Navigating global markets: Perspectives
from Nangoku Flexible Hose Industry Co., Ltd.
Masaki Yokomakura
President ofNangoku Flexible Hose Industry Co., Ltd.
For a special report on Japan, for distribution within Newsweek andwww.theworldfolio.com
shares insights on Japan's competitive advantages amid current global dynamics.
Yokomakura highlights the need for differentiation beyond competitive pricing,emphasizing the importance of innovation and market targeting. The interview
delves into the company's strategies amidst Japan's aging population, focusing on
global expansion, product strengths, and innovations in handling liquid hydrogen.
Japan is at a very interesting time right now. Due to the supply chain disruption
caused by COVID-19 and the tension between China and the US, coupled with thefact that the yen is at a historical low, we think Japan is once again very attractiveon the international scene. Do you agree with this premise, and what do you think
are the key advantages of Japanese corporations within this macro environment?
I agree with that sentiment but under a certain condition. The depreciation of theJapanese yen might be temporary. While Japanese products presently boast
competitive pricing, sustaining this advantage may prove challenging in the longrun. With numerous similar products in the market, differentiation becomes arequisite. We need to provide products and services that have special features. Our
strategy should extend beyond price competitiveness to ensure lasting appeal andcustomer satisfaction. We must introduce value-added products and services,
accompanied by a concerted effort to identify and cater to the right market.
We have a base in Vietnam. Although the Vietnamese local market acknowledges
the superior quality of made-in-Japan products, there are some there are
Vietnamese customers who do not require high standards. Hence, it becomes
crucial to pinpoint customers and markets that specifically demand Japanese
products renowned for their quality and sophisticated design, especially for ourbusiness.
One of the standout advantages of Japanese suppliers lies in the unwavering
political stability of Japan as a nation. This, coupled with the diligence of ourworkforce and the high-quality infrastructure in place, establishes a robust
foundation for ensuring a stable and continuous supply—a key strength for Japanin the global marketplace.

Japan has a very aging population, and it is said that by 2050, the population will
drop below 100 million people, raising two main issues. The first one is theshortage in the labor force, and the second is the slowly shrinking domestic
market. As a company specializing in flexible hose and expansion joints, to what
extent must you look overseas to ensure long-term business success?
Since we are in the infrastructure industry, the demand for refurbishment willcontinue despite the population decline. Our strategic goal is to further enhance
our presence in the domestic market, and through our Vietnamese factory, we cansecure a sufficient human labor force. However, we also want to go beyond theconfines of the Japanese market by expanding our footprint globally andproliferating the recognition of our brand.

What would you say is your firm's main competitive advantage that sets you apartfrom your competitors?
Our primary strength lies in delivering high-quality products and a thoroughresponsiveness to our customers' needs, down to the minutest details. A notable
example of our commitment to innovation is our offering of one of the smallest
radius flexible hoses in the industry.
This particular flexible hose boasts the world's smallest diameter and isspecifically designed for vacuum applications. The collar is intricately welded to a
3mm tube. However, it's important to acknowledge that this product doesn't
conform to the standard type commonly used in vacuums, and as a result, it hasn't
been selling well. It was developed primarily to showcase our technologicalprowess rather than being aligned with the mainstream vacuum market.
Your products cater to different kinds of industries such as energy, chemicals,electronics, real estate, and many others. Among these industries, which one doyou reckon offers the greatest growth opportunity for your business? Are there
any new fields you'd like your products to cater to?
While we currently hold a significant share in the industries you’ve mentioned, ourfuture focus and growth prospects lie in the evolving energy sector, particularly
with the emergence of the new hydrogen energy plan. Our goal is to proactively
engage in marketing efforts to position ourselves as integral contributors to thisgroundbreaking project.

One of your standard products is your flexible hose, with many types, such as thethreaded type with flanged fluorine resin joints and the fire service type. Whilethese hoses are crucial in ensuring safety, it's important to acknowledge certain
limitations like their inability to resist unexpected pressure, inner corrosion, scale,contamination, or bacterial growth. How does your flexible hose overcome thesechallenges, and how is it superior to more conventional, similar products?
The ridges incorporated into the hose design empower it to withstand externalpressure, ensuring durability even in a full vacuum state. To address inner pressure,rigorous testing is conducted to guarantee resilience up to four times the expectedusage.
When clients provide samples and specify their tube requirements, we carefully
assess the intended application. This evaluation guides us in selecting the mostsuitable stainless-steel material—whether it be 304 or 316L—to mitigate the risk ofcorrosion.
To counter issues related to scales, we employ a clean room environment toeliminate contamination. In addition, stainless steel itself is resistant to bacteria,
reinforcing the reliability of our products.

