A go-to partner for major clients in the automotive sector and beyond, the Japanese manufacturer is out to grow its global sales.
It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, customer-centric production, and advanced technology. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not?
Yes, the weakening of JPY has indeed had positive effects on our exports. However, in terms of importing materials and electronic components, the prices are increasing. Overall, though, the positive impact outweighs the negatives. Regarding the China-US decoupling situation, we have decided to close down our US factory this year. This strategic move allows us to bring all of our production back to Japan and effectively export our products to our US customers.
Presently, we operate one factory here, and there is another factory under construction in a different location within Japan. The new facility, once completed, will encompass all the necessary capabilities previously present in the US factory. Our focus with this new factory is to produce goods tailored specifically for the US market. Additionally, we will maintain our sales office in the US to ensure we retain our valuable customers there. Overall, I wholeheartedly agree with your assessment of the positive effects on the Japanese economy. As a company, we perceive significant growth opportunities despite the recent supply chain disruptions.
It is a common understanding that the previous era of Japanese manufacturing was actually all about global manufacturing; Japanese firms localized their production in countries like China and Vietnam, however, nowadays it feels like the inverse is happening. With the weak JPY and low wages, there is a significant push to bring back manufacturing to Japan, and obviously, it is an exciting shift but not without its challenges, chiefly among them being Japan’s aging population. In particular, rural areas pose all kinds of challenges when it comes to recruitment and technical inheritance. Can you talk to us about how you are navigating this path to bringing back manufacturing to Japan and how you are mitigating some of the obstacles you are facing along the way?
The challenges posed by the aging population and declining birth rate have indeed become a significant concern for our company, and each passing year brings added difficulty in recruitment efforts. Nonetheless, as a smaller enterprise, we have devised measures to sustain the company by hiring a modest number of 2-3 people annually. To address the evolving demographic landscape, we have made adjustments to our retirement policy. The retirement age, which was previously set at 60 years old, has been extended to 65 years old. Furthermore, we offer the option for physically capable employees to continue with us on a yearly contract basis until they reach 70 years of age.
An interesting trend we have observed is the increase in mid-career applications. We perceive this as a valuable opportunity, as these mid-career hires bring unique skills and experiences that can significantly bolster our company's overall capabilities
Eventually, these experts with a wealth of knowledge are going to have to retire. How are you making sure that their expertise is getting passed on to the next generation?
At Yuhara, we believe that on-the-job (OJT) training is the essence of learning and acquiring knowledge from experienced senior staff members. By working closely with seasoned engineers, our employees gain invaluable real-world insights that enhance their efficiency in their respective roles. While we do acknowledge the importance of in-class training, our firm places significant value on the practical learning experience provided through OJT.
We recognize and appreciate the unique strengths and attributes that each individual possesses. Some employees may excel in handling intricate tasks, while others may thrive in physically demanding assignments. When assigning roles, we meticulously evaluate and match each employee's skill set to the job at hand. This emphasis on aligning the right person with the right job allows us to unlock the full potential of every team member, creating a dynamic and productive work environment.
Your specialty is in the bending and processing technology you have, and this is perfect for very precise bending and processing as well as parts on a very small scale. Could you tell us a little more about this technology and what you believe to be your core strengths and competencies that would endear you to your foreign clients?
At the core of our technological prowess lies our expertise in welding, cutting, and metal deforming, with a particular focus on metal bending. While we have acquired bending machines, what truly sets us apart is our in-house production of jigs and tools. The quality of metal bends crucially depends on these tools, and the fact that we have the capability to design and manufacture our own jigs and tools gives us a distinct advantage.
While our primary product line caters to the automotive industry, we also manufacture pipes for H3 rockets. Notably, Mitsubishi Heavy Industry (MHI) is involved in producing these pipes as well, but we handle the parts that they are unable to manufacture. Although our production facility is on par with major companies like MHI, our key differentiation lies in our exclusive jigs, tools, and parameter settings, enabling us to deliver exceptionally precise and high-quality pipes that are unmatched by any other company.
Beyond the automotive sector, are there any new applications or other types of clients or fields that you are interested in putting a greater emphasis on?
Our current focus centers around the aerospace and EV industries, where our expertise lies in effective heat management solutions. In a promising development, we have entered into collaboration with a Japanese tier-1 supplier; however, due to non-disclosure agreements, I am unable to disclose their name presently. As part of the Keiretsu system directive, our pipes have gained widespread adoption, making them the preferred choice for various tier-1 suppliers. This advantage stems from the unwavering trust that other companies have in our high-quality and precision-engineered products.
Given the surge in demand for electric vehicles, the importance of heat control to prevent lithium-ion battery overheating has never been more critical. Our company is dedicated to establishing a dominant market share in this pivotal field.
Notably, Yuhara Manufacturing has a rich legacy of collaboration with Nissan, tracing back to its inception when my grandfather established the company with the intention of working closely with Nissan. Over time, we have evolved into a tier-2 company, and although we do not engage in direct business with Nissan, they have specified our parts as an integral manufacturing component, solidifying our position as a trusted partner.
Are you actively trying to work with more tier-1 companies in the United States that themselves work with major car makers such as Ford?
Yes, we plan to expand to foreign car brands.
China is another huge EV market, as is Europe. Do you have any ambitions beyond the United States in terms of being able to supply these critical components?
