Trust as the Foundation of Success in Japan

Goro Naito
Senior representative of Evonik group in Japan
President of Evonik Japan Co., Ltd. and NIPPON AEROSIL CO., LTD.
Evonik Japan Co., Ltd.

April 2024

The Evonik Group is a global specialty chemicals company operates production plants in 27 countries. Its products are sold in over 100 countries worldwide. The company's Japanese subsidiary has been successfully operating in the Japanese market for over 50 years, leveraging its technology to develop products in many different sectors.

Evonik Japan, initially Degussa Japan, established its foothold in 1969. Naito reflects on the beginnings: "Evonik's relationship with Japan dates back over half a century, initially focusing on providing technical services rather than directly selling our products."

He adds, "Our success in the Japanese market was due in large part to our commitment to forming close partnerships with Japanese companies, including establishing Nippon Aerosil, a joint venture with High-Purity Silicon Corporation (formerly Mitsubishi Materials Corporation)."

Japanese businesses have a grasp of the country's business practices, appreciating the expertise of local partners. This respect allows them to integrate their technological strengths with local insights, leading to innovative product developments. According to Naito, the enduring success of Evonik in Japan over 50 years is rooted in trust-based relationships with Japanese companies.

Evonik Group's stance on the Japanese market is insightful and strategic. "In terms of sales across the entire group, Japan's share is not so big. However, from the perspective of new product development, Japan has a massive presence. Japan is a key base for the group as a whole."

The Japanese market's increased motivation to embrace technologically advanced, eco-friendly products such as automotive components has caught the attention of local companies eager to innovate in these areas. This trend highlights both the demand for such products and Japan's capability to develop them. While Japan has an attractive environment for doing business, Naito points out that there are challenges unique to the Japanese market.

"It is sometimes pointed out that Japanese companies are slow in decision-making, and this may be an issue. In addition, it costs a lot of money to create eco-friendly products. There is a prevailing focus on quality and pricing the over cost," he notes.

However, according to Naito, a shift in consumer mindset is underway: "Japanese consumers are increasingly aware that they should pay a price in line with the actual cost of producing a good product."

Nippon Aerosil, a member of the Evonik Group in Japan, announced plans last year to build a new fumed aluminum oxide production plant in Yokkaichi City, Mie Prefecture, aiming to begin operations in 2025. This plant will support the burgeoning demand for batteries in electric and hybrid vehicles. "We anticipate a rapid increase in demand for automotive batteries. To address this, our new Yokkaichi plant will serve as a key production base for electric vehicle lithium-ion batteries," Naito says.

According to Naito, Yokkaichi City was chosen for its long-term collaboration with Nippon Aerosil and Japan's reputation for technological development.

"Nippon Aerosil has been operating a plant in Yokkaichi City, Mie Prefecture, for almost 60 years and has built a great deal of trust with the local community. When the plant was being built, the prefecture and the city collaborated to support us in obtaining the required human resources, and provided subsidies as well as other support," Naito added.

Japanese local governments are highly motivated to attract companies specializing in cutting-edge technology. Partnerships with local governments offer significant advantages for businesses looking to grow their presence in Japan.

Evonik Japan has technology centers in Kawasaki and Tsukuba, and conducts research in collaboration with universities and research institutes. Reflecting on the utilization of Japan's robust R&D framework for fostering open innovation, Naito underscores the vital connection between their local efforts and the broader objectives of the Evonik Group.

"Our headquarters in Germany shows interests in the research trends at our technology centers and academia in Japan, aiming to enhance our product offerings through further refinements. This is a domain where Japanese engineers excel, and our head office highly values Japan's ability to respond to customer needs as well as its outstanding abilities in R&D," Naito explains.

Yet, the benefits of Japan as a strategic business do not end there. Naito elaborates on the additional benefits that make Japan an attractive base for operations.

"The political stability and low country risk are tremendous advantages for conducting business in Japan. Evonik has enjoyed a stable presence in Japan for over five decades, largely thanks to our commitment to developing solid relationships with Japanese companies and local governments. Once there is mutual trust, the business environment supports operations that are both stable and sustainable," Naito states.

In conclusion, he says, "I'm convinced there are things that can only be made in Japan. The 'strong Japan' that drives our growth is defined by our technical expertise in developing products that cater to the intricate demands of users."