EBA Kogyo supporting the shift to the smart factory era

Can we begin with a brief introduction to your firm?

There are many leading companies in the machine tool industry in Japan. (DMG, Okuma, Makino Milling Machine, Mazak, for example). About 45 years ago, when we saw the practical application of horizontal machining centers as the performance of NC equipment improved, we focused on the idea that it should be possible to make machine shops unmanned by using horizontal machining centers, and we have been developing and providing pallet systems to expand the range of utilization of machining centers.

RPS series: Round Pallet Stocker

The basic idea that machining centers could be used to make machine shops unmanned has not changed over the past 40 years. Since then, in response to changes in the world and customer needs, we have developed and improved our pallet system series by saving energy, space, and resources, improving durability and maintainability, handling 50-ton heavy workpieces, reducing installation time, and making the system compatible with robots. This should benefit both end users and machine tool manufacturers. Of course, it is also in line with the SDGs.

This is an impressive accomplishment. You spoke about working with machine tool manufacturers which are top global companies in their field. There must be a reason that they choose your technology and your company to be their partner when they go overseas. I think a lot of this has to do with your customized engineering. Whatever the need is, whether it has to do with the size, the weight, or the noise, for example, you can cater to that. Could you tell us a little more broadly what you believe to be your core strengths or competencies that make you the ideal partner for these major corporations?

China, Taiwan, and South Korea are very good at mass production. They like money. However, the machine tools business is a small business and human power is required. Our love for machine tools comes first. Of course, we like money too, but love for what we do comes first. The machine tools industry is extreme in terms of work volume. Sometimes the work can suddenly fall to 30%. It is a very up-and-down industry. Therefore, the companies that embrace the “money first” concept find that they cannot sustain themselves. Our company can survive as we embrace our love for machine tools first and foremost. Our product will remain and still be required ten, twenty, or thirty years from now. We would prefer for our partners to purchase new products from us, but they ask us to repair and carry out maintenance on the products instead. Our products are very reliable and do not break down often.

You mentioned that this comes from your love of machine tools, and having a real passion for this work, in this company and this culture. You also spoke about the importance of human power and human interest. Your company operates in a more rural area of Japan, in Mie Prefecture. A big problem with the population decline in rural areas is that many young people are going to Nagoya or Tokyo, for example. They are not as interested in a manufacturing career. How are you able to preserve that culture and maintain the enthusiasm and passion for this craft?

We have a base in the city of Haiphong in Vietnam. The people there are very diligent and passionate about their work. They enjoy manufacturing. We have been training the people there for over 20 years. Nowadays Chinese, Korean, and Vietnamese companies like to headhunt the engineers that we have trained. In some cases, Vietnamese automotive companies such as VinFast doubled the salaries that we paid to our engineers there. Some of our engineers in Vietnam moved as a result.

It is a hard question to answer, but what are you going to do about that? How will you secure and maintain these talented employees?

Our policy is to train 130 people if we need 100 people, which is 30% more people than we require. That means that if 30% of our employees move to other companies, we can replace them. There is not much that we can do about this situation. Individuals make their own choices. However, our core engineers still work at our Haiphong base.

An interesting consequence of Japan’s aging population for many chusho kigyo or SMEs is that because in many respects the market in Japan is slowly shrinking, they have to turn an eye overseas and explore new opportunities in the international market as a way to compensate. What has your experience been in that regard? Would you say that you are turning your focus to the international market more so than you were 10 or 20 years ago?

When it comes to the overseas market, machine tool manufacturers already export around 50% of their products. As we are an SME, our manpower is very limited. Therefore, it is very challenging for us to focus on or even shift our eye to the international market. Machine tool manufacturers are kindly offering us the use of their sales network. Our products are available in their sales network. The two-pallet machining centers are standard. With our product, we can offer options such as weekend automation, or overnight automation. That is how we are working in the international market. It would be very difficult for us to create our network overseas.

VPS series; for overnight automation

VPS series; for weekend automation

It sounds like a good arrangement that you have with them.