While China presents a highly attractive market for our products, establishing a direct office may not be the most suitable approach for us. Instead, we are actively seeking a partnership with a reputable trader who can effectively penetrate the Chinese market with our offerings. To achieve this, we are collaborating with the Japanese External Trade Organization (JETRO) to identify the most suitable trading partner.
Entering a completely new overseas market poses certain challenges, one of which is finding a partner who truly values our technology, quality, and the reliability of our supply. For instance, our thermal management solutions for EVs are sophisticated and unique, yet there are similar products available. Furthermore, the prevalence of copycat products in the Chinese market adds complexity to the situation. Local companies may opt for cheaper and inferior alternatives, overlooking the additional advantages our products provide, such as enhanced stability. Notably, our production capacity of up to 10,000 units per month maintains impeccable quality and precision. It is challenging for potential partners to fully grasp and appreciate the value we offer without actively seeking top-tier quality and precision.
The true essence of what we do lies beneath the surface, and fortunately, Nissan recognizes and appreciates the intricacies of our work. Our ability to consistently deliver efficient, high-quality, and stable supplies has earned us their trust. However, conveying this unique value proposition to companies like Ford, GM, and various Chinese manufacturers remains a challenge. Despite our willingness and capability to collaborate with overseas brands, effectively communicating our strengths to potential partners continues to be an endeavor.
Throughout Japan's automotive dominance on the world stage, we observed that its keiretsu structure, an industrial organization model, played a pivotal role in helping foster close ties between tier-2 and tier-3 manufacturers and the top-tier OEM makers. Now with the current EV revolution taking place, we are seeing huge disruptions to this model. China is the world’s largest maker of batteries with companies like Contemporary Amperex Technology Co., Limited (CATL), and the world’s largest EV maker is Tesla, an American automotive company. How do you foresee your customer base developing with these disruptions in the automotive industry? To what extent will overseas customers make up your customer base in the future?
It is challenging to ascertain the exact percentage or ratio of overseas to domestic customers. As the automotive industry transitions to Electric Vehicles (EVs), our business model will shift from direct engagement with automotive manufacturers to collaborating with battery providers and in-vehicle component suppliers. Currently, our factory in Thailand is collaborating with TDK in Malaysia, where they integrate our products into their offerings, subsequently supplying them to prominent companies like GM and Audi.
Your company really is facing an impossible compromise between high-quality, high-volume, and high-mix products. This is especially challenging when every market has its own priorities and emphasis. It has been nearly 30 years since you opened in the United States. What have been some of the biggest lessons or takeaways you learned on how to approach international business? Where will you go from here to apply those lessons in the future?
I firmly believe that the automotive industry, regardless of its location, always demands a focus on Quality, Cost, and Delivery (QCD). Our experience of operating a manufacturing facility in the US for over two decades has highlighted that there isn't a vast difference between our US and Thai factories, making it challenging to pinpoint distinct takeaways. However, the most notable disparity lies in the cultural aspects. As you may already know, certain countries exhibit strict adherence to rules and regulations in the manufacturing sector, while others might not. Nonetheless, our paramount goal remains consistent - delivering high-quality products.
Presently, our overseas strategy revolves around expanding our Thai factory's capabilities and reinforcing our Japanese manufacturing stronghold. We also intend to bolster our North American sales office, undertaking robust sales activities in the region.
Before we embark on extensive overseas expansion, we are prioritizing Research and Development (R&D) efforts to enhance products that we believe require further refinement before going international. By innovating and developing new functional components and sophisticated parts, we aim to better cater to the diverse needs of various markets.
You mentioned earlier how you are closing the US factory, but bringing the equipment there back to Japan, basically increasing your production capacity here in the domestic market. Has this new domestic production center already started operations? If not, when will you open this facility for production?
The schedule right now is to transport the equipment over two different shipments. The first will be in late August 2023, and then we will be able to start partial manufacturing in later September 2023. The second delivery will be in late December 2023, so we are hoping to have full operations in Japan to replace our US operations in early 2024.
Imagine that we come back on the very last day of your presidency and have this interview all over again. What goals or dreams do you hope to achieve by the time you are ready to pass the baton onto the next generation of Yuhara Manufacturing executives?
First and foremost, it is of utmost importance for our company to establish a solid foundation in each industry we serve. This approach enables us to enhance our market share in each respective sector. Currently, we are collaborating with VOOL, a venture company from Estonia, on a remarkable project: creating a micro ISS. This innovative small container conducts experiments similar to those performed on the full-scale International Space Station. Although the project may not materialize into a fully-fledged business during my tenure, there is a well-defined roadmap in place, and I firmly believe that the next generation will reap substantial benefits from the seeds sown today.
The ISS container is available in various sizes, equipped with a camera to monitor and gather data from the experiments. In comparison to conducting experiments on the full-scale ISS, which incurs costs exceeding USD 100 million, our container remarkably reduces these expenses by a factor of 100.
Furthermore, I would like to highlight an earlier oversight: Toyota has approached us concerning our pipes, intending to incorporate our products into a limited-production sports car. This exclusive 2-seater low-nose sports car, projected to release in 2050, is exceptionally fast, enabling travel from here to Tokyo in under an hour. Regrettably, it's not an EV but rather an internal combustion engine-powered vehicle."