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New global electronics trading giant to unleash the full potential of IoT and AI

Mr. Takashi Ishibashi, Corporate Executive Vice President of Tomen Electronics

Mr. Takashi Ishibashi

Corporate Executive Vice President of Tomen Electronics

Nexty Electronics, the new company resulting from the merger between Tomen Electronics and Toyota Tsusho Electronics, will be the fourth largest electronics trading company globally and the number one in the automotive electronics field. "IoT (the Internet of Things) will have a major influence on the automotive industry," Mr. Takashi Ishibashi, current Executive Vice President of Tomen Electronics and future Chairman of Nexty Electronics, told The Worldfolio. With an increasing emphasis on developing AI for self-driving cars, the new electronics trading giant aims at expanding in the U.S. market with innovative and sustainable solutions.

Machine-to-machine interaction blurs the lines of economic sectors and links industries together to provide connected products and services. The IoT megatrend is estimated to reach a global industry value of $14.4 trillion by 2022. Being at the forefront of the Industrial Revolution of the 21st century would mean for Japan re-acquiring its leadership role as technology trend-setter. What is your personal opinion about the role that Japan could play within this megatrend and by shaping this fourth industrial revolution?

The most important thing is the business model and the structural change. Currently we are looking for new business solutions divisions that are looking into digital solutions, so that is a good example for IoT. What the Internet of Things is going to provide to the economy and to companies like us is a profound change in business models. For instance, digital signage, which was until now without any interaction, is now going to be about interactive communication. These digital solutions on top of the hardware will influence our business solutions, which will consequently change every company individually.

We are leaders in the automotive sector, where we will notice a major impact through an increase in communication between cars and the ability to retrieve data from cars. The information that will be stored in data centers will be consequently used to provide adequate analysis for a number of services to make the driving experience more comfortable. That is to say, IoT will have a major influence on the automotive industry.

What is the impact of the rising trend to produce environmentally friendly products, especially in your industry?

First of all, I agree that this trend is becoming a business opportunity. Considering our important involvement in the automotive sector, we are very interested in finding new materials to be used in the production of semiconductors which will allow to lower the energy consumption. This is a new environmentally friendly business policy for us. We might not always be the company that is producing these new materials, however, we are always on the lookout for innovative small businesses that can provide us with ways to reduce energy consumption and help our customers do the same, which by extension will be environmentally friendly behavior. This kind of new undertaking will be something that will continue to be successful, moving forward.

Chuken Kigyo are Japan’s hidden champions, namely medium-sized companies that, thanks to their investment in R&D, have been able to conquer large shares of the global market in their respective sectors of activity. In order for innovation to become an integral part of new business creation, innovators have more room to think out of the box and a closer relationship with both the executive branch and external relations officers to seek new fruitful synergies. Could you describe the genesis and the main development in terms of the progress achieved by Tomen Electronics up until today?

Back in the 1970s we were one department of the textile company Teijin. Especially in the 60s, 70s and 80s, textile businesses in Japan suffered immense damages related to other companies’ competitiveness. The industry as a whole was doing poorly. We quickly realized that we had to diversify and penetrate new industries as for example importing cars from Sweden or working with farms in Brazil to finally end up in the semiconductors business.

In the end, it was decided that the company should not be involved in so many non-related businesses and it was restructured to operate in electronics trading. Tomen Electronics was actually a stand-alone trading company, interested in creating its own electronics distribution business and this was why from that point on, Tomen became a shareholder of Tomen Electronics to absorb the electronics trading business, the genesis of our company.

In the next stage, our business focus was on international semiconductor products and selling them in Japan. Foreign international major semiconductor maker’s competitors were Japanese producers like Toshiba or Fujitsu, who are famous for both high-quality and premium service. The products manufactured by Japanese suppliers and our competitors as well, supported Japanese customer’s intention but overseas structures, notably in the United States did not. Therefore, it was a very difficult business to start.

In 1986, a trade agreement was reached with the United States, called the U.S. semiconductor agreement. It stipulated that the market share of internationally provided semiconductor chips in the Japanese market has to reach 20%. This allowed us to increase our sales, by bringing in unique semiconductors which had not been introduced in Japan yet, as well as introducing unique foreign knowledge displayed by international semiconductor chips manufacturers. In consequence, we helped those international companies competing within our domestic market.

