Unlocking Regional Synergies: Iwata’s Path to Global Leadership in Advanced Materials

During our last interview, you told us that Malaysia was a potential base for future expansion, and since then the acquisition of EXQ Materials has been completed through the advice of YCP. This signals a strategic move to strengthen your position in the chemical and semiconductor materials markets in Asia. Could you tell us about this process, how it happened, and the core reasons for specifically Malaysia as the target? 

For Iwata & Co., we’ve always prioritized entering the fields of AI and semiconductors because these fields are experiencing rapid growth. As for Malaysia, there are many reasons behind that decision. First of all, this decision was made as the result of a comprehensive evaluation of growth opportunities, especially within the chemical and semiconductor industries. Another reason relates to the governmental initiatives put in place by both the Malaysian government and the Penang State. These are granted to companies that settle down and start production in the country. I believe this is why Intel has invested heavily in the area, with estimates of USD 70 billion of investment from the giant firm. This move by Intel certainly triggered our curiosity in Malaysia.        This would also bring back higher stakeholders in America and Europe. All of these factors led to our acquisition and the establishment of our presence in Malaysia.

Were the logistics capabilities of EXQ materials another key reason? How are you going to maximize the synergies between Iwata and EXQ Iwata?

Yes, you are correct, and combining Iwata’s localized market knowledge with EXQ’s possession of regional distribution allows us to expand our reach across Asia. Malaysia is located in the heart of Southeast Asia. In particular, we aim to penetrate emerging markets, a huge variety of which exist in Southeast Asia.

EXQ’s acquisition makes the import and export into and out of Malaysia easier. The tariffs for imports are much lower than other countries like Thailand or the Philippines. This makes it easier to procure chemical compounds or equipment of Japanese origin. This results in a better business environment.

Will this be the first of many mergers and acquisitions?

You are correct. This is just the middle step in our long path to expand our business all across Southeast Asian countries. Thailand was a base prior to the acquisition in Malaysia, and while Malaysia is the focus, reaching out beyond is a core strategy.

Have you set any targets for EXQ Iwata by 2030?

We are currently in the process of setting up our strategy plan for this newly established company. Right now, we cannot say what financial results will happen over the short term. In regards to 2030, while we cannot say for certain right now, we do foresee good GDP growth from Southeast Asian countries, which paints a good picture for Malaysia and EXQ. The ultimate goal here is to become a top-tier global player in chemicals and advanced materials. We are aiming to increase income by 10% year-to-year, something we think is achievable.

While it is true that we might seem ambitious, we are optimistic about the growth not only for EXQ but Malaysia and Southeast Asia in general.

Will your internationalization focus mostly on M&As, partnerships, or joint ventures?

M&As are just one arm of our overall strategy for overseas expansion. We are not just limited to M&A activities, and grouping up with other companies is a convenient approach, creating a larger network. We are also looking into joint ventures. Our company will continue to invest in R&D to create advanced chemical solutions that support industries such as semiconductors, energy, EV, and life sciences. Now we are looking forward to joint ventures with manufacturing companies, which can help us excel in our best features. To summarize, while M&A is part of our strategy, we are also looking for cooperative partners who have the capabilities to accelerate our growth in the Southeast Asian region.

In conversations with other chemical companies in our interviews, the topic of the misperception of the chemical industry of Japan has often come up. The perception is that it is an industry that is struggling to compete with China in terms of cost-efficiency and production scale. There are also structural challenges, such as Japan’s aging population and shrinking industrial base. Can you tell us why you believe this misperception is wrong, and why do you believe the Japanese chemical industry is set to thrive in the future?     

It is my belief that Japan still has many things to offer the semiconductor industry. Japan is widely known as a country that drives technological solutions and is able to leverage DX, IoT, and precision manufacturing. This was actually one of the reasons we acquired EXQ Iwata, serving as a hub to procure materials and equipment from Japan and supply those to our customers, semiconductor manufacturing companies in Malaysia.

Of course, Japanese firms cannot compete with China or similar countries in terms of price competitiveness, but preference is still given to Japanese firms because of the added value provided. This element is unique to Japan, and no other countries can offer the advanced technology-driven techniques Japan has. All of this combines to enable Japan to remain responsive to changing market needs. From this perspective, I believe that Japan still has many advantages.

Japanese chemical firms are now considered global leaders. In this respect, how does EXQ Iwata allow you to reinforce your abilities as an advanced leader in specialized chemicals?

