Japan Business Report 2018

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Discovery Reports

Ferrotec Holdings reaps benefits of global perspective and pushes for diversified portfolio

In almost 40 years, Japanese technology company has grown from pioneering magnetic fluids to become a key supplier in the electronics industry

PUBLISHED : Monday, 30 April, 2018, 6:13pm
UPDATED : Monday, 30 April, 2018, 6:13pm

[Country Business Reports interviews and articles by Discovery Reports]

“Born in Japan, based on a United States-developed know-how; fortified by Japanese industrial technology and quality; expanded using China’s mass-production value chain, and sustaining growth with Europe’s deep-seated development capabilities and Asia’s burgeoning technology infrastructure.” This sums up the continuing story of Ferrotec, according to its founder and CEO, Akira Yamamura. “The course of our almost 40 years of operations reflects the rise of a company with a truly global perspective.”

Ferrotec traces its roots to the National Aeronautics and Space Administration (NASA) and the magnetic fluids developed for use in the NASA Apollo space programme in the 1960s. It was established as a Japanese corporation of Ferrofluidics (USA) in 1980 under the name Nippon Ferrofluidics with Yamamura as president. Yamamura went on to spearhead a management buyout of Nippon Ferrofluidics in 1987. In 1999, Yamamura led the acquisition of its former parent company via a friendly takeover bid. Ferrofluidics (USA) became a subsidiary and was subsequently renamed Ferrotec (USA).

“It was my firm belief that parent company and former subsidiary have to come together again and become a global corporation,” Yamamura says. “Otherwise, we’ll be competing with each other. It took me a good 12 years to unify the whole business. Those were difficult years, but we’ve reached significant growth milestones since reuniting.”

Ferrotec was originally engaged in distributing vacuum feedthroughs that use ferrofluid, a functional material attracted to magnets and magnetised by external magnetic fields. Yamamura has grown Ferrotec to become one of the key suppliers in the electronics industry and has initiated close alliances with many companies to incorporate ferrofluids in next-generation products. Over the years, Ferrotec’s product portfolio broadened from ferrofluids and Ferrofluidic seals to include critical components using advanced materials such as quartz, silicon, chemical vapour deposition silicon carbide (CVD-SiC) and ceramic products for semiconductor manufacturing processes, thermoelectric components for temperature control, and precision coating systems used to manufacture light-emitting diodes and smartphone components.

From 1990 onwards, Ferrotec embarked on an aggressive overseas business expansion and product diversification. It established local companies in Massachusetts in 1991, in Hangzhou in 1992, in Shanghai in 1995, and in Singapore in 1997. Significant milestones included Ferrotec’s launching of thermoelectric module production in 1992 through Hangzhou Dahe Thermo-Magnetics and its venture into quartz products for semiconductor-related businesses in 1998.

In 2002, Ferrotec expanded into the contract manufacturing service business for semiconductor production equipment and silicon wafer processing that capitalises on its integrated manufacturing technologies.

Its third division – the photovoltaic-related business – was established in 2005 with the start of full-scale production and sales of quartz manufacturing equipment and crucibles. This was followed by the company’s move into the manufacturing of ceramic products to further boost its earnings.

“Early on, I already knew that we had to grow worldwide and to manufacture in places where it can be more cost-effective, yet maintain a standard of quality that meets world market specifications,” Yamamura says. “This is where China comes in and the importance of having long-time strategic partners.”

“People have a lifespan limit, but a business doesn’t have to have one”
Akira Yamamura, founder and CEO, Ferrotec

To date, Ferrotec operates its businesses in the four geographic regions of China, Asia, North America and Europe, including Russia. It has a goal of achieving sales of 100 billion Japanese yen (HK$7.43 billion) by fiscal year March 2019 from these operating territories. Against a backdrop of increasing semiconductor production in China, Ferrotec expects to get a boost in sales from the “Made in China 2025” initiative that was unveiled by the Chinese government in May 2015.

In its second accelerated growth phase that started in 2014, Ferrotec began extending its portfolio based on its core technologies both horizontally and vertically through synergistic acquisitions and alliances. This allows the company to reduce its heavy dependence on the tech sector and focus on its consistently more profitable semiconductor equipment-related and electronic device businesses.

In 2015, Ferrotec broadened its solutions for structural components made from advanced materials with the purchase of Admap from Mitsui Engineering & Shipbuilding. Admap has exclusive technologies for developing ultra-high-grade CVD-SiC. With the material’s exceptional purity and resistance to corrosion, acids, heat and abrasion, CVD-SiC is forecast to be a critical element in enabling the most advanced precision semiconductor manufacturing equipment.

Ferrotec also looks to establish new profit sources by diversifying into the automotive, general industrial, medical equipment and domestic demand-related industries. As part of this strategic direction, Ferrotec acquired Asahi Seisakusho, a leading manufacturer of industrial laundry equipment with a solid market position in Japan.

Asahi, which became a consolidated subsidiary in July 2016, will allow Ferrotec to cater to the rising demand for industrial laundry machines in China and emerging markets, particularly for use in hospitals and hotels.

The Ferrotec group today consists of 40 companies, of which 34 are consolidated subsidiaries. As a transnational company, Ferrotec has built a robust worldwide presence with marketing, development, manufacturing, sales and management capabilities in Japan, Europe, the Americas, China and Asia.

A holding company structure was implemented last April with Ferrotec Corp, changing its name to Ferrotec Holdings Corp. The holding company is responsible for management, administration and research development across the Ferrotec group, while Ferrotec Corp serves as the operating company that is in-charge of customer support, sales, manufacturing and quality assurance.

“People have a lifespan limit, but a business doesn’t have to have one,” Yamamura says. “That is, if you’re not in it just for the profit – a short-term vision; and if you do it right and not focus on one key product. It is vital to keep on looking at new areas and new partnerships so growth can be sustained.” and