A Japanese company boasting over 130 years of history, Yukawa Iron Casting Works specializes in crafting premium-quality cast-iron products used by manufacturers in a variety of industries.
Can you provide a brief overview of your company?
I am the fourth-generation leader of this company, and we are celebrating our 133rd anniversary this year. I have been contemplating why we managed to sustain our business for so long. Firstly, by keeping our company small, we navigated economic challenges by having the management team make individual investments in the business. Secondly, we were able to adapt to the evolving needs of different times. We no longer make casting products that we initially had at the time of our foundation. We attained the impressive longevity of our company because we stayed small and successfully transformed our business according to the current demands.
Could you give an example of that evolution in products?
Back in the 1900s, Wakayama was home to several textile and chemical manufacturers, most of which were SMEs. We used to supply casting products to these companies. At that time, they lacked advanced lining technologies, and stainless steel wasn't commonly used. Consequently, casting products were extensively employed by the chemical industry for their fluid-conveying pipes and plant agitators due to their exceptional anti-corrosive properties. However, the demand for such products declined as innovative lining and stainless steel technologies emerged. The tumultuous period of WWII compounded our challenges, as Wakayama endured attacks and widespread factory damage. The aftermath of the war posed substantial obstacles as we worked tirelessly to recover and identify new business avenues.
About 50 years ago, when I was in my 20s, our competitors had garnered most of the shares in the casting industry, prompting us to contemplate how to differentiate ourselves. This led us to focus on crafting specialized casting products, often produced in smaller lots. One remarkable example is the polisher for bearing balls. Manufacturing bearing balls involves an initial pressing step. The original shape formed through the pressing machine has to be polished as a finishing step using a grinding plate made from a special alloy. We started this three-year developmental journey when we heard the problem from one of our customers. This pursuit pushed us to venture into new industries, allowing us to thrive in unexpected ways.
Where do you see the biggest need coming from today or in the short to midterm future? Many industries are looking to diversify the materials they use in order to be more environmentally friendly, which entails a shift from traditional iron and steel. However, other industries need to continue utilizing this type of material due to its inherent strength and security advantages. Today and in the short term, where are the most pressing or interesting applications for the products you create?
Casting has the longest history among all other industries. We were involved in this field back when we didn't have a lot of machines. Its significance extends to the steel-making industry and serves as the foundation of various other industries. Although many industries are trying to be more eco-friendly by reducing carbon emissions, our theme in the casting industry is more foundational. Our emphasis lies in enhancing the environmental conditions within our factories while maintaining cost-effectiveness. To this end, a pivotal transformation we are currently undergoing involves the integration of robots to supplant certain processes. We've navigated numerous transformations throughout our journey. Analogous to the evolutionary processes in biology, survival often hinges on overcoming crises. Similarly, our company has triumphed over a multitude of challenges and adversities, allowing us to endure and operate successfully up to the present day.
Recruitment can be an ongoing challenge in this industry, especially in more rural areas of Japan. How do you balance modernizing the facility and the manufacturing process without sacrificing your 130 years of human expertise and experience? Could you give us insight on how the demographic challenges of Japan are impacting your operation?
I believe that securing human resources presents a substantial obstacle across diverse manufacturing sectors in Japan. Interestingly, only six out of the 25 workers at our plant are Japanese; the remainder are from countries such as Indonesia, the Philippines, Brazil and China. The manager of our factory is Indonesian. About 30 years ago, we began augmenting our workforce with foreign employees, all of whom exhibit remarkable dedication. It is very hard to continue running the business unless we become global.
Casting can be categorized into two distinct types. The first involves mass production, often characterized by the automotive industry. The second, which we specialize in, pertains to high-mix-low-volume production, requiring the utility of various materials. This unique production approach has advantages and, correspondingly, certain weaknesses.
The premise of this report is that now is a very critical time for manufacturers like yourself who specialize in a kind of high-mix-low-volume model. After three years of supply chain disruptions and continued tension between the US and China, Japan, with its advanced technology, reliability and weak yen, has an opportunity to fill the vacuum that this macroeconomic situation has created. Do you agree with this premise that now is a critical moment for Japanese firms? Why or why not?
While we are currently experiencing a historically weak yen, I don't think this situation will continue indefinitely. Over the past 30 years, we have witnessed two instances of a significantly strong yen, nearly reaching JPY 80 per USD. On the contrary, we've also gone through two episodes of a weak yen, both of which approached JPY 150 against the dollar. The currency exchange rate has exhibited substantial fluctuations during this period. Yet, I am hopeful that the weak yen will persist for a longer time. Anchored on that assumption, I believe the direction of Japanese companies will shift.