Do you offer maintenance services to companies that have been using your hoses
for a long time?
No, we don't offer maintenance services.

You're also an expert in manufacturing bellows type expansion pipe joints fromstandard ones such as the expansion joints NK-6500, NK-6600, and NK-6700 toyour NK-8700 lead pipe pressure balanced expansion joint. These help contain
expansion and contraction within your clients' different piping systems andgreatly prevent earthquake damage. In 2023, many locations experienced
devastating outcomes, like Turkey and Morocco. How are your bellows expansion
joints ideal for resisting these kinds of conditions and environments? Do you take
into account the rise of natural disasters worldwide and in various regions when
you think about international expansion?
Given Japan's susceptibility to earthquakes, our flexible hoses adhere to strict antiseismic standards. In our product development, we prioritize compliance withregulations to address the seismic challenges unique to the region. The importanceof this became evident during the Hanshin-Awaji Great Earthquake, when rubber
flexible hoses succumbed to ground settlement, resulting in significant waterleakages.
In contrast, our manufactured flexible hoses and bellows are made from metal,
offering a superior solution. During ground settlement, the ridges of our hoses

expand and seamlessly return to a straight pipe form. This design ensures that
there is no risk of liquid or gas leakage, even in the event of an earthquake. Our
flexible metal hoses have consistently demonstrated their effectiveness inearthquake scenarios, but we aren't yet ready to promote our products overseas asa part of the earthquake resistance measures.
To illustrate the concept, envision a bendable straw—the flexible part is similar toour pipe bellows. In the event of an earthquake, the bellows expand and straightenout, exemplifying the resilience and adaptability of our products in seismicconditions.
Japan is known to be one of the most innovative countries and has pushed its
R&D to meet extreme requirements. Japan invests about 3% of the country’s GDP
into new technologies. What is the main focus of your R&D strategy? Do you haveany new products or developments you can share with us today?
Our ongoing development focuses on creating flexible hoses suitable for handlingliquid hydrogen, a task presenting unique challenges due to the distinctive
characteristics of hydrogen atoms. Being the smallest existing atom, hydrogen canpenetrate through materials.
To counteract this, we are experimenting with a denser type of stainless steel as amaterial choice. The goal is to employ this denser stainless steel to effectively traphydrogen atoms within the hose. Compared to traditional materials like rubber orresin, dense stainless steel demonstrates a promising capability to securely retainhydrogen.
In our development efforts, we are refining the material and exploring innovative
pipe shapes to achieve optimal results.

When do you expect to launch the first product?
We are engaged in a joint development initiative with a major Japanese company,
one of the top-heavy industry makers in Japan. Our target is 2025.

Partnerships are key to accessing international markets and unlocking thedifferent aspects you don't know about to introduce your products. It’s also very
useful in co-developing innovative products and solutions. What role does
partnership play within your business model? Are you looking for these kinds ofpartnerships or any other partnerships within overseas markets?
Establishing partnerships plays a vital role in our business development strategy.
We are actively seeking domestic and international partners with expertise intechnologies related to flexible hoses, particularly those capable of producing more
efficient bellows capable of withstanding warping or changes in shape.
Furthermore, we are interested in collaborating with companies capable ofproviding fluorocarbon pipes

Where would you like to continue your international expansion? What strategies
would you employ to go to new locations? Would it be through M&A, a new
subsidiary, or a joint venture?
Our strategic emphasis is on directing resources toward our operations in Vietnam.
Our plan involves leveraging our presence in Vietnam as a springboard forexpansion into other ASEAN countries. The primary consideration is to establish adirect subsidiary in these markets. However, we remain open to the possibility ofM&A should we encounter a well-aligned and promising company. ASEAN
countries are also on our top list.

Imagine we come back in three years for your 55th anniversary and have thisinterview with you all over again. What would you like to tell us? What are yourdreams for this company, and what goals would you like to accomplish over thenext 3 years?
As we celebrate our 52nd anniversary, reflecting on our journey reveals atransformation from a subcontractor for major firms to a strategic shift in ourbusiness approach, emphasizing the promotion of our NFK brand. This strategic
pivot has yielded significant results, elevating our turnover from approximately JPY
1.2 billion to JPY 3.1 billion. The NFK brand has become widely recognized within
the Japanese industry.
We aspire to replicate our remarkable growth in the Asian and global markets. Ourfocus, anchored around our factory in Vietnam, is on a continued expansion
overseas. In three years, I can imagine our company not only thriving in Vietnamand other ASEAN countries but also actively promoting the NFK brand on a globalscale.