Message from the President

As times change, we will continue to evolve toward the NGK Group Vision while persistently embracing challenge and transformation.

The Uncertain Future of Changing Times

In 2022, uncertainty continued due to many factors, including higher energy prices driven up by the tense situation happening in Ukraine, the skyrocketing costs of raw materials caused by the weak Japanese yen, and the serious semiconductor shortage. This resulted in an operating income of 66.8 billion yen, down 22% from initial forecasts.

The automotive industry struggled to overcome the semiconductor shortage and was unable to respond to customer needs, which greatly influencing the NGK Group businesses. I can clearly see the tremendous impact any one thing has throughout our supply chains as each becomes broader and more closely interconnected, especially as products become more complex and businesses continue to globalize. We have not been through a global situation like this since the 1979 energy crisis, which makes the future of our times extremely difficult to anticipate.

To not only survive but thrive in these harsh and fiercely changing times, I recognize that a company must transform. When I assumed the role of President in April 2021, I strongly believed that we cannot stop the changes and transformations my predecessor did his best to pioneer.

The NGK Group has always had an industrious corporate climate with the ability to make steady progress forwards when the path is clear. However, I feel that we struggle to leap into the unknown while trying to take steps on a new path forward.

I myself am not averse to change and adapt quickly thanks to my life living overseas since my childhood. Even after I joined the NGK Group, I spent a majority of my time at Group companies outside of Japan. I think my work away from the head office has given me a relatively objective view by allowing me to observe the NGK Group from the outside in. My goal has been to actively drive forward transformations right for the times while taking advantage of my experience abroad. I hope to share the trajectory that the NGK Group must take with the entire organization. Driven by this passion as President over the last two years, I have pushed forward a variety of different initiatives.

Group Vision for 2050 and Five Transformations

I announced the NGK Group Vision: Road to 2050, as a medium- to long-term vision for 2050 in April 2021 right after assuming my role as President. We drafted this vision through an exhaustive debate about the specific direction that the NGK Group should take as a company based on the NGK Group Philosophy, which was put in place on our 100th anniversary in 2019.

The first step of this process was to imagine what we want the NGK Group to be by 2050. Next, we backcast the action necessary to realize this vision to define the initiatives necessary now as five transformations that act as priority issues for the NGK Group. These five transformations are the backbone that will support the entire Group in fiercely changing times. I also believe these are a signpost that guides what we must do now.

Previously, our employees often headed in different directions causing disjointed action when trying to start something new or to incite some kind of change. However, these five transformations have become a key road map for everyone to always keep in mind, which has aligned action in a way that can drive forward solutions to our challenges. I feel we are gradually changing the corporate culture to one in which employees are more proactive and independent-minded when it comes to change. ESG management is core to corporate management and the first of these five transformations. Since the founding of the NGK Group, our purpose has been to resolve social issues through ceramic technologies. We have also integrated strategic growth within these efforts to address a broad range of social problems. I would like to once again review and reaffirm the work that the NGK Group has done thus far from securing and developing excellent human resources to strengthening corporate governance in an effort to connect these initiatives in a way which will strengthen our ESG management.

Outcomes and Progress of the Five Transformations

Two years have passed since we established the NGK Group Vision. I feel that we have already seen positive outcomes in a variety of areas thanks to these five transformations.

As one example in research and development, the NGK Group has successfully developed various sub-nano ceramic membranes. These molecular sieve with a pore size less than a nanometer can separate a specific gas from a gas mixture or a specific liquid from a liquid mixture at a molecular level. We also expect these sub-nano ceramic membranes to contribute greatly to carbon neutrality for a variety of reasons, including CO₂ separation from emission gases.

Today, a demonstration field test of a CO₂ separation and recovery technology using DDR-type zeolite—one type of sub-nano ceramic membrane—is underway at a Texas oil field in the United States. This proof-of-concept test is a joint project between the Japan Oil, Gas and Metals National Corporation and the JGC Japan Corporation. Although there are still many challenges to overcome, I hope the repetitive trial-and-error tests will lead to practical use in the near future.

Moreover, we can further expand the uses of sub-nano ceramic membranes by combining many different applications. In particular, the type of technological needs to realize carbon neutrality still remains unclear. That is why I believe this breakthrough product presents a tremendous business opportunity for the NGK Group.

Even after developing an amazing technology, our weakness has typically been the slow pace until reaching social implementation and commercialization of that technology. However, I feel our partnerships with other companies have dramatically shortened the time it takes from development to the launch of a business.

The driving force behind these efforts has been Corporate NV (New Value) Creation, which specializes in commercializing new technologies. We have striven to not only actively approach companies in Japan but also those in Europe. Even in regions where our technologies were relatively unknown before, we have seen an increase in inquires asking whether the NGK Group can do this or that.

No matter how excellent a technology is, a company working alone becomes complacent and will face limitations in what can be done. Broad technological disclosure and the exploration of pathways to partnerships with other companies will surely expand the uses of each technology, and in turn more readily bring about breakthroughs. Our Group will continue to expand these connections to increase the number of partner companies worldwide that are confident the NGK Group can tackle even the most difficult requests related to ceramics. I also want the NGK Group to be competitive in the global market.

Our transformation to improve profitability faces obstacles, such as the changing external environment I described earlier and a sluggish economy, but the fiscal 2025 targets of 600 billion yen in net sales, 90 billion yen in operating income, and 60 billion yen in current net income set by the NGK Group Vision will not change. We are forecasting consistent income from the Environment Business as our most profitable business currently. The NGK Group will invest these earnings in sectors expected to show significant growth in the future, such as semiconductor and digital social sectors. I hope we can also ride this wave of growth by injecting new ceramic technologies into the market.

