Founded in 1963, initially as the Sanyo Alloy Research Institute, the Japanese company Sanalloy is a leading specialist in the production of cemented carbides – heavy metal alloys whose hardness is second only to that of diamonds.
Over the last 25-30 years, Japan has seen the rise of regional manufacturing competitors who have replicated Japanese monozukuri processes by taking advantage of cheaper labor costs and pushing Japan out of mass industrial markets. However, Japan is still a leader when it comes to niche B2B fields. How have Japanese firms been able to maintain their leadership despite the stiff price competition?
During the Cold War, other Asian countries were unable to set up production facilities, and Japan had an advantage in manufacturing. However, after the end of the Cold War, China, South Korea, and other countries began to have production capacity with low labor costs, and Japan lost its advantage in terms of price competition.
In the 1980s, Japan was the only country in Asia that could invest under WTO rules in production, manufacturing, and exports to the West. However, after the end of the Cold War, Malaysia, South Korea, China, and other countries reformed, opened up, and liberalized their economies, and Western countries began to invest in non-Japanese countries and use them as production bases due to their cheap labor and production costs. Japan also shifted its production bases to these countries.
Something similar was seen in the past in Europe and the U.S. as well, following the Industrial Revolution. I believe that a similar situation focused in France from the 1860s to the 1900s.
I believe that the situation in Japan's manufacturing industry is not unique to Japan, but is a phenomenon that has occurred in the past in advanced industrial countries in Europe and the United States. Moreover, if we look at the companies that are still competitive in these countries today, I believe that the source of their competitiveness lies in their original technologies and business models, and in the fact that they have established a brand power that is accepted worldwide.
What would you say are the main competitive advantages of Japanese monozukuri? Why should someone take Japanese products or services instead of Chinese ones?
We Japanese place the highest priority on manufacturing first, not business. In comparison to Japan, I believe that China puts business first.
Japan has the world’s oldest society and a rapidly shrinking population, which means a reduced labor force and less demand for products in general. What are some of the challenges and opportunities this demographic shift is presenting for Sanalloy?
Although the population of Japan as a whole is declining, the population of the region in which we are located is relatively stable and the decline is not as great as in other regions. In addition, compared to urban areas such as Tokyo and Osaka, there is less migration of people, and many of our employees are parents, children, and siblings. This is advantageous for the transfer of technology and skills.
In addition, while demand for our products in Japan is shrinking, our domestic and overseas sales are increasing. Internally, in preparation for future population decline, the company's manufacturing processes have become more data-driven and standardized, and there has been a shift to production management that does not rely on skilled labor, which has allowed for smoother overseas production and sales.
Even though the domestic market is shrinking, your overseas sales are increasing. What are some of the competitive advantages that have increased your sales overseas?
Our main customers are Japanese companies with factories and offices overseas. In addition to our "Made in Japan" domestic customers, many Japanese companies with "Made by Japan" manufacturing bases overseas are also our customers.
Since the company was established, we have been selling our products to the global market and have a large number of foreign employees. There are many cases where foreigners who received technical training at our company have returned to their home countries, established companies, and become our business partners, so we are not doing anything special for overseas customers. Basically, I think the most important thing is to provide a stable supply of good products at reasonable prices to our customers in Japan and overseas.
You said most of your clients are Japanese companies based in overseas markets. Are you looking to further expand and add international companies to your list of clientele?
Yes, we think so. Our customers are companies involved in advanced industrial production, and our customers are all companies that demand a high level of quality, both domestically and internationally.
The automotive sector is undergoing a great time of change, and with the switch to EVs, there is demand emerging for new, lighter-weight materials such as aluminum, magnesium and CFRP. What are the effects of this change on your business, and are you developing any new products to meet these new demands of the automotive industry?
The use of aluminum, magnesium alloys, and copper alloys has been increasing in recent years due to the development of EVs. On the other hand, copper alloys and aluminum alloys, which are new lightweight, soft materials, have problems such as easy surface adhesion when cemented carbide is used in the manufacturing process due to their high affinity with cobalt and nickel, the binding metals of cemented carbide, and measures such as using cemented carbide with low binding metal content or coating the die surface Therefore, measures such as using cemented carbide with low binding metal content or applying coatings to the mold surface have been taken. However, these measures have been problematic because it is difficult to select a cemented carbide with the required mechanical properties, and the coating process causes dimensional changes and high costs.
We are diversifying our products so that they can be applied to a greater variety of materials. Some materials cannot be handled by cemented carbide, and although they are not cemented carbide, they are a new type of material with properties such as corrosion resistance, adhesion resistance, and heat resistance.
The P-Series can achieve a reduction in friction coefficients without damaging conventional characteristics. Could you tell us a bit more about the P-Series and what makes it superior to more conventional carbide products?