In any case, I think Japanese industries will maintain their overseas production sites as part of their global expansion strategy. We ourselves have a production site in China. My dream or goal is to expand into the global market through the collaborative efforts of our production facilities in both Japan and China.
Japanese firms that establish their presence in Southeast Asia or China mainly cater to Japanese customers but later look to diversify their clientele bases. Do you feel like your company has products or services to offer that could help non-Japanese companies? If so, which particular countries do you think would value your services the most?
We started our production site in China in 1995, but our decision wasn't guided by the intentions of following Japanese users. Rather, it was a proactive move grounded in our assumption that Japanese companies establishing overseas production sites would require our expertise. Casting products are the basis for many industries.
I don't think the decoupling situation between the US and China will push through. Their relationship is similar to that of a couple – one being a supplier, the other a consumer. Despite intermittent disputes, they recognize the impracticality of indefinite decoupling. I believe their relationship will be better down the line as they remain dependent on the same sources of sustenance.
The geopolitical risk has been a deterrent for many. We are seeing a trend for many manufacturers and the smaller manufacturers that support them moving out of China for India, Vietnam or Thailand as a way to hedge that risk a little bit. In relation to one of your dreams for the company to further internationalize, is there a particular market beyond China that you have your eye on as an interesting choice for that kind of international development?
One of the reasons we chose China was because we believe in the people’s deeply-rooted DNA for monozukuri. On the other hand, countries such as Vietnam, Thailand, Indonesia or Cambodia have strength in the field of agriculture but a more limited footing in manufacturing. Industries focused on assembly, like consumer electronics and textiles, often establish their production bases in these countries before pursuing global expansion.
However, since we specialize in base products, securing the human resources and procuring the materials we need for our production in these countries will be very difficult.
As an SME, is finding like-minded manufacturers in new markets to partner with a strategy you are considering for your international development?
Rather than actively seeking new partners as our primary approach, I think coincidence can aid us in discovering a new market or purpose. For example, I didn't deliberately seek those who hold the second and third positions in our top management team. Their roles fell into place almost by coincidence. Mr. Yoshida used to work for a software company, where he met my second daughter. About five years after they got married, he joined this company and became an integral part of our team. A colleague of ours who previously worked as a purchaser for machine tool makers, facilitated a business relationship with that company and later joined us. I didn't proactively look for these wonderful additions to our team. I want to employ a similar approach to finding good partners in China and other foreign markets. Furthermore, I hope such incidental encounters will happen as we expand our presence into global markets.
If we were to interview you again on the last day of your presidency, do you have a personal goal or an ambition you would like to accomplish by that date?
I don’t have any specific numeric goals for productivity or revenues. We are categorized under the manufacturing industry, but we define our business as belonging to the service sector because we seek and supply products or services that satisfy our users. I believe that what we do is a service to our users. My earnest hope is that our users find both our products and services to be genuinely satisfactory.
The machining center is equipped with an NC device, which serves as a flexible manufacturing facility. Any work input into the machine undergoes processing through this NC device. This made me think that our company should like this machining center. Even as a small company, we want to be able to flexibly respond to our customers’ needs. That meeting significantly influenced my direction for the company.
While a substantial portion of our business partners consists of larger companies, often imposing rigorous standards and requests, overcoming these challenges has proven to be a valuable learning experience. Despite our struggles, including requesting favors and making errors, we managed to not only meet but also advance our technological capabilities to meet their demands. Interacting solely with companies having lenient standards wouldn't have provided us with the necessary growth and expertise. We've achieved significant improvements through our relentless pursuit of excellence and extensive efforts in overcoming these demands.
It's important to note that all of our products are customized to the specific needs of our clients. This means that the casting products designed for Company A cannot be sold to Company B. Given the unique requirements and preferences of different customers, our strategy revolves around serving a diverse range of companies with varying needs. Since casting products are predominantly handcrafted, our accumulated experience is a key selling point that our customers value.
As the number two personnel, I think it is important to continue providing good services based on our experiences and technologies. Some of our customers have production sites in foreign markets, where they consistently maintain the same level of product quality as they do in Japan. Being one of those firms, Yamazaki Mazak expanded their two production sites in China to the UK and Singapore. Additionally, we recently added Fanuc to our roster of major customers, a collaboration that commenced last year. Our efforts to expand and diversify our customer base remain ongoing.