At the same time, we need to rationalize plant equipment, improve productivity, and make other sufficient preparations to immediately capitalize on eventual market recovery. To do this, the digital transformation (DX) set as one of our transformations is essential. The Digital Transformation and Innovation Department launched in 2021 is playing a central role in driving forward the transformation of our engineering and supply chains, which has already proven quite effective. Especially in the research and development stage, we will advance material informatics (MI) to efficiently explore new materials through AI analyses of past data to leverage in product designs. The NGK Group possess a century of experiment data. An MI development approach capitalizing on a wealth of data that no other companies have not only aims to cut the research and development period to one-tenth of current levels but is already producing results. Eventually, our challenge will be to train AI with the expertise the NGK Group researchers have cultivated in material development.

The ESG Management Department launched in 2021 has even taken the lead to execute initiatives to further our ESG management. Over the last two years, I feel the ESG Management Department itself has grown a lot. Although I cannot say that the concepts of ESG have fully penetrated every aspect of business throughout the organization, I am confident we will continue our work in the future to make that happen.

Toward Sustainable Development—Identification of Materiality

In April 2023, we identified several Materiality to further clarify the current direction of the NGK Group. Some of these issues do coincide with our five transformations, but I feel it is imperative that the NGK Group is able to fully communicate to our stakeholders what our aspirations are as well as what is important when engaging in these businesses, especially as we expand our business globally. In addition, the identification of Materiality will make it easy for employees to understand and accept why they are carrying out a specific business.

Out of numerous social issues, I believe fight against climate change is one that the NGK Group must tackle first. There is tremendous potential for us to take advantage of NGK Group technologies in products and services that will help reduce CO₂ emissions.

Any individual or company can cut their own emissions, but only a few companies can expand businesses that contribute to the direct reduction of CO₂. Toward that end, first, I want to have the NGK Group broaden specific businesses in the pursuit of further emission reductions.

In addition the respect for human rights is the social issue I would like us to concentrate our efforts in particular. Japan is an island nation with a relatively low awareness of human rights, which could be because of the high ethnic identity. Worldwide though, many different people have a long history of fighting and spilling blood to protect human rights. Within this social landscape, I am highly aware of the importance of treating everyone equally and ensuring a life guaranteeing human rights.

When I first moved overseas as a child with my family for work, I was very shocked to have people throw racial slurs at me. This was my first real experience with discrimination. I feel strongly that Japan should emphasize the importance of respecting human rights more in the future.

Of course, the reality is that international politics and other such circumstances do influence and sway the vision for these values. Even with this said, I want to make sure to adhere to the universal values of democracy and equality. The NGK Group will always keep these values in mind while further identifying Materiality.

To Become a Company Where People Are Proud to Work

The NGK Group Philosophy established in 2019 advocates that quality people embrace challenges and teamwork as one value. This year we drafted the new NGK Group Human Capital Management Policy. As one of our five transformations, ESG management advocates the NGK Group to secure and develop quality human resources. I recognize efforts to develop human capital in the future as one of our challenges.

Japan has a long history of the membership type lifelong employment system. In recent years, some Japanese companies have adopted the job-type employment system, which is one of many changes in the thinking about employment. Regardless of the type of employment system though, it is vital to value employees, put in place educational opportunities to enhance skills, and build an environment for all to reach their full potential.

Especially in a modern society focused on digital and other technologies, this generation cannot fully leverage their skills unless they both gain experience and learn at least the minimum knowledge necessary. The society of Japan is said to lack educational investment in human resource development. I want to change that by sufficiently investing in our human capital.

Going beyond human resource development, the establishment of a workplace where everyone can actively participate is also important. I am always telling every NGK Group employee to create a company where everyone can speak their mind without hesitation and colleagues take those ideas seriously. As a result, the atmosphere of the entire organization has changed over the last several years. I feel I am seeing much more constructive and positive ideas shared in and outside of meetings.

I am also constantly encouraging everyone to take on challenges without fear. As I mentioned in the beginning, the NGK Group has many very industrious people as employees. That is why I want all of us to step outside of conventional ideas to incite our transformations. By doing so, I hope everyone can feel excited about coming to work. There was a time in the past when I was young that I hated going into the office because it wasn’t fun. I have thought incessantly about how to reduce even one person who has that feeling.

Transformation does come with adversity. An unthinkable disaster or problem could manifest tomorrow. I want our company to be one where everyone can enjoy working together to overcome such adversity. I would like to share this kind of approach with our Group companies around the world as well.

Above all else, I hope to realize a company where every NGK Group employee can work with a sense of pride. That is my goal.

To Become a Company Trusted by Every Stakeholder

The NGK Group must earn the trust of society, shareholders, customers, suppliers, employees, and every other stakeholder in the future to exist as a company. “I can trust the NGK Group and a relationship with them would be beneficial.” Without corporate management giving our stakeholders this level of confidence, the value of the enterprise can only fall. Moreover, I don’t think such a corporate entity is a sustainable organization.

To reiterate the point, the mission of the NGK Group is to resolve social issues through ceramic technologies. If we can spearhead the transformations necessary to accomplish this mission, I am confident that we have the power to evolve as a company regardless of the type of business we find ourselves in the future.

I hope all of our stakeholders will watch our future transformation and evolution. To everyone who shares this passion with me, I ask that you join our circle of stakeholders to help us all engage in better business.

Note: This interview was conducted in May 2023.