EXQ Iwata is going to be the core foundation of our operation, and we see a bright future. The company presents a more strategic, integrable, and scalable approach, which can take advantage of the synergies as a result of our firm providing materials and equipment. The plan is to continue to drive innovation, create synergy, and strengthen our presence as a leading company in this area.

Are you going to capitalize on EXQ's existing customer base?

You are correct, our plan is to use EXQ’s existing customer base as a launching pad to further penetrate other high-growth Asian markets such as Vietnam or Indonesia. Expanding our presence in those emerging markets will significantly increase demand for our chemicals and advanced materials.

I would also like to mention Australia. I will personally be visiting the country next year to establish some business there. Potentially, our market coverage might be expanding in 2025.

The acquisition of EXQ presents opportunities for your company to enhance your company’s edge in the chemicals and semiconductor sector. How does this acquisition further differentiate Iwata?

We need a combination of our established manufacturing capabilities in Japan and the integrated expertise and synergy in Malaysia. This will create specialized knowledge and a strong product lineup, as well as advanced logistics capabilities in this area. This will become a great advantage to our company compared to some of our rivals.

We consider ourselves to be an R&D-enhanced company, and we prioritize R&D to deliver customized solutions tailored to the specific needs of customers in the chemical and semiconductor material sectors. The accumulated knowledge we have will open many doors and allow us to tackle even more regions and industries. Our ideal situation is to be able to listen to customer needs inside and outside of Japan. Taking an approach like this will enable us to discover solutions that go beyond the existing ones.

You’ve spoken extensively today about the benefits of Malaysia, but in general, acquisitions do present challenges, especially cross-cultural ones. Can you tell us how you have been successful in integrating EXQ Iwata at the labor level? What does a strategy for successful integration look like?

Seamless cultural and operational integration has to take place, but right now, we’ve just started. It is hard to say what our cultural alignment initiatives will be. Certainly, we are fostering open communication between teams in Japan and Malaysia to bridge the gap between cultural and operational differences. The biggest factor needs to be mutual respect, and I feel that staff in both locations understand the other’s background. Cultural harmony and mutual respect can create professional efficiency and employee engagement.

We dispatch our employees to Malaysia, and some of the Malaysian staff come here to Japan. In December 2024, the SEMICON Expo took place in Japan, so we brought some of the Malaysian staff here to visit the expo. I believe this approach allows us to create cross-cultural training programs that can ensure that employees from both countries can easily collaborate.

A few months ago, we had the opportunity to interview Tokyo Electron, and their president, Mr. Kawai, talked about how potentially the semiconductor market could be worth USD 5 trillion by 2050, a tenfold increase from 2023. Obviously, chemicals play a key part in this growth, almost like an invisible giant that helps semiconductors become what they can be. In this journey, what role do you think Iwata will play in building this USD 5 trillion market for semiconductors?

We aren’t just a trade company; rather, we are a company that combines trading capabilities with manufacturing capabilities. This makes us stand out and makes us unique. Our company actually has another small factory in Kumamoto.

If I answer your question from the perspective of the chemical industry, the industry itself allows us to be more creative. We can create products from scratch to meet the customers' needs. We also have upscaled, accumulated knowledge in the area, which is expanded by our network all across Southeast Asia.

If I now answer from a semiconductor perspective, we benefit from a close presence near key stakeholders in Japan. Kumamoto has been in the news a lot over recent years because of Sony and TSMC’s opening of a new fabrication plant. During the next five years, we believe that the semiconductor industry in Japan will jump to three or maybe more times higher than it is right now.

As a company, we are driven by innovation and the desire to create in-house products. Customers benefit from our R&D capabilities to address emerging technological trends and the creation of next-generation materials. This is something that not many companies can actually do, making Iwata unique in a competitive market. Even though the semiconductor industry is in a state of constant change, our company possesses the capabilities to be flexible and adjust to the ever-changing environment.

The last time we interviewed you, it was mentioned that your aim was to drive technological evolution and sustainability through next-generation chemicals, leveraging the power of chemistry to solidify your international presence. Imagine many years from now when you are retired. What kind of Iwata & Co. do you want to leave behind for the next generation of executives?

Advanced chemicals are found in almost every aspect of human life, and there is no part of life that isn’t connected to chemicals in some way or another. I want my company to represent solutions to people around the world, supporting industries such as semiconductors, renewable energy, EVs, and life sciences. I would like Iwata to be a pioneer in any area where people or companies need support with chemicals.

For more information, please visit their website at: https://iwata-cc.jp/