Under five business lines – Commodity Chemicals, Polymers & Oligomers, Adhesive Materials, Performance Chemicals and Plastics – the Toagosei Group has been recognized the world over for its technological strengths and value-added products.
Since WWII, Japan has gained an excellent international reputation for its manufacturing industry. The foundation of this manufacturing industry is the chemical industry, known as the “industry of industries”. Japan does not have a lot of natural resources, so has had to resynthesize its imported chemicals in the best way possible and this has allowed it to become the third largest chemical producer by revenue in the world. Why do you think is Japan so successful when it comes to materials? What are the advantages of the Japanese chemical industry?
In the late 19th century, the business of chemistry began in Germany and England. Japan followed the chemical research that had begun in Europe and the United States. Japan once held a significant share of the market for plastic-based products such as polypropylene and polyethylene, but simple plastic-based products became inexpensive to produce and lost their appeal. However, chemical products can open up entirely new applications through combination and processing. The potential for growth is unlimited as both the applicable fields and functions expand.
Japanese manufacturers are focusing their R&D efforts on exploiting the various properties of chemical products. The chemical industry is developing beyond expectations, for example, in the semiconductor field. Semiconductor chips are made from a variety of chemical substances and can therefore be considered chemical products. Also, in the automotive sector, there is a growing need for batteries for EVs; people who see an EV car do not necessarily think it has anything to do with the chemical industry. However, the batteries are made from a combination of various chemical products. Japanese chemical manufacturers are adept at enhancing the functionality of their various products. They are constantly improving their products. We are proud of our company's history and approach.
You mentioned that semiconductor chips are made from a combination of chemical products. For the past two years in the semiconductor industry we have seen a shortage of chips around the world and to address such shortages, big chip manufacturers are opening up new fabs. Intel has plans to open one in the United States, while TSMC has begun building one in Kumamoto with Sony. As a manufacturer of performance chemicals, what opportunities has the increase in semiconductor production presented to your company?
Toagosei manufactures high-purity liquid hydrogen chloride used in the production of semiconductor chips and supplies it to reputable companies in this field. We currently export not only to Japan, but also to Asia and the U.S. In the future, we hope to establish infrastructure for manufacturing and production in the U.S. We are planning to export many products to the U.S. this year, but due to logistical problems and container delays, things are not going according to plan. We hope that this problem will be resolved soon.
In addition, current and future automobiles will use semiconductors in large quantities, and our chemical products are also used in batteries for electric vehicles. Some players in this industry are more concerned about the low cost of materials rather than their performance. However, our customers produce high-performance batteries, and we both agree that we are not only looking for cost reductions, but also for quality. This is why our business is doing well. We intend to focus our R&D efforts on the two products I just mentioned to expand our business.
At the 2021 United Nations Climate Change Conference (COP26) last November, a rulebook was laid out as to how countries will achieve carbon neutrality by 2050. What steps is Toagosei taking to make its production process more environmentally friendly as we work towards the goal of carbon neutrality?
Traditional energy sources such as oil, coal, and natural gas have been the primary energy sources used to date. However, new energy sources such as hydrogen gas and solar energy are also beginning to be deployed on a large scale. From a macro perspective, our company is not looking to directly supply more hydrogen or directly support the production of solar panels. What we are thinking about is leveraging our strengths in chemical products to help users reduce CO2 emissions in their production. We want our products to enable users to build efficient and environmentally friendly manufacturing processes. For example, our products used in electric vehicle batteries help optimize the quality and function of the battery and minimize its environmental impact. By blending innovative new materials, such as cellulose nanofibers (CNFs), into plastic-based products such as films, manufacturers can ensure that less plastic is used. If our customers use our CNFs, they can reduce the amount of plastic they use in making their products. In this way, there are many ways to contribute to carbon neutrality.
Even though CNF seems to be a good material, it is still at the early stages of its development. New materials such as CFRP took 30 years from the lab before becoming mainstream. How long do you think it will take CNF to be accepted and used in mainstream production?