Let’s use a car as an example. When you buy a car, the car navigation or the aluminum wheels are options. If you want those options, you choose those options. Our overnight automation or weekend automation are options that we offer. By providing different options, our products can be sold. We cannot enter the global market independently. Therefore, we depend on their sales network. It is through this that we can offer our technology and our different options to the international market.

One big trend in the machine tool industry, especially the cutting industry, is what kind of sectors they are servicing. In the past, automotive components and parts were very common, for example. We met an interesting SME in Nara Prefecture called Takatori Corporation which makes cutting tools and machines. They told us that in the past it was all about components, but now they are moving into new areas such as the medical sector and the semiconductor manufacturing sector, where a high degree of precision and cleanliness is required. They also told us how they were dealing with the challenges of that transition. Is this transition impacting your business? What changes have you noticed from the new sectors that your clients, the machine tool makers, are exploring with their products?

Yes, we have been working in different sectors. However, we have not been very successful so far, but we will utilize our manufacturing capabilities (mechanical and electrical design capabilities, welding and casting material capabilities, machining and surface treatment capabilities, assembly, commissioning, and inspection capabilities, especially our capabilities for welding large objects weighing more than 10 tons and high-precision machining capabilities of less than 10 microns). In Vietnam, we are working on renewable energy generators from wind turbines. We are also working on bonding machines for semiconductors.

The renewable energy business in Vietnam was very active last year but has slowed down this year. However, we expect it to recover next year. When it comes to renewable energy, it takes around three years of planning. For example, for wind power generation, we first have to do an environmental assessment and we then have to develop a grid. Finally, we can develop a power generation plant. This all takes around three years. During the former administration in the US, the whole thing stopped. However, the current administration has said that they are going to focus on renewable energy once again. We expect this business to pick up next year.

Another sector that we are focusing on is robotics. We are looking for partnerships in the robotics industry. We want to incorporate our machine tool technology into robotics to make robots easier to manipulate.

The factories of machine tool manufacturers are like showrooms for us. Our tilting load stations are being used in those factories. Gradually, we have been getting inquiries from general users.

You spoke about seeking partnerships in the robotics industry. Does that extend to international companies? Are you looking for partners in the US or Europe to build alliances and further your technological development?

That is something that we are considering for the future. If we have opportunities, we would like to try. The fusion of robotics and machine tools is very important, and that is the challenge that we are working on right now.

Right now, there is a major transition in the automotive industry from internal combustion engines to EVs. We can be of help to the automotive makers as they shift their activities. We will be able to help them to increase their automation ratio. Also, China is going through an important transitional period right now. China’s population is now declining, so in the future, they will require more automation. Therefore, we are considering to what extent we can help with that automation in China.

This is a great opportunity for your company, as your technology is perfect for these transformative times, as it can help facilitate the shift from one system to a new system depending on a new need. In this case, it is the shift from the ICE engine to an EV motor instead. You just mentioned China, the largest market for EVs going forward. In terms of meeting that demand, is there a particular region or country that you are focusing on and putting more effort into establishing and branding yourself in to meet that demand?

Up to now, our primary customers have been from Japan, the US, and the EU. Going forward they will probably continue to be our primary customers. China is quite difficult in terms of politics, and they also tend to replicate products. I am unsure if a commercial relationship could be established with Chinese companies.

We are curious to know more about your plans to form local partnerships, or what experiences you have had working with foreign companies.

It is similar to the global sales network issue. We decided already not to create our own sales network and instead have been using our partners’ sales networks. We are not thinking about M&A or joint ventures with local companies. Machine tool manufacturers are doing this. However, as far as our company is concerned, that is not for us.

This year your company is celebrating its 70^th anniversary. If we were to return in 10 years as you celebrate your 80^th anniversary and conduct this interview all over again, is there a specific goal or ambition that you would like to have achieved by then?

Seventy years ago, my father started his own business. This company was founded 66 years ago. That will be the next president’s job, as I will not be here 10 years from now. I will be enjoying skiing in winter and farming in summer. Those are the activities that I enjoy doing.

In the next ten years, I would like to work with our partners utilizing AI. It will be challenging, but that is my goal for the future.