Technology disruptions force Japanese manufacturers to change or die.

Constant technological innovation is shaking up traditional markets and forcing established manufacturers to adapt or die.

Two big names caught in such turbulence are Japan’s Kobe Steel and Hitachi Metals, whose growth engines are at risk of becoming outdated.

Kobe Steel will close the blast furnace at its Kobe Works in Hyogo Prefecture in October, leaving the company with only two blast furnaces — at its Kakogawa Works, also in Hyogo. Blast furnaces make iron by burning iron ore and coal.

Kobe Steel Chairman and President Hiroya Kawasaki has been gazing into the crystal ball, and what he sees does not bode well for his mainline business. In 10 years, for example, the emergence of self-driving cars that do not crash could change the industry landscape by reducing the need for steel products. After all, if cars do not crash, softer, lighter materials would suffice where steel was once needed.

“I’m not sure if iron made at blast furnaces will still be used 100 years from now,” Kawasaki said.

The executive has been busy sowing the seeds of growth in the nonferrous sector, such as aluminum and titanium alloy. He knows that those operations could become the steelmaker’s core business sooner rather than later.

Engine trouble

Over at Hitachi Metals, similar thoughts are racing through the minds of the company’s executives.

On April 1, Akitoshi Hiraki, a board member, will become the company’s new president. He will oversee a group workforce of about 30,000 employees.

Those who work under him are used to hearing his constant refrain: “Don’t think that the materials used today will be used forever.”

For Hiraki, the alarm bells starting ringing about a year ago, when he received a report from his engineers that aircraft engine manufacturers, the company’s main customers, had increasingly been opting to use ceramic matrix composite.

CMC is a new material developed specifically for aircraft engines. Made up of ceramic fibers in a ceramic matrix, it is lighter and more heat-resistant than nickel alloy, a common composite used for jet engines.

The advent of CMC has potentially dire ramifications for Hitachi Metals, which depends on nickel alloy for much of its revenue. Hiraki recalls thinking at the time, “This could be terrible for us.”

Hiraki is no longer wedded to the idea of Hitachi Metals being known as a major metals player. This spring, the company will begin developing CMC itself at a research institute to be opened in Kumagaya, Saitama Prefecture.

It is perhaps fitting that CMC is a disruptor, as it was an industry disruption that gave rise to the silicon carbide continuous fiber used for the material.

Nippon Carbon developed the fiber at a time when a massive glut of Chinese steel had clouded the outlook of the company’s core graphite electrode business. Graphite electrodes are used primarily in electric arc furnace steel production.

NGS Advanced Fibers, a Nippon Carbon subsidiary based in the city of Toyama, Toyama Prefecture, will begin mass producing the material at its local plants in mid-2017. “We will transform the metal world,” said NGS Advanced Fibers President Michio Takeda.

Digital shift

Another Japanese company blindsided by technological change is Fujifilm Holdings.

At one point, the company was the world’s biggest manufacturer of photographic film. Then digitization happened. In the 2000s, Fujifilm saw demand for its film shrink at an annual pace of 20-30%. Reeling, the company was forced to slash 5,000 jobs worldwide.

Looking back on that time, Fujifilm Chairman Shigetaka Komori said, “We were stepping on the gas and brakes at the same time.”

Desperate to avoid being swept under, Fujifilm launched painful reforms. Those efforts have paid off. Today, digital-related materials and medical products have become cash cows.

“I can’t serve as commander if I try to heed the needs of each and every person,” Komori said.

The never-ending wave of innovation and disruption means that companies must constantly be prepared to shift course in order to stay alive.

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