Pursuing the infinite possibilities of titanium while boosting a sustainable society

In the last few decades Japan has seen the rise of regional competitor manufacturers, such as China, South Korea or Taiwan, who have managed to replicate the Japanese monozukuri manufacturing process, but at a lower labour cost. However, we continue to see Japanese firms dominating niche fields, characterized by a high-mix low-volume production. Could you tell us why, in your opinion, Japanese firms have been able to maintain global leadership status, despite the regional competition? 

I don’t have an engineering background, but from before coming to this company, I had worked at factories for many years, so I’ll base my opinion on that experience. With its life-long employment system, Japanese firms were able to harness their employee’s loyalty. In the mass production era of the 70s, when Japan was strong, the employees dedicated their private lives also to their company. However, with the rise of employment cost and arrival of cheaper competitors, the mindset of Japanese people had changed. In terms of working styles, companies shifted their approach to provide health and safety to the employees, in order to retain their loyalty. Now Japanese companies have shifted their perspective, not to simple manufacturing, put to provide products that harness consideration and added value. This considerate mindset could be seen throughout the attention to customers.

In the 90s I was working as an accountant at a metal press company, a SME of about 150 employees. A friend from that company mentioned one day that in one of the products, there was a difference in between the 10-micron allowance that had been agreed with the customer. I though, if was within the spec agreed with the customer there wouldn’t be any complaints. But he said that by having a slight variance within the product, once it’s installed within the production line, there could be an inefficiency caused. It’s true that if there’s 20-micron difference, one must redesign the production line. But the reason why he was so aware and could pay attention to such minute detail is because, he had to make adjustments himself when there was a slight difference in the copper coil materials for the press. In order to cater to that slight difference he had to make adjustments in the die.

He said, as a provider of the material, it’s difficult to provide the exact measurement product in the centre value, however, he wanted to minimize the difference. And with his opinion, I negotiated with a copper coil material provider, which was able to make fine adjustments, so we didn’t have to make many adjustments in the die.

I think the strength of Japanese monozukuri is that there are several engineers and factory workers on-site who are very attentive on minute details. Furthermore, the R&D fields have good relationships with the clients, they find out their specific needs and communicate well within the company, in order to come up with a new product that caters to those needs.

There are many discussions about how companies are understood in the capitalist society but I’m of the conventional old way of thinking, that companies are not for the investors but for the employees and sustaining their lives. I truly believe that by providing a safe environment for the employees, they’re able to harness loyalty and motivation towards the company, which contribute to the investors and stakeholders who are interested in us.

There are two key factors in Japan’s monozukuri. The first is being considerate, and the other is taking challenges to make improvements, because by making big efforts to combine those, Japan will be able to sustain and survive within the difficult competitive market.

Japan isn’t the only advanced society that has super-aging, but it seems to be at the forefront of this trend. In the next fifteen years, 1 in 3 Japanese people are expected to be over the age of 65. There are two main consequences from this. First, the labour crisis; there’s fewer talented graduates to replace seasoned workers, and the problem of transferring the know-how to the new generation of craftspeople. The second, is the shrinking of domestic market; you have fewer consumers and companies. Can you tell us what impact Japan’s population decline is going to have on Toho Titanium, and how you will overcome the challenges this will oppose?

We have been dealing with the aging population matter for about twenty years already. We consider the labour force decline as the biggest issue, and in order to cater to that, we need to utilise digital transformation (DX) and incorporate technologies to pass down the know-how acquired by the engineers. In order to retain the workers in our company, we’re trying to provide a safe environment for their mental and physical health. Furthermore, by introducing IoT among other means, we try to minimize the number of people working at high-risk processes.

The second factor we need to approach, is the reduction of the market, we need to expand into specific fields that have a higher demand. Currently, there’s an increasing demand for the communication and electronic components, we need to shuffle our company so we can allow more human resources in the evolving business.

I’m pushing forward within this company to re-determine and re-define the importance of human labour, it is a valuable asset to our company. As an accountant, I’ve been saying this for over ten years. What is important is not only to see the company asset through a balance sheet of productivity, but to make a big feature on the human resources. If we can do that, we can raise our efficiency as a company overall.

When we talk about Japan or worldwide demography, typically the three common themes are: population decrease, new digital adoption and the environment. 

On November 2020 Prime Minister Yoshihide Suga has declared Japan to become a carbon-neutral society by 2050. Heavy industries involved with metals, such as yourself, have been rushing to reduce their carbon footprint. We know that Toho Titanium engages in recycling, using titanium scraps and electron-beam furnaces. Could you tell us in more detail how Toho Titanium is contributing to make Japan a carbon-neutral society?

We’re currently approaching recycling to reduce our carbon footprint. We understand making our company carbon-neutral is definitely something we must move forward to. In May this year, we came up with a plan to make that possible by 2050. Our first target is for 2030, to reduce our carbon footprint by 40% from 2018. And by 2050, we will be a carbon-neutral company.

