CORPORATE JAPAN AFTER THE EARTHQUAKE The Chuken Kigyo: Invisible - PowerPoint PPT Presentation

CORPORATE JAPAN AFTER THE EARTHQUAKE The Chuken Kigyo: Invisible… Invincible? May 3 rd 2011, Daiwa Foundation/APTN Alex Stewart May 3rd 2011 Alexander Capital Access Ltd 1

What Future, Japan…. • Is the economic model flawed… • Is China by-passing it… • What about Samsung and Korea… • Role of the Chuken Kigyo..??? May 3rd 2011 Alexander Capital Access Ltd 2

The Economist Magazine Nov 2009: “ Japan’s chuken kigyo is not simply a part of the national economy, but the core of its industrial structure. It enables the country’s bigger, well known electronics firms to exist, as well as meeting foreigners essential needs .” May 3rd 2011 Alexander Capital Access Ltd 3

Advanced Manufacturing • “mono zukuri” • Not post-industrial…but • Advanced manufacturing May 3rd 2011 Alexander Capital Access Ltd 4

May 3rd 2011 Alexander Capital Access Ltd 5

MFG PYRAMID Role of intermediate and capital goods Brand Integrators Mass Production (advanced technology) Parts and Production Materials machinery (intermediate ( capital goods) goods ) Transport and logistics services Human resources, Technologies, Knowledge, Capital May 3rd 2011 Alexander Capital Access Ltd 6

Chuken - little known Keyword Company Global Share Cathode materials for Tanaka Chemical Top mkt share for Li On batteries nicketlmetal hydride Titanium Dioxide Tayca Corp Top mkt share for micro titanium dioxide Moulding equipment Towa Corp 50% for LED and semicon Capacitors Nichicon Capacitor 33% for conductive polymer type LCD film Kuraray 80% for PVA optical film Bearings NTN Corp 60% for bearings in spindle motors LCD film Nitto Denko Top mkt share for polarising film May 3rd 2011 Alexander Capital Access Ltd 7

Chuken - Unknown Keyword Company Global Share Resins for PCB boards Wakayama Seika 80% for raw material used in resins Thin Film Electronic Susumu Co 60% thin film electronics Components Electrolytic capacitors Kohoku Kogyo 40% for lead terminals HDD motor Nippon Super Industry 80% for motor hubs for components hard disk drives Aluminium cases Fuji Springs 40% for battery terminals Flexible PCBs Taiyo Industrial 50% laser equipment for Li-on batteries Lens arrays Isuzu Glass Over 60% for LCD projectors May 3rd 2011 Alexander Capital Access Ltd 8

Chuken – Pretty Big! Company Keyword Sales (Stg) Employees March 2010 ( overseas ) Kyocera Components 8.3bn 67,000 (42,000) 33,000 Nidec Motors, Spindle 4.5bn drives Murata Piezoelectric 4.1bn 34,000 capacitors (12,000) Omron Relays, Parts 4.1bn 36,000 (25,000) 21,000 Rohm LSIs 2.6bn (15,000) Horiba Measurement 0.8bn 5,100 equipment May 3rd 2011 Alexander Capital Access Ltd 9

Characteristics of Chuken • Family owned • Idiosyncratic • “Number One” May 3rd 2011 Alexander Capital Access Ltd 10

“Number One” Nitto Denko’s No. 1 Strategy: • When a firm has a top market share it has access to the latest market information. • Customers come to the top firm first with their ideas and this leads to a regular flow of newly developed products. • The top firm gets to see market trends ahead of the rest of the field and can make timely investment moves. Source: Nitto Denko Web Site May 3rd 2011 Alexander Capital Access Ltd 11

Frontline in Tohoku Company Keyword Global Share Toshiba NAND Flash memories 35% Kureha Polymer lithium ion 70% + component Mitsubishi Chemical Critical electronic resin - 80% Bismaleimide triazine Mitsui Mining & Ultra thin electrolytic 90% Smelting copper foil Kobe Steel Alum substrates for HDDs 60% JX Nippon Mining Thin film for LCDs 45% and Metals Renesas Electronics Automobile microcontroller 30% May 3rd 2011 Alexander Capital Access Ltd 12

Corporate Responses Suppliers • Re-organise production • Pull together: a crisis mentality Customers • Find alternative suppliers • Re-design products May 3rd 2011 Alexander Capital Access Ltd 13

Risks to Chuken • Japanese customers seek alternative suppliers • Foreign companies reduce dependence on Japanese chuken • Invigorate national policies elsewhere May 3rd 2011 Alexander Capital Access Ltd 14

Losing share to Asia • Korea – Samsung-centric; government policy • Taiwan – Semicon fabs, contract manufacturing • China – Shift from OEM to ODM • Japan – Losing share in brand markets May 3rd 2011 Alexander Capital Access Ltd 15

STRENGTHS (SWOT) • Precision production and logistics system • Perfectionist • Group orientation • Complete manufacturing system • Long term planning system May 3rd 2011 Alexander Capital Access Ltd 16

WEAKNESSES (SWOT) • Weak political leadership/system • Weak decision making processes and mentality • Deflation • Demographic decline • Growing frustration • Loss of vision May 3rd 2011 Alexander Capital Access Ltd 17

OPPORTUNITIES (SWOT) • Post Oil/Carbon Economy • Re-think organisation of supply chains • Size of the China market May 3rd 2011 Alexander Capital Access Ltd 18

THREATS (SWOT) • Competition from other Asian leaders and supply chains • Substitution • Open innovation • New business models May 3rd 2011 Alexander Capital Access Ltd 19

SWITZERLAND IN ASIA Not a bad outcome…. May 3rd 2011 Alexander Capital Access Ltd 20

THANK YOU Alex Stewart Alexander Capital Access Ltd., www.ac-access.com May 3rd 2011 Alexander Capital Access Ltd 21