A long-established voice in its industry, KOA is pushing for a much-needed update of international resistor standardization rules.
Could you give us a quick introduction to KOA? How did the company start, what are your core competencies and what are some of the key milestones throughout your company’s history?
The founder, Mr. Kazuto Mukaiyama, was born in 1914 in Ina Valley of Nagano prefecture to a farming family that had mainly raised silkworms for generations. The silkworm industry was essential to the rural economy of Ina Valley in those days, however, in 1929 the great crash of the New York Stock Exchange triggered a global depression leading to a rapid decrease in raw silk exports to the US and a crash in the price of cocoons. Japan fell into the Showa depression and Ina Valley’s silkworm industry took a massive blow. Suddenly, rural life became agonizing.
Around the time Mr. Kazuto Mukaiyama went to then-junior high school, Japan was facing the Second Sino-Japanese War after the Manchurian Incident, and rural residents reached the lowest point of their pain. All the while, young Mr. Mukaiyama had a big dream for the future of his hometown. He graduated from junior high school having already set his sights on the world of electronics. He headed to Tokyo fueled by his love of learning, and he studied at an electrical engineering school at night while working for an electrician and a charcoal dealer during the day.
He pursued knowledge under difficulties to accomplish his goals. There he would have a fateful encounter that would determine the course of his life. He soon found himself instructed by Professor Masataro Kawaharada who is said to be the father of Japanese television. Dr. Kawaharada studied in the United Kingdom focusing on cutting-edge technology. Thereafter he taught at his alma mater, Waseda University. Young Mr. Mukaiyama noticed the promise of electronics under his professor and formally decided that this would be the world where he lived. Naturally, after graduating and working for a company, he established a resistor manufacturing company at the tender age of twenty-six, and in two years, established a factory in his birthplace, Ina Valley.
Thus began his steady progress toward his spirit of supporting the lives of farming families in Ina Valley by sowing the seeds of the electronic industry to provide the balanced opportunity of farming and manufacturing, which he named “farming and manufacturing in unison”. Despite wars, illnesses, and fluctuations in his business, after the late 1950s, KOA factories multiplied across the Valley. The creation of factories in the mountain villages of Ina Valley, which were facing depopulation, was a symbol of farming and manufacturing in unison. People from all over Ina Valley came together in KOA factories, and these factories became the foundation of this new industry born in Ina Valley. Mr. Kazuto Mukaiyama together with the company employees expanded the business with the idea of creating the most cheerful and fun workplace in the world. KOA’s founding spirit of farming and manufacturing in unison is still emphasized among the employees of KOA.
The population of Japan is a very big problem right now because of the country’s negative demographic line. Of course, Japan also has the oldest population in the world too, and that is creating several challenges for businesses. There is a labor crisis, and it is becoming increasingly difficult to attract young workers to come and work for companies, especially in rural areas. It is also creating problems in terms of the domestic market; fewer consumers means fewer people to sell things to. That being said, it is creating certain opportunities, and Japanese firms are being forced to develop automation technologies or products that cater to this aging workforce. As a company that has a past in regional economic growth, how are you facing Japan’s decreasing demography at the moment?
KOA's global sales are 39% in Asia, 17% in North America, 15% in Europe, and 29% in Japan. The largest use of KOA’s products is for automobiles, accounting for more than 40% of total sales. KOA's main product, resistor, is in great demand worldwide due to the long-term trend of electrification of automobiles. Therefore, rather than trends in a limited area, we believe that the global trend of demand for electronic components is the key to our growth.
The founding spirit is, so to speak, the voice of the era where KOA was founded, and today, it is important for us to build the trust in the relationship with each of our stakeholders -- shareholders, customers and business partners, employees and families, communities, and the global environment -- not only in Ina Valley but also in other parts of the world where our company's offices are located.
As securing human resources is certainly a major challenge for the management, in addition to the investment in increasing production, we continue to invest tirelessly in production automation and the development of new production technologies. Meanwhile, in Ina Valley, in particular, we are developing long-lasting activities, fostering a love for the birthplace, together with the local communities to increase the number of young people who settle in the area.
Your business is involved in the manufacturing of electronic components and if we look at this industry perhaps the most defining feature of progress is miniaturization. Moore’s Law dictates that the number of transistors in large-scale integration (LSI) will double every two years. Seven years ago the smallest node size was 7nm, while today you can see chips as small as 1.8nm, which Intel will start manufacturing next year. This breakneck pace must create several challenges for companies such as yours. How have you faced these challenges, and beyond miniaturization what are the solutions you foresee?