For steel companies, when 1ton of steel is made, 2 tons of carbon dioxide is emitted, but making 1ton of titanium emits 1ton of CO₂.

We are already making changes within our factories in Chigasaki and Kitakyushu, using electricity that is generated without emitting carbon dioxide. Clients like Apple demand it, so we’ve shifted towards that, especially in the chemical and the catalyst businesses.

In the titanium metal business, we must reduce CO₂ and there’s a demand in the world for titanium to be light, durable and corrosion-free, but another requirement is it should be manufactured carbon-free. In order to do that we’re trying to introduce a new technology utilising a furnace to reduce the amount of carbon dioxide emitted. Currently, 80% of our carbon footprint is emitted through the manufacturing of sponge titanium. Thus, we’re trying to develop a new distillation technology to reduce that amount, and we hope to launch it by 2024. Our target is to reduce 60% of the emission through this distillation process, and the remaining 40% by reducing the use of energy and purchasing green energy.

Toho Titanium is obviously known for its titanium business, but you also have the chemicals and catalysts business. What kind of synergies have you been able to create between these three main business lines?

Those other two business lines have evolved through the manufacturing of the sponge and ingot titanium.

We saw a research saying in terms of the sales, titanium is still your largest business. But the chemical business, increased its sales almost 70% compared to last year. More than titanium’s 44% and catalysts’26%. Can you tell us why it increased so rapidly and how do you plan on capitalizing this growth?

We had a big impact from COVID-19. In terms of the titanium business, due to the decline of the demand in the aerospace industry, there aren’t new airplane manufacturers of Boeing or Airbus, so there’s been a decrease in the needs for sponge and ingot. I believe this is temporary, however, after the pandemic, we may not receive the same amount as before.

Regarding our chemical business centred around nickel powder, there’s been an increase in the demand for computers and communication devices for remote working. Hence, the need for ceramic condenser has been rising. Although it’s a temporary situation, there’s a tendency in the upsurge of the telecommunication industry and we believe it will continue.

I foresee that in the near future, the percentage of our main business line will change. Today our main focus is the titanium metal business, however, people’s lifestyles are changing; people will make less business trips overseas, they prefer to do video conferences. Therefore, in order to increase the turnover of the usage of airplanes, their size will be smaller and the need for titanium will be low, resulting in a decrease of the titanium metal business, but simultaneously, an increase in the catalysts and chemical businesses.

When we spoke with the president of Osaka Titanium Technologies, he emphasised how finding local partners in the United States was vital for them to penetrate and unlock the North American market. We know about your involvement in Saudi Arabia, but we would like to know what is the role of co-creation in your business model? And are you presently looking for any new partners?

Regarding our collaboration with other companies, we have a sales agreement with TIMET, a U.S. company that has dealings with Boeing. In order for us to cater to a surging need of titanium, we discussed where we should have the factory. Rather than having it in Japan, where the electricity cost is high, we focused on Saudi Arabia, which has the cheapest electricity cost, allowing us to produce at a lower price.

As for catalysts, our main target is currently China and United States. For the chemicals business our main market is Japan, however, we need to expand overseas as well,  for  business continuity planning (BCP), and to have factory that is near where it’s been consumed.

The purpose of M&A and investing in startup overseas companies is to stabilise our finance for mid and long term. We focus on high-end and niche fields of businesses; by expanding the source of income or profit, we hope to achieve a stability in our financial situation.

Investing in the carbon-free area is considerable. In order to retrieve the investment, our main focus would be European countries, which have high awareness towards carbon-neutral solutions.

Since there’s just a small group of manufacturers that can produce high-purity titanium, could you tell us what’s the defining feature of Toho Titanium? What sets you apart from the other companies in this very elite group?

Because we are material providers, the key for our company is that we need to grasp exactly what the need of the customer is. Our investors, JX Nippon Mining and Metals, produce semiconductor-related parts, and they can tell us exactly how pure the titanium should be.

Our biggest strength tight relationship with our customers, for example, our engineers have meeting with JX Nippon Mining and Metals once a month. Allowing us to grasp what their customers are requiring so we can foresee and respond to those needs. This client has 95% share in the copper foil printing sector, and that serves to the high requirements of the iPhone. We can learn about the demands and needs of the industry, through the close relationships with our customers and makes us different from other companies.

You recently became the president of Toho Titanium this June. Imagine we come back in five years and have this interview again. What would you like to tell us? What are the dreams and goals you would like to have accomplished by then?

In five years I probably won’t be here, but as I mentioned before, the company is for the employees, so what is important is to establish an infrastructure for their happiness and good health. In order to do that, I would like to pursue changes in how people work to include diversity. By establishing our foothold, I believe we can contribute to the clients and society itself.

We are a 70-year-old company, and when you have such a long history, there can be an atmosphere of stagnation, which is true for us. I would like to create a comfortable environment for the workers; 50% for their mind and 50% it’s important for their physical safety. 

It’s my dream and objective to make the company stable and highly evaluated by our stakeholders in 30 years, when we will have our 100-year anniversary.