing back the history of optical equipment, all the companies involved started during wartime; they provided scopes for the munitions industry such as telescopes, rifle sights, periscopes and rangefinders. After the war, optics manufacturers shifted their focus to utilise these technologies for peaceful means and we also started to create microscopes, medical scopes, industrial measuring instruments and electro-optical devices during this time. At that time, there were about 500 companies in the optical field; 10 major ones with the rest small, but they all collaborated with each other like one big family. Companies with higher technologies, such as Japan's leading optical manufacturers, later entered the semiconductor field. Even the Japanese government, along with The Ministry of Economy, Trade, and Industry (METI), had a policy to allot specific technology development to those companies, to help them become forerunners in the semiconductor field.
In terms of materials, equipment, and specific devices, Japanese companies are cautious and very strong in their areas of expertise. As a result, some Japanese companies still occupy important positions in the field of sensors and power semiconductors. In the semiconductor device industry, Japan's share reached 50% (US 36.8%) in 1988, but its position has gradually declined since 1990, and Japan's share was 10% (US 50% Asia 25%) as of 2019.
SEIWA OPTICAL was founded in 1947 and has been in business for 74 years now. To sustain the business over such a long time, it has been necessary to manage it with a balance between traditional inheritance and modern innovation. I think it's an interesting story, but it is also true that many long-standing companies are pursuing uniqueness and an uncompromising attitude rather than profit, and we are in that category.
Across the world, companies have been affected both positively and negatively by COVID-19. In the semiconductor industry, an over reliance in the pure play foundry model with companies like TSMC was recognised. As a result, the Japanese government has taken steps to strengthen domestic manufacturing processes, for example, by increasing 3D packaging capabilities of domestic companies. What has been the impact of COVID-19 on your business and what measures have you taken to adapt to it?
We also have been badly damaged by the COVID-19 crisis as 70% of our customers are overseas and we lost our capacity to do sales, maintenance, and after-sales services there. We are seeking to continue our business even in such an environment and are making every effort to minimize losses as much as possible by implementing various measurements, for example, with web meetings, acceptance tests with video conferencing, engineering services via overseas subsidiaries, sales activities via overseas agents, etc. In addition to providing services and support through the establishment of joint ventures and new employment at local subsidiaries, we are also discovering new business opportunities and developing new businesses. The semiconductor package business is one of the leading industries in Japan, and we also have some products (inspection and repair equipment for package substrates), which are shipped to Japan, Taiwan, Korea, and China. What’s good about Japanese companies is their speed for building new things and new inventions, although Japan is still lacking in the mass-production capacity, R&D is fast and efficient. Once the trend of the semiconductor field changes, we will surely find a better chance and collaborate to enter and uplift the technologies within this field.
When we spoke to the president of Tokyo Electron, he told us that collaboration is essential in this industry, not only domestically, but also internationally. Could you tell us what role co-creation plays for your business? Are you looking for new partners?
We have partnered and collaborated with more than 200 companies for our imaging optics business such as with microscopes and cameras. To sustain our business in the long term, it is important to build a regular position in each industry, focusing on our core optical technology. To achieve this, partnerships in various fields are essential, especially in the field of electronic components such as semiconductors. Given the trade issues between the U.S. and China, it is necessary to establish a system that divides the world into two. While we value our existing partners in the world, we are always looking for new partners to prepare ourselves in adapting to the global situation.
You are specializing in three main business divisions, could you explain these three and which is your main focus? Where do you see the most potential for international sales?
35% of our business is based upon optical components and 45% comes from industrial equipment. In the past, we mainly manufactured equipment for display panels, but now the mainstream has shifted to semiconductor equipment. Our three main business fields now are optics, equipment, and environment. Automation in the industrial field is evolving at an ever-increasing pace and for this reason, the "Machine Vision" in optical business has become the core of our business. Image input equipment, in which telecentric lenses and high-definition cameras play an important role, high uniformity illumination systems, auto focus systems, XYθ stages, image processing systems and software. These are our commercial products.
In the industrial equipment business, we develop equipment such as production equipment and inspection equipment that are indispensable to production lines for devices and various electronic components (new displays, all-solid-state lithium-ion batteries, laminated capacitors, PKG substrates, etc.) mainly in the semiconductor field. These are the products that we are focusing on as they have great potential for overseas sales. Although these technologies were developed in Japan, they are now being exported around the world and have become standard in high-tech industries in many countries. We can't imagine this business without overseas sales.
What strategies are you implementing in order to start your business in new fields?
One of Japan's weaknesses is in the business of medical equipment, and it must rely mostly on imports from overseas. So, we raised our hand and requested the government for funds to make laser processing and inspection products for the medical and life science field the fourth pillar of our business. What I proposed to the government is that we foresee a medical revolution, or innovation. Looking back at the past, manufacturing used to be done manually by the craftspeople, which has now shifted to automation; the same could apply to medical industries also. In Japan and worldwide, doctors’ mistakes have been a big issue, and in order to solve it, we would like to propose a solution, in terms of technology and automation. That would be our fourth business pillar, which will hopefully strengthen us and lead us to become a 100-year-old company.
Industry 4.0 is the core and foundation of your business where you supply your various optical devices. We know this involves marrying both the physical and the digital world; you’re creating synergies in that sense, not only to automate a line, but to make the whole supply system more robust. Could you tell us how your products are helping companies in adapting to Industry 4.0 and why you are the chosen partner when it comes to optical equipment?
The application of Industry 4.0 in high-tech companies has become more and more common. Our optical systems are related to optical technology (inspection, positioning, etc.), and these are essential for automated production lines through the introduction of AI, which is necessary for smart factories. In our daily development, we aim to be ahead of the technology and differentiate ourselves in this automated production line, which is becoming more advanced and innovative.
In terms of R&D, what feedback are you receiving from the customers? What new strategies are you looking to implement in your new products to meet the challenges your customers face?
Our approach to R&D is to work in a tight knit with our customers. We provide OEM customized technology specifically for our customers' needs, and we also make their own black box units to provide unique technology for our customers to win and grow the business. This is how Niche Top companies strategize.
You have been present abroad since 1996 in the USA, in South Korea since 2003, Taiwan, Germany and Shanghai in 2011, and more recently, Singapore. Could you tell us more about your international strategy and the benefits of those locations?
We run our own companies in seven countries (Japan, USA, Germany, Korea, Taiwan, China, and Singapore). In these countries, we have established wholly owned subsidiaries that can provide local sales support and maintenance. In addition, we have 12 distributors in the neighboring countries, and we plan to expand this number.
The world is divided into two major markets. One is the European and North American markets, and the other is the Chinese and Asian markets. When we expand overseas, we focus on research and development to suit the circumstances of each country. Then we work with innovation and high technology, and as a result we have a wide variety of products.
What would be the strategy for working together with new partners? Will you be looking for a joint venture, an M&A or how would you do that?
It is highly important for us to have partnerships in every field for us to have an extended product line-up. M&As and joint ventures are also important methods for acquiring technologies that we don’t have. At the same time, by partnering with companies, we can respond to changes in product lines due to difficult world conditions or national policies.
Imagine we come back in five years and have this interview again. What would you like to tell us? What dreams or goals would you like to have reached by then?
We want to contribute to the development of the world economy by developing and selling valuable products that can respond to the circumstances of each country on the planet. To do so, we must keep up with global trends. but at the same time, we have to maintain the basic principles of the company along with what we have gained through our experiences. The core of our products will continue to be optical engines. In the next five years, we expect to see significant advances and innovations in technology. Hopefully, we will not only be a part of them, but also be a worldwide front-runner to lead the core optical instrument field.