Our main product, the resistor, is used in various electrical devices. Adapting to the downsizing of electronic devices, our smallest product is now 0.25 mm by 0.125 mm in size. Nevertheless, the sizes of resistors rather need to be catered to the purpose of usage as passive electronic components such as resistors are mounted on a substrate, unlike transistors and other components formed on semiconductor circuits. For instance, for the power supply units of electric vehicles, large-sized resistors that withstand high voltage are used. KOA is a "department store of resistors", having the resistors accounting for 90% of the total sales, our strength lies in its ability to offer a wide range of products that can meet various needs.
When components are smaller, the thermal design must be more complicated for the designers not only for resistors but also for electronics. What are your thoughts on thermal design?
In the history of electronic components such as resistors, the leaded type (one with lead wires on each side which is to be inserted into the substrate for mounting) was dominant before 1990. Leaded resistors generate heat and dissipate it into the ambient air to cool themselves. The standard for resistors with such a heat dissipation mechanism is still functioning properly for those resistors to this day. In the course of a big shift from analog to digital in the 1990s, leaded type resistors and other components started to be replaced by surface mount types (ones that are bonded directly to the substrate surface by soldering) which dissipate most of the generated heat into substrates. In addition, due to the recent miniaturization and dense mounting of electronic components, now the heat dissipation through substrates has greater importance. Hence, the use of standards based solely on heat dissipation to the ambient air was becoming unsuitable.
KOA, foreseeing this problem, has been making efforts to change an international standard for ten years, and have brought our proposals to Japan Electronics and Information Technology Industries Association (JEITA). With the help of JEITA, the revision of international standardization is being considered by the International Electrotechnical Commission (IEC), which prepares and publishes international standards for all electrical, electronic, and related technologies. So far, a technical report “IEC TR 63091, Study for the derating curve of surface mount fixed resistors – Derating curves based on terminal part temperature” has been issued by IEC. By applying the forthcoming standard to thermal design, surface mount components can be used more safely without overheating.
Besides the above efforts, to promote the proper use of resistors, we offer a variety of up-to-date information on thermal design, which can be accessed by anyone on our website via the following link:
https://www.koaglobal.com/design_support_tools?sc_lang=en
What have been the key elements in your company's history of continuing and growing its business?
The sharp appreciation of the yen resulting from the so-called Plaza Accord in 1985 caused our company to lose money for three consecutive quarters and for two years we could not pay dividends to our shareholders. Executives at the time did not attribute this to external factors but reflected on the fact that they had diversified beyond the founding spirit, therefore tried to return to basics. This was a major turning point in our company's business continuity and growth.
First, we discussed our thoughts toward five stakeholders: Shareholders, Customers and Business Partners, Employees and Their Families, Communities, and Mother Earth that support KOA. Then we set up the mission to build stronger relationships of trust with five stakeholders while most corporations recently started to reflect on shareholder supremacy.
Then we established KOA’s management philosophy which consists of four values. Around 1990, what human civilization produced was based on the perception that we are reaching a "tipping point" where nuclear reactions will continue indefinitely, as we continue to conquer the global environment and expand in the pursuit of convenience. The established philosophy represents our devotion to transforming the human-oriented concept into the values of "Circulation, Finite, Harmony and Enrichment". The mission and values were the solutions for the circumstances of those days as "farming and manufacturing in unison” had been a solution for the circumstances at the time of the founding.
Founding Spirit, Mission, and Four Values have been the basis of our company's management philosophy, which are permeated throughout employees through education. We are convinced that these elements have been our strength to overcome several management difficulties starting from the Plaza Accord and enforcing the corporate structure.
In addition, the KOA Profit System (KPS), a management improvement initiative in which all employees have been participating since the early 1990s, is another major factor for our growth. From the first phase to the third, KPS is still being conducted at various levels. In phase 1, we learned the Toyota Production System and practiced it at each site. In phase 2, we focused on the quality not only of products but also of our work, in order to realize high precision and reliability for automotive applications. Currently, in phase 3, we have been striving to create new products and markets with customers, exploiting numerous fundamental technologies we have accumulated, under the keyword of innovation.
One of the sectors that KOA is very present in is the automotive field, a field that is living a very transformative time. Cars are becoming essentially computers on wheels, and then there is the switch from internal combustion engines (ICE) to hybrids and EVs. As this change occurs the value of the car is shifting more to the electronic components. Experts expect that within 20 years, 60% of the car’s value will come from its electronic components. What are some of the challenges and opportunities this transformation is creating for your company? What products are you developing to cater to these new demands?
