Measure for Measure

Tokyo-based SME Napson Corporation has built a global reputation for its one-of-a-kind measuring instruments for semiconductor devices, solar cells, flat panels and other such technologies. Katayama Osamu asked Napson’s president, Nakamura Makoto, about the company’s enduring pre-eminence in this niche but essential new industry.

Napson President Nakamura Makoto

Napson Corporation has its head office in Koto Ward, an old downtown district of Tokyo. It is a small-scale enterprise with approximately forty employees, but has been highly appraised globally in the field of measuring instruments for semiconductors and other technologies.

“Our company’s products are what are referred to as sheet resistance or resistivity measuring instruments. They are not really something that are very familiar to the general public, but they are absolutely essential as measuring devices for semiconductors,” explains Napson’s president, Nakamura Makoto.

While semiconductors are a massive global market, the related measuring device industry is a much smaller niche market; with a scale of less than 5 billion yen worldwide. It is in this niche market that Napson prides itself on its unique, one-of-a-kind technologies.

The measuring instruments that Napson provides are indispensable in the inspections of a truly wide array of target products, including semiconductor devices, solar cells, flat panels such as LCD and OLED (organic electro-luminescence) panels, touch panels, conductive films, as well as new materials such as graphene and silver nanowire, and the cathode, anode and separator materials used in lithium-ion batteries. In other words, they are essential to our modern day IT society.

Broadly speaking, they have two major applications.

The first is in research and development of new substances and materials. For example, in the development of new materials, they are used when evaluating a material’s electrical resistance. They are used in many situations, such as in measuring to see whether or not a material’s resistance changes with changes in shape and conditions of use.

These kind of resistivity measuring devices are separated into contact type and non-contact type devices depending on the particular application.

“Contact type measuring devices have probe heads that are placed in contact with the sample. An electric current is then passed through the material to measure its resistivity, using what is called the four-point probe method. There are dozens of different types, which vary depending on factors such as the shape of the probes and pressure with which they are applied. The advantage of these types of devices is that they can be used to measure over a wide range, and enable measurement of absolute values. The only downside is that, because the probes come into contact with the sample, they leave some kind of mark or impression on the sample,” explains Nakamura.

Non-contact type measuring instruments measure resistivity without applying probes to the sample. They are an application of a technique in which coils of wire wound around magnets are used to generate eddy currents. The distinctive feature of these devices is that they cause no damage to the sample, because they do not have probes that come into contact with the sample itself. However, they do not measure absolute values, but instead make use of proofed data, based on data from measurements obtained using the four-probe method. They also have the added disadvantage of having a limited range of measurement.

“There are three manufacturers of contact type measuring instruments in Japan, and around seven in other countries around the world. When it comes to non-contact devices, in Japan there is only Napson. Globally, there is just one other company in the United States, and three in Europe. We are the only company in the world engaged in the full-scale development, manufacture and sale of both contact and non-contact type resistivity measuring devices,” says Nakamura.

The other major application for Napson’s measuring instruments is in conducting product quality assessments. For example, the value of electrical resistance required for semiconductors varies depending on the application of their use. Napson instruments are used in quality inspections, or acceptance inspections of purchased products, to determine whether or not the resistance value of a particular semiconductor matches the required value.

One of Napson’s leading products in this field is a sheet resistance measuring device for the conductive films used in touch panels. Touch panel films are applied to the screens of smartphones and tablet devices. Napson’s devices enable the measurement of the resistivity of these films on the production line during the manufacturing process, without the need to stop the line itself.

With regard to this measuring device product, Napson’s only significant competitor is a single German firm. Because Napson’s product is superior in terms of performance, Napson has an almost exclusive monopoly in the marketplace for these resistivity measuring devices for conductive films used in touch panels.

A semi-automatic, non-contact multi-point measuring system for measurement of a wide range of sheet resistance

Incidentally, these measuring devices are priced at around 800,000 yen for small, compact types to in excess of 50 million yen for the most expensive models. Models in the “volume zone” (or premium market segment) cost in the region of several million yen.

Human Resources: Napson’s Competitive Edge

Napson was founded in 1984 by previous company president Yuki Tadanobu and two others.

“It was around the time of our founding when we used to talk about ‘Japan as Number One,’ when Japanese semiconductor manufacturers were at the very top of the world semiconductor market, occupying the top six spots in terms of global market share. Our company has walked hand-in-hand with that flow of events,” explains Nakamura.

However, after that, the situation changed drastically, as the semiconductor market was hit by a recession.

In 1990 and 1991, the company fell on hard times due to a slump in demand for its products. At one point, they were driven down to such a level that their order backlog was around only 5 million yen. Even Nakamura himself prepared himself for the worst, accepting the possibility that the company might not make it through this difficult time.

But from around 1993 onwards, the Japanese domestic market for LCD displays started to gain momentum, and the company became busy once again.

“After that, we were busy all the time. When the so-called ‘Lehman Shock’ (the bankruptcy of Lehman Brothers Holdings and the ensuing financial crisis) came in 2008, of course, it was a tough time, but even then our business remained in the black,” says Nakamura.

The semiconductor market, as has been made known by the term “silicon cycle,” often experiences major ups and downs in market conditions. When they happen, manufacturers of measuring instruments and other related businesses hardly stand a chance. There are more than a few cases in which such companies have been tossed around by the massive waves of market change and disappeared altogether, unable to swim through; lost to natural selection.

But despite being tossed around by the stormy seas of the silicon cycle itself, Napson has survived. Why is that? The explanation lies in the fact that Napson has treated its engineers well, and made diligent efforts to train and develop them. Regardless of the scale of the business, when it comes down to it, the competitive edge of any enterprise lies with its human resources.

