Established in 1952, FUJICO has built its success upon technological innovation aimed at “making the impossible possible”. The company’s founder, Hidesuke Yamamoto, developed a groundbreaking repair technology for ingot molds used in steel manufacturing that allowed the molds to be reutilized, leading to a major reduction in environmental waste. Since then, the company has continued to develop unique technologies for the betterment of industry, environment and society, providing its clients with quality solutions far superior to those of its competitors. We spoke with president, Toshiaki Hagio, to learn more about the company and its technologies, such as its CPC process (Continuous Pouring process for Cladding), which is a composite casting method used to manufacture rolling mill rolls and rollers for the steel industry.
In the last 25 years we have seen the rise of regional competitors such as China, South Korea, and Taiwan that have replicated the Japanese Monozukuri process at a cheaper cost, providing the world with cheaper products but at a lower quality. Japan is known for its high-quality products. As a Japanese manufacturing company, how would you define the essence of Japanese monozukuri and how do you implement it in your production processes?
Asian countries had been catching up to produce common quality products at a competitive cost and started mass production with a strong workforce. In that area, Japan cannot compete. The philosophy of “MONOZUKURI” is based not on the contract but on the craftsmanship backed by science and long experience, and we will always share the pleasure of high-quality products with our customers. Therefore, we will try to develop new technology that other companies have never tried before. And therefore, we made the best use of our manpower and implemented our principle of teamwork and continued to improve and develop how to produce high-quality goods.
These untiring efforts of “MONOZUKURI” have depended on our teamwork, and we believe as the teamwork gets stronger, the team members become a family. Colleagues in the business become family members, meaning we have extraordinarily strong ties within the company. This is the mentality of most Japanese businesses, that we have strong connections, and put a strong importance on human relationships.
As Japan entered 1990, it began the two lost decades, where the economy was stagnating. When Japan tried to open overseas to capture the overseas market, they faced what is called the ‘Galapagos syndrome’, where they produced high-quality and reliable products, but were unable to market their products overseas. In your opinion, what should you do to overcome this challenge and become competitive on a global scale?
Focusing on B2B strategies, after the bubble bust in the 1990s, we were able to overcome our economic slump. We try to come up with technology that is unprecedented in the world, focusing on developing new technology and methods of production.
Japanese companies focus on the niche field, so when you ask people overseas about the Japanese manufacturing industry, they often think about Toyota, Panasonic, JFE Steel, Hitachi Zosen, but they often forget about the backbone of the Japanese economy, and that is why we are here to showcase your model. The backbone of the Japanese economy is the chuken kigyo, representing 55% of total added value manufacturing. Would you please showcase to our international readers, your unique technologies and their competitive advantages?
First of all, rolling mill rolls and rollers are one of our excellent products; those are manufactured by the CPC process (continuous pouring process for cladding), and we supply them to the steel industry. Our rolls and rollers show high performance with very small wear and excellent surface texture which leads to high-quality rolled products, long life and cost saving.
Secondly, our photocatalyst goods. These are excellent technologies to showcase to the world. They are supplied to the individual users or consumers as air cleaner or sterilizer. Thirdly, the others are our overlay welding and thermal spraying technologies. For example, in the garbage incinerator, the generated heat from incinerating garbage will be reused. For that reason, the main pipe in the boiler of the incinerator corrodes over time. We have stopped and slowed down the progression of corrosion with our technologies based on our welding and thermal spraying. These services are mainly supplied to the local government.
The main photocatalyst has titanium dioxide as its active component, when applied to surfaces, it functions to purify air so as to prevent contamination of the surface. There are two major characteristics when it comes to photocatalysts, the first one is decomposition, the second is super hydrophilicity. Can you please talk about your photocatalyst business and what solutions you can offer to your customers and clients?
We have been doing this business for more than 10 years. 10 years ago, we didn’t have COVID-19, but we went through SARS, MERS or other new types of virus so we have been supplying our products continuously during this term.
For the photocatalyst business, a thermal spraying process is applied, which is used to produce the tools for the steel industry, that is one of our core and patented technologies.
The photocatalyst materials are powders of titanium oxide that convert organic substances to CO2 and H2O. In the past, we didn’t have a suitable technology for the surface treatment, so we used to mix the photocatalyst powder and binder and apply it to the surface of a product. But its efficiency was low and didn’t reach our target.
Fortunately, we had the technology for the special type of thermal spraying that is high speed and low temperature. By using this technology we successfully applied 100% of the photocatalyst on the material and achieved very high efficiency.
This business regarding the photocatalyst is growing right now under the COVID-19 situation, and as mentioned the COVID-19 is not the first virus that has broken out in the past 10 years. Hopefully it doesn’t happen, but surely another virus will come up in the future. What opportunity do you foresee in the future, when it comes to the overseas market and the specific business?
These types of products of ours, the air purifier or air cleaner, have been sold for a pretty long time, but they didn’t become a high seller. However, due to COVID-19, the sales volume has rapidly expanded.
Is it only available here in Japan or is it also available in the overseas markets?
It’s not largely available overseas now, because we have supplied these products to the limited domestic market under our own brand. Therefore we decided to make an OEM approach to the overseas market. Just before the pandemic, some famous large companies who have a global distribution channel, had an interest in this product. It is tough for us to do the marketing or commercials activities by ourselves because we are an SME. So it is necessary for us to have a good partner to support our products with overseas marketing.
Many Japanese companies, interestingly, invest massive amounts into their R&D to introduce new products and technology to be competitive domestically and globally. Could you please share with us information on your R&D facilities?
R&D represents our dreams and hopes. We started this business with the development of technology that had not been seen in the world. This started with the repairing technology for ingot cases.
