Wakayama Seika the hidden champion for multiple sectors

Why do you think Japan has been successful in producing chemical products despite natural resource limitations? Additionally, what do you think are the key contributions that Japanese chemical makers provide to the global industry?

The question is a difficult one, and our expertise may be limited to a particular area of the industry, so my response may be quite personal. However, as you mentioned, Japan has been able to procure natural resources from elsewhere despite its natural limitations. These limitations, including the size of land available, don’t make for a good environment in which to do business in this sector.

Furthermore, the environmental effects of the chemical business have placed many restrictions on Japan's chemical makers throughout history. Thus, we have always been aware of the challenges and problems of the industry and have focused on our advantages.

One unique aspect of Japan's chemical industry is the balance between the layers of large companies and SMEs, each with their own roles. Due to all the restrictions, we are well aware of the costs involved. SMEs have had to focus on what they are good at, what products are stable, and what role they should play in the market. With limited resources, Japanese SMEs have prioritized the production of high-quality, stable, and reasonably priced specialty and fine chemicals.

Japanese companies are also relatively good at responding to different or changing needs from customers. The area of specialty chemicals, or fine chemicals, is particularly suitable to the Japanese people's characteristics, and we are good at dealing with small lots of high mix, low volume production. I think that’s why we were accepted in this market, and why we were able to have success in this industry.

Occasionally we make proposals based on what we are able to do, but it is often the case that we respond to different needs or requests from customers, and we work with them to give form to those ideas and generate new products. That’s how we have conducted our business so far.

In terms of the electronics sector, I understand that more than 70% of your sales come from supporting electronics production with your products. Can you provide more detail on how your products are helping to support the electronics sector and the miniaturization trend?

It is true that around 70% of our sales come from the electronics sector. Indeed, our specialty is aromatic diamine, which is a monomer used to create polymer-based materials, which are then used to make finished products.

The largest part of our share in the electronics sector comes from polyimide film. When the film was first launched in the 1990s, its thickness was about 25 microns, but it has since been reduced to around 10 microns or less. As the thickness is reduced, impurities, especially metal impurities, can harm the electric properties of the material, so we need to remove those impurities.

If we just keep producing the same stuff, then new players will enter the market and a price war could emerge. To avoid a situation where competition is based solely on price, we aim to add value to our products by focusing on advanced development. Our customers are driving this advancement through their requests, which in turn is giving us new themes for technological advancement.

You serve a lot of different types of customers, from smartphones, PCs, to semiconductor manufacturing and 5G communication development. Is there a particular segment where you're seeing a greater push for this kind of advancement in your technology, or that you're focusing on more, going forward, for your product development?

Speaking about new materials, I think the communication industry, which drives 5G and will drive 6G in the near future, is contributing to the advancement of our technology a lot. However, when it comes to volume, I think smartphones have the largest share. Recently, we’ve been seeing an increase in needs from the automotive sector as well.

Do you see the switch to EV as an opportunity, or a new era, for the growth of your company?

Cars are becoming more like mobile PCs or tablets, and thinking about safety, heat-resistant properties are quite important for cars, so in that sense, I think polyimide is used a lot for cars. Certainly an opportunity.

What was the motivation to switch to your holding structure in 2021, and what are the advantages of the new set up that have emerged now, two years after its inception?

The motivation for us to set up the holding company was that we wanted to streamline the organization. Looking back at our history, we founded Wakayama Seika Kogyo in 1955, and in 1973, we established a trading company that specialized in sales and accounting processes that were driven by the trend to separate manufacturing and sales.

After that, we set up a company for warehousing and logistics. However, there was some complication with the shareholding structure for these companies, because we are an owner company. To simplify the structure, we established the holding company, and under that umbrella, we made the Seika company, which was established in 1973 as a 100% subsidiary, and Wakayama Seika Kogyo, which was founded in 1955, became the 100% subsidiary of Seika.

We are in the process of streamlining the operations of the entire company, and we had several objectives in setting up the holding company. One of them is that because we had overlapping jobs in the group companies, we wanted to reduce the redundancies, especially for back-office jobs.

Another objective of setting up the holding company was to speed up decision-making processes, and we wanted to mitigate the legal risks, and risks from natural disasters, as well as addressing environmental issues such as the reduction of CO2 emissions, as a whole company. In the future, we would like to centrally control the capital of these companies, but we have yet to achieve that. The main purpose of having a holding company is to have centralized control of these companies.

You mentioned that next week, OmniSpecialty is going to come and visit you here in Wakayama. I was hoping you could tell us more about the challenges and synergies of your relationship with OmniSpecialty, operating between Japan and the United States.

OmniSpecialty is not entirely under our control. Of course, we are involved in the decision-making process, but for most things, the CEO of OmniSpecialty has the right to make the decisions. If we go back to the history of our alliance with OmniSpecialty, we used to produce pigment intermediates or the raw materials for ink, and we had many customers for pigment intermediates in the US. We established OmniSpecialty to handle the sales of pigment intermediates in the US market.

We no longer do that type of pigment intermediates business. It forms a part of our business, but the proportion is significantly small compared to the total. I always think about ways we can improve the synergy between OmniSpecialty and Seika, but I haven't come up with any specific ideas about it yet. It would be great if we could find an opportunity to do new business together, either in Japan or outside Japan and the US. If we could find any opportunity to work together, we would be willing to go for it.

We’re meeting them tomorrow actually, but the main purpose is not really business this time, though we will talk a bit about the business. They're going to have their 30th anniversary in two years from now.

I’m curious to know a little bit more about how you envision the company’s international development and overseas business channels. Is it a matter of finding new markets you'd like to enter? Is it a matter of finding new partners, or forming new alliances with companies like OmniSpecialty?

There is a company in India, and we have a long relationship with them. Although we don't have any capital relationship with them, we are outsourcing some of our process steps to them because we cannot do that in the domestic market due to the lack of capacity.

This kind of initiative is going to be more and more necessary for us. It would be nice to have that capacity in Japan, but the needs of customers are changing a lot and are diversifying a lot, and existing plans may not be able to cover everything coming from the customers, so it is necessary for us to find a partner for production so that we can expand the foundation of our production base.

Regarding markets to sell our products in, we don't have a specific target, but for the sourcing, we would like to strengthen the partnership, or collaboration, with foreign companies.

Something we saw that's quite exciting in terms of a new business like the one you have just been describing, is your initiative in the aerospace field. We saw your chemical products being used in creating aerospace parts. Could you elaborate a little more on how your products are supporting the aerospace industry?

What we are supplying to the aerospace industry is a carbon fiber composite (CFRP). Our diamines are used as a curing agent to impregnate epoxy into carbon fiber sheets, resulting in the production of CFRP. Once they use it, the weight is just one-sixth or one-seventh of steel, but the hardness is 10 times as much. That's the material we are supplying to the aerospace industry, not just for planes, but for spacecraft as well. New materials are needed, and the requirements call for even better performance than what we are currently supplying now, so we would like to actively challenge those new needs.

We saw on your website that you have been the President of the company since 1996. That's quite a long time. Imagine we come back on the very last day of your presidency when you're about to pass the company to the next generation, and we interview you again. What dreams and goals would you like to have achieved by that time that you would like to share with us in that new interview?

We have about 270 employees, and we need to provide a stable business foundation for them. To that end, we have to continue working on R&D. I'm also aware that we have strengths and weaknesses in this organization, so we would like to have a better balance in order to mitigate the weaknesses.

Interview conducted by Neale Oghigian & Ana Ruiz