Hard material, yet resistant to chipping. Conventionally, when a material is hard, it cracks easily; the P series is a product that combines the properties of being hard but resistant to cracking by reducing the friction of the surface alloy while hardening the surface. At first, we were making products in which various cemented carbides were layered like a baumkuchen. The surface of the alloy is a hard material, but the inside has high toughness and is hard to crack. However, the layered structure of the material alone sometimes resulted in cracking due to impact at the boundaries of the alloy layers.
The P-series cemented carbides developed by Minebea have a reduced coefficient of friction without compromising conventional mechanical properties, and have excellent resistance to seizure and wear against soft materials such as copper alloys. The P series (PRD9N) was found to have a lower coefficient of friction than conventional cemented carbides (our RD25). A lower coefficient of friction suppresses the frictional heat generated during machining, and thus suppresses seizure between the soft material to be machined and the cemented carbide used as the mold material.
The alloys we are currently manufacturing are produced by a completely different process, and we have succeeded in making the alloy material uniform but with high toughness inside and high hardness on the surface.
What applications can these specific hardened cemented carbides have?
We have a lot of customers in technical fields such as forging and deep drawing. Products with very hard surfaces can be really difficult to coat, which is why we developed the P series.
Can you tell us a little bit more about your R&D strategy, and are there any other products or technologies that you would like to showcase to our international readers?
One of our strengths is our robust supply chain. Since we have multiple factories in Japan and overseas, even if one of our factories is damaged by a natural disaster, we can substitute production at another factory. The processes at each factory are checked in Japan, and the quality of products made overseas is also highly evaluated by our customers.
In addition, since we collect sold products and recycle them in-house, we have built a supply chain that can handle issues such as the supply of rare metals and rare earths, even if the supply of rare metals and rare earths is disrupted in the future, as long as the used products are returned to us. Even with global supply chain issues, our customers trust our ability to supply their products.
We have sufficient stock in our recycling program, which allows us to divide our production capacity among Korea, China, and Taiwan.
Over the last two years, COVID has posed major issues for global shipping and logistics. Quarantine measures have impacted human resources, the restricting of commercial flights have narrowed down the shipping capacity, and with the near tripling of oil prices, 77% of international ports reported delays last year. How have these global disruptions in shipping and logistics affected your business?
Supply chain vulnerability has always been a major issue in Japan. Our end customer's production value has increased or decreased over the past two years due to the impact of COVID. On the other hand, since we had set up a company quarantine system in the event of the spread of avian flu and SARS, and our factories were trained on a daily basis to be prepared for natural disasters and other troubles, there were no major problems with our production system. Our production system did not experience any major troubles.
You have overseas factories in Thailand, which is very different to Japan in terms of engineering skills and equipment. How are you able to ensure the quality of your products in overseas markets?
We entered Thailand in 2005, but at that time it was very difficult to produce products of the same quality as those in Japan. However, in 2013, we opened a new factory in Thailand, which is not only equipped with the latest facilities, but also has 72 checkpoints in the manufacturing process, and the production process has been standardized and standardized by using data. The Thai factory not only has the latest equipment, but also divides the manufacturing process into 72 checkpoints, and standardizes the production process. The production data from the Thai factory is shared with our Japanese counterparts on an on-time basis to check the production process, ensuring that the quality is maintained at the same level as in Japan.
Can you tell us what role collaboration and co-creation play in your business model? Are you looking for any new co-creation partners in overseas markets?
As a company that develops and produces materials, we work with our customers, such as parts and die makers, to develop new products. In the past, we mainly developed new material types in response to customer requests, but in recent years, we have responded to requests from customers that we did not anticipate at the time of development, and some of our products have been used in applications that are completely different from those we initially anticipated. In overseas markets, we are looking for alliance partners in regions where we have not yet entered.
Moving forward, what other countries or regions have you identified for further expansion into, and what strategies will you employ to do so?
We have overseas sales and production bases in Asian countries such as South Korea, Thailand, Malaysia, and China. Currently, policies linking the economy and security of each country are emerging, and we plan to expand our sales and production bases in accordance with the policies of each country.
As regions that we will place particular emphasis on in the future, we are focusing on North America and India.
In order to expand your presence in those two markets, what strategies will be implemented to do that?
For the ASEAN and India regions, we plan to increase the supply of products from our plants in Thailand. On the other hand, for the North American market, we plan to increase the supply of products from our plant in Japan, as the supply chain will be limited from the viewpoint of economic security in the future.
Imagine we come back to interview you again in three years' time for your company’s 50th anniversary. What would you like to have achieved by then?
We would like to remain stable without any changes. We want to continue to be a company that sells good products at a fair price and satisfies customers and employees as we do now.