Under the Paris Agreement adopted in 2015, 2100 was initially set as the target year for carbon neutrality, and later it was brought forward to 2050. The reason supposedly is COVID-19's influence. Everything stopped, people were forced to stay at home, and CO2 emissions plummeted. One of the stories I find fascinating is that a river in Venice, Italy, has become so clean that you can see fish swimming. Also, though India is known for having its sky filled with smog, however, it had a clearer sky during the COVID-19 lockdown. I suppose that reaffirming the need for promptly addressing climate change and seeing the feasibility of changes occurring around the world, the original goal of 2100 was pushed forward to 2050. It is reported that about 4 billion tons of CO2 is emitted from automobiles annually worldwide. The automobile industry is preparing to achieve the shift to zero-emission vehicles in the 2030s. As stricter regulations in various countries are accelerating the trend toward electrification, KOA predicts that the proportion of green vehicles will reach about 44% in 2030 and about 74% in 2040.
In response, we have taken apart a hybrid vehicle and an electric vehicle to see how the components are used. By disassembling and analyzing the latest vehicles, we can learn about current industry trends and develop new products that meet those trends. From the analysis, we found that the number of resistors installed in electric vehicles is about 1.6 times that of internal combustion engine vehicles. The number will increase further as autonomous driving and the like develop in the future. This is a huge opportunity for us. To succeed in the opportunity, we believe that assurance of high precision and high reliability that never causes errors is essential. As I mentioned, our company has been engaged in a company-wide effort to improve quality since the early 2000s with the aim of making a serious entry into the automotive sector through KPS activities. This is a company-wide effort that covers not only product quality but also the quality of the work done by the employees supporting the customers. Reaping the benefits of the paid efforts, KOA is now recognized throughout the supply chain in areas that require high precision and reliability. We will continue to conduct KPS activities relentlessly and will further strengthen our cooperation and collaboration with customers and partners.
Over the past few years we have seen supply shortages and chip shortages, and this has pushed tier-one OEMs to pursue their system-on-chip (SOC) architecture. The automotive industry traditionally is very mechanical based and those makers are not used to electronic development. As you collaborate, how do you ensure very close synergies with an industry that is not traditionally familiar with system-on-chip (SOC) architecture?
Through the disassembly and analysis of vehicles, we started by learning the structure and operation of each circuit. Furthermore, we invite people with expertise and collaborate with external organizations for those levels that we cannot learn on our own. Based on the acquired knowledge, we try to identify the functions and features that customers’ design departments may be trying to achieve and propose KOA’s technology that best suits their needs. In any case, the connections with the customers lead to new businesses. We continue to strengthen our relationship of trust with the customers so KOA can be the go-to when solutions are needed.
Since 1973 you’ve been present in Malaysia, and since you have expanded to various areas around the world. As part of your mid-term management plan, you made a JPY 44 billion capital investment with new production capabilities to come onstream. Could you tell us which countries and regions are you particularly targeting for this growth?
Our company's mainstay product, the Flat Chip Resistor, is in great demand from major customers such as those in vehicles. To ensure supply capacity in line with customer growth, we decided to build a new plant in Malaysia, which is located in ASEAN, the region with the presence of major electronics manufacturing services (EMS). While the customers for resistors are spread all over the world, among our production sites in Japan, China, and Malaysia, we continue to arrange supplies from the area that is most suitable for the customers, considering the business continuity. We are also making planned investments to increase production in China and Japan.
Additionally, we are building a new research and development facility in Japan, which will be an innovation hub to develop technologies that solve social issues and identify potential needs as a part of phase 3 of KPS, while strengthening existing businesses.
Imagine that we come back and have this interview again on the very last day of your presidency. What goals or dreams would you like to have achieved by the time you pass the baton to the next generation of KOA executives?
KOA 2030 vision with the slogan of “Essential Parts of The World” was developed by a team of employees with an average age of 35 at the time who spent the entire year discussing the history and geography of the company and what its future strengths would be. Sooner or later, these employees will be on the management side of the company. By then, I want to make sure that we have a solid foundation that can be passed down with confidence.
Because the employees set the goals based on their own thoughts, they can fully commit themselves to achieving the goals. In this way, at KOA, its aspirations have always been driven by employees, not just led by the president. I would like to convey this message on the last day of my presidency.
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