Production Technology to Realize Stable Product Supply Leads the Way to the World’s Largest Market Share

This post is also available in: Japanese

Work Environment with Open Communication and No Buck-Passing

Saito: Whether or not you can authorize the employees to make decisions depends on their skill levels. How do you educate them?

Sakai: Different types of customers appear in different business situations. They may be engineers, sales engineers, or cost managers. The level of staff communication determines if we can deal with them.
In my office, persons in charge of different divisions work on the same floor and talk to each other freely. We have chosen not to be tucked away in an office, but we don’t schedule meetings either. Our thinking is that if you want to know or confirm something, you should do so on the spot.
I believe that things go faster regardless of job titles if the staff members share necessary information. I would also like to emphasize that you should never blame someone else. Trying to locate the person ultimately responsible for a mistake intimidates the employees, prohibiting the company from improving. Managers must be most careful about any such accusations.

Obinata: Is this about your company? Or, is it only about your division?

Sakai: This is about my division. If this were a companywide practice, our company would be a 10 trillion yen company by now (laugh).

Unique Production Technology for Handling Large-Volume Orders

Saito: Recognizing the needs of major accounts early on is the key to increasing the market share. What is your approach?

Sakai: Identifying what the customer wants as fast as possible is the only strategy. Customers may not think too much about the price if you can successfully deliver what they want promptly. Being slow never works. Regardless of how great your products are, customer will not pay attention to them if you are slow. Generations change quickly particularly in the field of modules, and dual or triple sourcing occurs frequently. Therefore, you must always be the fastest one.

Saito: You are saying that you select who to send to customers based on their technical knowledge instead of job title to identify their needs as quickly as possible.

Sakai: That’s right. When mobile phones were first released, they were manufactured by Motorola, and then manufacturers like Sony, Nokia, Samsung joined the competition along with several more Japanese manufacturers. Typically, production of a new product is dominated by one manufacturer at the beginning and later joined by others as the market expands.
Accordingly, the order volume from each manufacturer decreases, allowing parts manufacturers to handle it without requiring a high production capacity. In the case of mobile phones, however, only a few manufacturers continued to dominate production despite the steady market expansion. It was the complete opposite of the typical pattern.
What happened was that the volume of a purchase order from a single manufacturer exceeded the capacity of parts manufacturers. Meanwhile, we had the manufacturing capability and production technology that met the manufacturers’ needs. We also had reserves and were therefore able to start using production equipment that could handle the order volume. I believe that was an excellent decision our management made.

Obinata: So you were able to release the products at the right time, before anyone else, and provide a stable supply as a main supplier.

Sakai: We may not have grown this much if many parts manufacturers were involved and the purchase orders were smaller. I think we were able to demonstrate our potential because of the market dominance. The employees ourselves, including me, were surprised with what we were really capable of (laugh).

Strict Standardization to Carry On High-Mix Low-Volume Production

Obinata: How long is the life cycle of a smartphone module?

Sakai: It’s usually 18 months.

Obinata: Do you change the manufacturing equipment accordingly?

Sakai: We standardize the products to avoid equipment changes as much as possible. We do not change wafer processing equipment but make changes to the packaging equipment in order to meet customers’ specifications.

Saito: You used the word “standardize.” We at ULVAC often customize the products to meet customers’ specifications but are not good at standardization. Would you tell us about your approach?

Sakai: It may sound like boasting, but I give lectures on standardization to the employees. When I first joined the module business, I actually had a negative view of standardization. At one point, my boss scolded my group saying “Every time you develop a new technology, you cause confusion and lower productivity at the plant. Productivity would improve if you just didn’t do anything.” It is a bit strange that I am now an advocate for standardization.
The reason why I changed was a big mistake that I made. Modules vary in size, and we used to produce them on a high-mix low-volume basis. When a few manufacturers dominated the mobile phone production, we received a large purchase order from one of the major manufacturers. You know, mass production gives production engineers a sense of achievement.
Blindly believing that we could mass produce mobile phone modules despite the general understanding that modules needed high-mix low-volume production, we built an exclusively designed mass production line. In a short while, however, the board shape and device changed as the mobile phone functions improved. The exclusive production line we built was no longer used. This bitter experience of wasting production equipment taught me that we must stick to high-mix low-volume production. That is how I started high-mix production with little changes to standardized equipment.

Obinata: You can implement far-sighted standardization because you are ahead of everyone else. If you were chasing after others and always trying to keep up with specification changes, you would naturally prioritize releasing products over standardization.

Sakai: I believe we should stick to high-mix low-volume production even when a small number of manufacturers dominate the market requiring mass production. We provide requested diversification and changes using peripheral technologies while keeping the core element standardized.
We wait for 4 to 5 years before we make big changes to the equipment. We are patient until the time comes.