Some of our products will be available this year or next, and our customers who have used CNF told us that they have been able to reduce the amount of plastic used in their products and make them thinner. Our CNF production uses far less energy than other companies, which allows us to reduce costs. We are the only company in the entire industry with a patent for this process.
On a different note, in terms of environmental friendliness, instant adhesives are also contributing to Volatile Organic Compounds (VOC) reduction. The conventional method of making adhesives uses solvents to dissolve the main ingredients of the adhesive, such as rubber. When the adhesive is used, the solvent is released into the air to form the adhesive. Our instant adhesives do not contain solvents. Therefore, the view that instant adhesives are the most environmentally friendly of all adhesives has taken hold.
Our adhesives are used in the B2B sector, such as in the automotive industry, where they help improve work efficiency and reduce product weight. Instant adhesives have a wide range of applications and are used in a variety of industrial sectors because of their energy efficiency. This is an element of our products that we want to emphasize and promote.
For your midterm strategy, you are looking to create added value with your existing line of products, for example in the semiconductor industry or for the next generation of EVs. Your functional adhesives are used by Toyota, who you worked together closely with for their Fuel Cell Vehicle (FCV), the Mirai. Collaboration is clearly a key part of your business, are you currently looking for foreign partners to help you bolster your technology in these fields?
We are looking for new partners and opportunities abroad. But we must really look for the right ones. However, we cannot just partner with anyone. Even if they are close and accessible from Japan and have experience in chemical plants, it may not be enough. We prefer to partner with companies that manufacture components and products using cutting-edge materials, such as batteries, semiconductors, and telecommunications equipment. Companies that already know their needs and have a clear understanding of what products they need to stay in business. We want to supply those companies with our products.
We believe our chemical products are cutting edge and top of the line, and we want to continue to expand while keeping the industry's secrets. We are careful about our partners because we don't want our processes to be easily copied. We also want to determine the direction in which our materials will be used. We are looking for co-creation partners who know the needs of the market and can directly produce the products the market demands. We are interested in working with leading companies, because we believe that they are the best partners for us to work with. Within a leading company, there are key people who lead the company's research and development and produce leading products. We are looking to work with such people.
Japan has a declining population. Currently, it has a fertility rate of 1.37 and there will be less than 100 million people in Japan by 2060. For businesses, this means a smaller domestic market to sell products to. Your company is targeting 20% overseas sales, but this year you achieved 16.5% – understandable given the legacy of the pandemic disruptions. Which markets or countries are you looking to bolster your sales in to achieve this target?
Currently, Russia is invading Ukraine, and this makes it very important to know which region to do business in. While there is no doubt that there is a large market, it is also a good idea to judge the risk based on how far away from Japan you are. We want to be able to produce and consume locally. We want to develop adhesives in Southeast Asia because it is easy to do in the B2B and B2C sectors. For products for advanced fields, such as high-purity liquid hydrogen chloride for semiconductors, the location of customers is limited. However, since it is an important raw material, we would like to expand into regions where there is demand for our products. We would like to develop our business by identifying such regions. As for high-purity liquid hydrogen chloride, we believe that the U.S. will be a promising market, not only in Japan and Taiwan, but also in the U.S., where Intel and TSMC are expanding production. This is something we have room to consider. Europe is not entirely absent either. It remains to be seen whether Taiwan's TSMC will build a factory in Europe. Keeping a close eye on that trend will determine our development.
If we come back on the last day of your presidency, what goals and dreams would you like to have achieved by then?
Although we are recognized as a highly profitable company in Japan, it is important for us to expand the scale of our business in order to become even stronger in the global economic situation. We intend to grow by expanding our field with new specialty chemical lines and chemical products with high added value, quality functions and characteristics. We are not only expanding basic products that are inexpensive and easy to produce. We want to expand the application of highly functional materials to the healthcare field.