The ingot case is a mold used to make steel ingots. Frequently high temperature molten steel was poured into this and caused damage to this ingot case. After repeated damage, the case was only thrown away in the past.
Our company founder developed the technology to repair it by welding. That is the origin of our company. So this is the reason why we are focusing on R&D. Our R&D has four sections: the first one is steel, the second is photocatalyst, the third is the new areas of business that are relevant, and the fourth is industrial air purification.
Especially, regarding the industrial air purification, this area has not become a business yet. However, we are trying to achieve air purification that is economical and cleaner than any other competitor. Factories emit pollution from their plants, and they are facing challenges to be more environmentally friendly, which are also their SDGs.
For example, we have been doing examinations about how to solve the problem of air pollution in large rubber factories. There are so many methods to purify the air. We tried to solve that problem with reasonable cost and in a better way through photocatalyst technology.
Speaking of R&D investment, here in Japan, companies are quite active in R&D investment. However, when it comes to the large companies, if the sales performance of a company is not good, they reduce their investment. Regarding companies that are the same size as ours, probably around 2% of the sales revenue is invested into R&D on average. However, we are investing 3-4% of sales revenue, regardless of our company performance results.
With so much investment into R&D, many Japanese companies that make unique technologies, such as yourself, tend to diversify their business in order to tackle different industries, such as the steel industry or transportation. Looking to the future, are there any specific industries that you would like to introduce your technologies to?
We are asking the employees in the R&D department to take anything they are interested in and do the development work in that area. But for SMEs like us, our employees in R&D are always looking at newly required technology from the market. As a result, we can get financial support from the administrative bodies. So, we take advantage of this subsidy into R&D.
The presidents of JFE Steel and Mitsubishi Heavy Industries both agreed that they encourage SMEs to shift overseas and find partners in terms of co-creation, because this allows them to increase their innovate touch, but also create a synergy between Japanese monozukuri and the foreign know-how in order to be competitive globally. Please tell us your point of view on this, and are you actively looking for foreign business partners in terms of co-creation?
Our chairman decided that we would never transfer our core technology overseas. A lot of companies tried to build factories overseas and distribute products in the local market. However, once their labor costs have risen a lot, their operation might be difficult.
Firstly about photocatalyst products. We are focusing on manufacturing in Japan. We do the OEM business just only for some parts of photocatalyst products. Regarding the sales activity of this business, we found several companies that are good at distribution in the local market, and we have a partnership with them for the distribution.
Secondly, regarding rolls and rollers, we will not export CPC equipment overseas, we will do the manufacturing using the CPC technology only in our factory in Japan. Now we are looking for a good partner in the overseas market that has a factory and ability to do the processing (final machining process) after the CPC process.
Looking to the future, what would be your mid-term strategy to continue your corporate growth and what will be the role of the international market and expansion in the near future for Fujico?
Our policy is to keep developing the technology that is not seen anywhere in the world. We will stick to that policy, however, we will not lean on the existing technologies or existing business areas. Over the past 10 years, our sales volume has increased by 75%. Over the next 10 years we would like to increase it to 30 billion yen.
In order to achieve this goal we need to keep investing in R&D activities, and among those coming up in the new section of R&D there is something related to photocatalyst technology.
In the next 10 years, we would like to complete the technology for the solar power generator that is in a cylinder shape. Normally, the solar power generator is a flat-shaped panel. To install these panels, you have to cut down trees that will cause deforestation. If you put them in the wrong angle, you can not harness the full potential of the sunlight. So, we are trying to change a flat-shaped panel to a cylinder-shaped type, whose shape is similar to fluorescent light. For example, if we put those generators over an agricultural field, the field is undisturbed. Because of the cylinder shape, it can get sunlight wherever the sun is. It is also resistant to typhoons, snow, and extreme weather. It is also easy to install. The product is close to being finished.
We are now working on the business scheme to distribute this product and put it into the market. We are working through the open innovation style, with several other companies as well. One of them is a large company that is good at distribution. We will rely on them for distribution. We are good at coming up with high technology. However, we have to work together with large companies that have good marketing skills. That is the challenge that we are facing because it is hard for us to have good recognition of the brand.
Regarding globalization, Japanese companies are now shifting overseas to capture new markets. You are present in Korea and China; you also have activities in the US. Can you tell us your current international strategies? Is there a specific geographic area that you would like to tackle in the future that you haven’t been able to tackle yet?
For the air purifier we have an original brand as well as the OEM brand. As for the original brand, the volume is not much but we are exporting them to several countries now. On the other hand, regarding the OEM brand, starting from June this year, we will start exporting a large amount to China, the US, Europe, and UK. We are looking to the markets that have a high demand for our products. Also, when we enter into the overseas market, we will have a partnership with the local distributor. We would like to find good regional partners who have a good distribution competence in their local market, and we will take responsibility for the development and production.
One last question, and it is a bit more personal, if I am not wrong, you became president in 2016. Imagine we come back in 2 or 3 years, to interview you again. What would you like to tell us; what are your dreams for the company, what legacy would you like to leave?
That largely depends on the situation of the COVID-19 pandemic. But we started the development of the photocatalyst technology with the hope of cleaning up the planet. In terms of the sales volume, it has increased more than ten times, and in the next fiscal year we are planning to increase sales by 50 times.
I am not saying that we would like to have more profit from this, but it would be of great pleasure if more and more people recognize the value of purifying the air through our technology and we would like to communicate that message to the world and our partners in the local markets as well. For a long time, this type of concept hadn’t been recognized. Personally, I myself was a sales representative of this product in the past, and when I did the sales activity, people used to just say ‘you can just open the window to clean the air’. So, I am so happy that people are now recognizing the value of this technology. 2-3 years from now, I hope this will be the standard around the world.