The secrets to achieving success with Japanese subsidiaries
11/01/2006
As an early pioneer in the worldwide semiconductor market, Japan holds a place of strategic importance for any company that supplies materials, components, and equipment to Asian semiconductor and related markets. For our company, Nihon Entegris K.K., the key to operating a successful Japanese subsidiary is to forget that it’s a subsidiary.
Treating Japan like a sales office of a foreign company is a clear path to failure. We’ve realized that walking, talking, and acting like a Japanese company is the only way to earn the respect and partnership of customers and industry partners. That means a commitment to long-term relationships, sharing product and technology road maps, and providing fast, timely responses to needs.
While Nihon Entegris is a subsidiary of our American-based parent corporation, Entegris Inc., it operates like a Japanese company with the full range of business capabilities located in Japan run by Japanese professionals, from research, engineering, and manufacturing, to administration, sales, and customer service.
Important values in Japanese business
History. When we merged Mykrolis and Entegris in August 2005, we also merged Japanese operations to form Nihon Entegris K.K. The combined company has been operating in Japan for nearly 40 years, from the days of a few employees working through distributors, to hundreds of Japan-based employees. When Nihon Entegris was formed, we decided to move quickly to make sure that the subsidiary had the necessary infrastructure of human, physical, and financial assets-just like any other homegrown Japanese company. These moves did not just take place recently, as the history of both Mykrolis and Entegris in Japan goes far back before our merger.
Proximity. Unlike other American subsidiaries that have a “face presence” in the country backed by research, engineering, manufacturing, distribution, and business administration elsewhere in the world, Nihon Entegris consolidated business resources to concentrate all necessary business in Japan as a Japanese company. The company delivers high-technology products including liquid filters, dispense pumps, gas filters, FOUPs, FOSBs, hard disk shippers, fuel cell components, and other related items.
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Significant portions of these products are manufactured at the company’s facility in Yonezawa (see map) in the Yamagata prefecture approximately 300km north of Tokyo. Those products that aren’t manufactured locally are designed and produced with significant input from Nihon Entegris employees to ensure that they meet the specifications of Japanese customers.
Relationships. A comprehensive report, titled “Best Practices for High-Tech Firms in Japan” and published by international consultancy Eurotechnology Japan, points to “understanding the nature and value of personal relationships” as a critical business success factor. One of the defining characteristics of our strategy in Japan is recognizing that long-term customer relationships must be earned, and customer loyalty is something to be protected and treasured. Foreign companies that come into the market assuming they’ll take market share through low-cost products quickly realize that Japanese customers recognize that low cost alone does not necessarily translate into value.
 Figure 1. Japanese customers value partnerships in business relationships more than other regions of the world, according to a 2006 Entegris customer survey. |
A recent worldwide study conducted by Entegris found that Japanese customers seek out and value strategic partnerships with their suppliers more than any other region (Fig. 1). This is not surprising because a long-term view is common in Japanese culture. Strategies should be viewed in terms of years, not months, and strategic partnerships are a critical part of that thinking.
Partnering requires working collaboratively with Japanese customers early on in the design process to assure that a suppliers’ long-term product strategy matches that of its customers. It’s not uncommon for Nihon Entegris employees to work closely with customer counterparts at leading fabs and OEMs to plot long-term product development strategies.
A natural outgrowth of this customer intimacy is a larger degree of customization in solutions. When fabs or OEMs invest in long-term relationships with suppliers, they’re expecting the benefit to come in the form of products and solutions that are tailored to their own unique needs in order to help propel them forward on their respective technology roadmaps to the future.
Working side by side with Japanese IDMs and wafer growers, Nihon Entegris has developed unique solutions for Japan’s 200mm and 300mm semiconductor fabs. Global teams with representation by the customer, local field applications engineering, global product support, sales, customer service, product management, and engineering, both in Japan and the US, work together to solve the specific problems in design and product implementation.
For example, to ensure close alignment with Japanese preferences for product design and performance, Entegris chemical pumps and valves provided from the Yonezawa, Japan, facility were designed, engineered, and developed in Japan with direct participation from equipment manufacturer customers. Additionally, some key design features of several products that are marketed globally were developed in Japan. For the dispense pump business, Nihon Entegris invested in comprehensive capabilities for local design, manufacturing, test, and product support.
Alignment with Japanese preferences also extends beyond the product itself. Based on customer demand for customized design, high quality and shorter lead times, the Yonezawa plant has cut the average lead times for liquid filter and dispense pump products by 70% over the past three years.
Japanese customers expect their suppliers to provide outside industry perspective as well. Those suppliers without strong local technical capabilities quickly realize that they have virtually no chance of establishing the long-term relationships necessary to compete in the market. Nihon Entegris works with companies across a wide range of disciplines and geographies, and customers expect a leveraging of that experience and perspective when providing solutions.
 Figure 2. Japanese customers expect local suppliers to work with them on unique product requirements. |
Local talent. Entegris never had the intention of running Nihon Entegris as a division of an American company. We recognized that, to be successful, we needed to staff Nihon Entegris with local talent, and to fully leverage that talent across our other geographies. Japanese customers, whenever possible, prefer to work with local suppliers, but it’s for practical reasons more than nationalistic ones. The perception among customers is that local suppliers will have a better understanding of the specific quality and performance requirements necessary to compete in the Japanese market, and they’re right (Fig. 2).
Nearly 99% of Nihon Entegris’s employees are Japanese nationals, and many came through a university in the very same classes as their customer counterparts. Such history is absolutely critical in a marketplace that values long-term, stable partnerships.
Nihon Entegris makes sure that its Japanese employees obtain a “world view” by spending time in other countries-both to share valuable insights on the Japanese market and to bring best practices from the rest of the world back to Japan. As a global company, all of our employees need to have global perspective.
Entegris has learned the lesson of patience. Stereotypically aggressive Westerners will find nothing but frustration when working in Japan and will likely harm the reputation of their companies. We’ve learned that you have to wait for the right circumstances before charging in to solve a problem or complete a sale. Bringing better and broader customer and cultural sensitivity to our factories has been one of the single biggest changes that has allowed us to be successful in the Japanese market.
Gateway to other markets
Japan can’t be viewed as an island unto itself. The country plays a significant role in helping shape the delivery of products and services to the rest of the semiconductor and global electronics industries. The infrastructure that a company establishes in Japan to serve the marketplace has value not just in other Asian countries, but also around the world.
The Japanese marketplace values investments in technology and tends to honor patents and other intellectual property rights, while other emerging markets within Asia have less defined guidelines. Patent infringement and lack of respect for intellectual property rights run counter to Japanese business culture. That is a value that other countries are starting to adopt, and it makes for a business environment more conducive to innovation and technology differentiation as well.
Future directions
While patience is a virtue in working in the Japanese semiconductor market, companies cannot stand still. They need to continue to innovate and deliver new offerings to their customers, but with an eye toward clear customer needs.
Building long-term local relationships, listening to customer needs, and continuous innovation are the keys to success for companies extending their reach into Japan. For Nihon Entegris, the company’s investment in the country since the late 1960s is paying major dividends-especially with this subsidiary not acting like a subsidiary at all.
Jean-Marc Pandraud is executive VP/COO at Entegris Inc., 129 Concord Rd., Billerica, MA 01821; ph 978/436-6500.
Takashi Mizuno is president of the Japan region for Entegris and GM of Nihon Entegris K.K.