It's a tumultuous time for Japan's injection press industry, manufacturers of some of the world's top-end and top-priced molding machines. Sales are expected to drop 15 percent this year amid economic turmoil, and global competitive pressures are causing some companies to take a serious look at broader financial or technology partnerships.
The industry in March for the first time saw a Japanese press maker buy a major European rival. That merger, between Sumitomo Heavy Industries Ltd. of Tokyo and Germany's Demag Plastics Group, created one of the world's largest press makers. It was followed quickly by a second Japanese-European linkup, a technology development agreement between Toshiba Machine Co. Ltd. and KraussMaffei AG.
Whether such combinations are an indicator of things to come was clearly on the minds of many industry executives interviewed at Japan's biggest plastics show, the International Plastics Fair, held Nov. 7-11 in Tokyo.
Some felt this year's Japanese-European links were signs of a realignment.
``It seems we need some partner in sales or partners in manufacturing,'' said Yoshitomo Tanaka, director of the injection molding machinery division at Tokyo-based Japan Steel Works Co. Ltd. ``It is one of the options in the future. So we will watch the situation closely,'' he said.
JSW recently invested in fellow Japanese press maker Meiki Co. Ltd. in Obu. Tanaka said it was an important investment for Meiki's expertise in hydraulic direct-clamp pumps and its background with large presses.
Hozumi Yoda, president of another one of Japan's largest press builders, Hanishina-based Nissei Plastic Industrial Co., also said his thinking has evolved in the past year. He said he sees the necessity of building strong partnerships with other companies, though he suggested that reducing manufacturing costs is more of a motivator for his firm. Like many executives, he was vague about potential tie-ups.
One clear motivator for Japanese firms is a better sales channel into the European market for all-electric machine technology, a market they see as large and untapped. Electric machines make up about 10 percent of the European market, compared with 50 percent of the U.S. market and more than 90 percent in Japan.
Rising energy costs are pushing European firms to look more closely at the low-energy-consumption electric machines.
``I think Toshiba and KraussMaffei, and the Sumi-Demag thing, I think that's a sign of things to come in the industry,'' said Peter Gardner, vice president of Niigata Machine Techno Co. Ltd.'s U.S. unit in Wood Dale, Ill. ``I think you'll see more of that.''
He said Niigata has no specific plans for partnerships, but he said the company, which has made only electric-drive machines since the mid-1990s, has been approached by at least one European firm.
He said because Japanese machine makers were quicker to jump on electric technology, they control more of the key patents.
``It's a little difficult for the Europeans to get in late in the game without violating patents,'' Gardner said.
But JSW's Tanaka, like many Japanese executives interviewed, said it is tougher for Japanese firms to crack the European market because companies there are more conservative in their purchasing. ``It is not easy for us to get into the market and get some market share,'' Tanaka said.
Not everyone thinks the Sumitomo-Demag merger is the wave of the future.
Akashi, Japan-based Toyo Machinery & Metal Co. Ltd.'s technical officer, Naohiko Tsuzuki, said Japanese firms can build sales networks in Europe without full-blown mergers.
He said his firm debuted at Germany's K show last year with its partner, Italian machine builder R.P. Injection srl, and hopes to boost sales in Europe to 200 machines this year, from 120 last year. Tsuzuki said the European market does present a good opportunity for the Japanese industry.
Toyo is pursuing other strategies, such as opening its first Chinese factory, a small operation near Shanghai that for the moment is capable of building about 180 electric machines a year, or about 10 percent of the company's production in Japan.
An executive at another large Japanese injection firm, Mitsubishi Heavy Industries Plastic Technology Co. Ltd., said his firm for the moment wants to focus on being independent. He acknowledged, however, that the mergers — including auxiliary equipment maker Wittmann Kunststoffgeräte GmbH buying press maker Battenfeld Kunststoffmaschinen GmbH — have prompted a lot of analysis about the direction of the industry.
``Everyone says it is going to be changed,'' said Kiyoshi Ikuta, general manager for the export sales department for the Nagoya-based firm.
The backdrop for all the talk is a market that most executives think will stay soft for at least another six months and possibly more than a year, although they said it's extremely difficult to predict.
The Association of Japan Plastics Machinery in Tokyo estimates sales for the country's injection press industry will shrink 15 percent this year, with JSW's Tanaka saying the hard-hit auto sector's sales have been halved since the financial crisis started a few months ago.
Japanese firms have also been hurt in sales by the strength of the yen, although conversely, the strong currency does give them more buying power when shopping for acquisitions elsewhere.
Helmar Franz, a German executive with China's largest machine maker, Haitian International Holdings Ltd., offered another trend pushing the talk of global alliances: The customer base is increasingly global and wants equipment suppliers with a more worldwide product platform and focus, capable of easily delivering interchangeable machines anywhere in the world.
He said the Sumitomo-Demag merger could be an indicator of future trends. Haitian had a small booth at IPF.
For their part, the two Japanese companies at the center of the debate weren't saying much.
Sumitomo Demag officials said at the Fakuma show last month that they wanted a global, unified product line by 2011.
A Toshiba official at IPF said it is possible the partnership with Krauss Maffei could deepen — the companies have jointly developed one machine thus far — and he predicts the industry will see more such collaboration.
``Others may find it more difficult to survive,'' said Hiroshi Azuma, general manager of export sales at Tokyo-based Toshiba.