In your opinion, how important is it nowadays to leverage on economies of scale, looking for new partners for M&A in order to stay competitive in the global market?

In the 1970’s and 1980’s many Japanese companies had a lot of success focusing on personal computing. Over the years, the business transformed into the production of cell phones, smart phones, etc. Big companies such as Panasonic were especially successful with TV’s, for example and so many Japanese companies achieved success.

Taiwanese and Chinese companies started to produce the same and started to penetrate the Japanese customer’s market share, leaving domestic businesses unable to compete. These were the general trends. It is also important to mention that in other product ranges, such as automotive or printing, Japan is still the leader and the same goes for industrial products. The difference between companies, that have nowadays a dominant share and the ones that do not, is that the leaders have unique technologies. Japan in particular has the mechanical knowhow.

All the companies that lost their market shares to foreign companies are component-based companies, which means that any company can come around and copy their product. Mechanical knowledge and technologies are unique and help companies being successful. Technologies cannot be copied easily. This kind of unique technology sheltered by Japan is what is helping the country to be a leader, along with the mechanical knowhow that will continue to be enhanced in order support even more growth in the future.

The two key concepts that will certainly continue to drive the Japanese economy are ‘hitozukuri’ and ‘monozukuri’. In your position as Chairman of the new company, how do you plan to cultivate hitozukuri?

What has to be understood is that we are a trading company and these concepts are more related to manufacturing companies. That being said, I have come up with a concept that I call TQL which represents Technology, Quality and Logistics for the new company. These are the three key principles that the company should focus on. Achieving this will be the driver of sustainable growth.

Keeping human capital in mind, we also have a strong presence in the international environment, operating in over 90 countries and having subsidiaries in 34 countries. We will therefore always be looking at developing supported by our international workforce. Supporting our international expansion through human capital is something that we are very much focusing on.

The country can no longer afford to over rely on its huge-yet-aging domestic market. Prime Minister Abe is pushing forward policies in an effort to open up the country’s economy to the global market. Japan Inc. companies are following suit with an aggressive strategy to expand globally through M&A. The U.S. is Japan’s top foreign investor and second largest trade partner. What is the role of the American market for your future long-term growth?

The roots of our company are trading and cooperation with the U.S. Our company was established in 1972 and already by the end of the same decade we had an office established in San José, in order to be close to the Silicon Valley, as one of our most important businesses was to import semiconductor chips from Silicon Valley based companies.

Our great hope is that the U.S. continues to develop cutting-edge technologies which we will then be able to introduce not just to the Japanese market but to the whole Asian market. Furthermore, the U.S. market is very important to us as we are heavily involved in the automotive industry and Japanese auto makers currently have a very strong growth there and are opening manufacturing plants, especially in Detroit. The providing of electronic chips to the U.S. will therefore be an ongoing business and definitely considered as an important business for Japan. The U.S. market will therefore remain an integral part of our business strategy.

One interesting example is that our company is receiving special attention for the development in AI technology which is important for self-driving cars. 15 years back the industry was concentrating on chips for arcade game machines. This is the kind of transformation and dynamism in the industry that we can notice as an effect of U.S. provided products and this is also the kind of development that we would like to continue to see, especially by being the ones to introduce this technology into the Japanese market.

The new company will become one of the major players in Japan and of which you will be the Chairman. What is your personal vision for this new company and what are the strategic objectives that you would like to achieve, once you have been officially appointed to your new position?

Nexty Electronics, the new company resulting from the merger between Tomen Electronics and Toyota Tsusho Electronics, will become Japan’s largest electronics trading company. We expect to have sales of approximately $4 billion (¥460 billion), which will make Nexty Electronics the fourth largest electronics trading company globally but also the number one company globally in the automotive electronics field, with related sales expected at more than $2,6 billion (¥300 billion).

By becoming one of the biggest in the field we are not counting on direct competition. However, our business model of providing value-added services is very important to customers and will be sustainable. This is an important strategy to the company, the driving force behind both our company’s mission and this merger will be TQL. The evolution need for our company is to move from being a distributor to actually providing business solutions as our suppliers are now doing. We will have to be able to provide even more valuable business solutions to different types of customers and industries in order to continue to be an important part in the ecosystem of all of these industries. Reaching these very realistic goals are the responsibilities that I will have to take as Chairman.


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