“We have also ensured that we have plenty of technology development engineers. Currently, engineers account for 28 of our 40 employees; and around 6 of them—in other words 20% of them—are development specialists. For a company of our scale, assigning 20% of our engineering team to development is quite a hard thing to do. But the reason that our company is still here today is that we have continued to work towards the development of new technologies,” says Nakamura.

In other words, Napson’s advantage lies in its surefire technological and development capabilities. It is precisely because Napson is able to continue delivering the technologies demanded by its customers that the company is regarded as a necessity by its customers, and that it has been able to survive as a result.

Napson also maintains a policy of not overly restricting or restraining its engineers. It places its confidence in them, and entrusts its development work to them.

“We use the one term engineers to describe them, but their specialties actually lie in many different fields, including mechanical engineering, electrical engineering, software engineering, measurement and manufacturing. They each have their own area of assignment, and we take care to ensure that they can each work at their own pace. Ultimately, this presents itself in the form of results, so we usually tell them to ‘work at their own discretion,’ while at the same time managing them to a certain extent,” says Nakamura.

It is precisely because they are trusted to carry out their tasks as they see fit that the engineers at Napson work hard to respond to the trust placed in them. The trusting relationship between the company’s senior management and its engineers leads to a high level of employee motivation.

“The basis for all products is technology. Unless its products are of a high quality, a company will not survive. Even if, for example, we deliver one of our devices, if that device does not come with the necessary technical support—including maintenance—then our customers will not buy from us again. In other words, in order to secure the business of repeat customers, we also have to have maintenance skills and technology.”

“Further still, before we reach the stage where customers can purchase products from us, marketing—including building trusting relationships with our customers—is also essential. This is because, even if we are winning in terms of quality, there is also the issue of cost, and there are times when customers will not buy our products because of that. Marketing is very important,” says Nakamura.

Surefire technology and marketing capabilities to connect customers with that technology: it is precisely because Napson is equipped with both of these that it has an unrivaled competitive edge in the global market.

Networking Overseas

Napson has maintained a positive balance from 1992 onwards, right up to the present day. Aside from human resources, there is one other additional secret behind that track record. It is the fact that Napson—which considered that it could not survive on just the Japanese market alone—turned its attention towards overseas markets, with the aim of achieving greater business stability.

The man who was the driving force behind this overseas expansion was Nakamura, who at the time was in charge of marketing at a semiconductor-related company.

Nakamura joined Napson in 1988. At the time the company had only seven or eight employees, and aside from him there was not a single other person at the company working exclusively on sales. Nakamura started a program of overseas sales activities from scratch.

“I think that they approached me with the idea of having me do overseas sales because I could speak a little English. During my days as a student I spent around eight months backpacking around Europe for fun, so I didn’t have any reservations about going overseas. It’s a small industry, so I already knew Napson by name. I had no sales experience, but the company was relatively close to my home. And so I thought that I would give it a try, and made my decision to join,” he says.

When expanding into overseas markets, small to medium-sized enterprises with limited human resources typically try to sell their products to overseas customers through a specialized trading company. But from the very start, Nakamura didn’t want to take that approach, and so he set about building his own sales network using overseas dealers.

For a small business, this might seem like a bold strategy, but Nakamura says the following.

“People from trading companies will come to you and say, ‘I know lots of semiconductor manufacturers, so I’ll introduce them to you.’ But products like ours cannot be sold through a trading company. On the contrary, the trading company might not accept small-scale orders for us, and might even charge excessive amounts for our products.”

Ultimately, in terms of results, Nakamura’s judgment was correct. According to him, because the semiconductor industry has no real concept of international borders, expanding overseas wasn’t even that difficult. In actual fact, after exhibiting Napson’s products at a trade show, they were immediately approached by a South Korean firm.

“Korean firms use Japanese firms as a benchmark, so they are interested in Napson products because they are adopted for use by major Japanese manufacturers. Then, if one firm buys from us, then competing South Korean firms will also take an interest in our products,” he explains.

For example, as a result of Japanese corporations providing their technologies and outsourcing production to Taiwanese firms in an attempt to oppose Korean firms, from around the year 2000 Taiwanese companies—and more recently Chinese companies too—also began investing massive amounts of money into semiconductor and LCD panel technologies. Napson has been successful in selling those of its products adopted by Japanese companies to these firms too.

“After the Lehman Brothers collapse, the portion of our sales turnover accounted for by overseas sales began to grow. Around 60% to 70% of our sales now come from overseas customers. Orders from Japanese electronics manufacturers are decreasing, but in the field of new materials they are increasing. In the field of materials, Japanese companies still remain some of the strongest in the world,” comments Nakamura.

In addition to its South Korean branch, Napson now has dealerships in countries around the world, including Taiwan, China, the United States, Singapore, Malaysia, India, Russia, the United Kingdom, France, Germany and Egypt. It has built its own sales network, and boasts a large market share.

In this way, behind the scenes of the massive and glamorous stage of the semiconductor industry, tough-nosed small to medium-sized grass roots enterprises like Napson are hard at work.

KATAYAMA Osamu is an economics journalist and representative of K-Office. He has published extensively, including Sumato kakumei de seicho suru Nihon keizai (Growing the Japanese Economy with the Smart Revolution), and Naze Za Puremiamu Morutsu ha uretsuzukeru noka? (Why does The Premium Malt’s beer sell so well?). Recent publications include Samsun kuraishisu (The Samsung Crisis).

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