Value Creation Approach Practiced by the Sumitomo Rubber Group

Roundtable Talk among Officers in Charge of Technological Development

Value Provided by SENSING CORE

• Visualizing CO2 Emissions• Automating Tire Inspections• Preventing Tire Trouble

SENSING CORE provides extensive value by detecting Tire Pressure, Tire Load, Tire Wear and Road Conditions.
In order to further expand the value that SENSING CORE provides, we are now working on the development of a
fifth sensor function to detect Warning Signs of Wheel Detachment

Road
Conditions

Tire
Pressure• Improving Fuel/Energy Efficiency• Preventing Overload &Unbalanced Loads• Preventing Overturn Accidents

Kiyoshige Muraoka

Yoichi Mizuno

Senior Executive Officer

Director, Senior Executive Officer

Executive Officer

What Is the Goal of Our Technological Development in
Terms of Supporting Genuine Joy and Well-Being for All?
Transformative Initiatives Now Being Undertaken
by Technological Development Divisions toAchieve the Goals of the New Midterm Plan
Muraoka Under the Transformation Project stipulated by the new
Midterm Plan, our technological research divisions are focused on threeobjectives: (1) pursuing optimization via close collaboration among manufacturing, sales and technological departments; (2) developing next-­
generation tires; and (3) expanding the scope of the operations throughwhich we take on new business fields as well as pursuits in our fields offocus by scaling up the business applications of our SENSING CORE
Technology. The Transformation Project strives to transcend organizational boundaries via the use of a top-down approach, with officers playing a central role. Thanks to these features, the project has proven highly
effective in promoting measures to achieve the above objectives.
First of all, in pursuing optimization via close collaboration among manufacturing, sales and technological departments, we are addressing the
major problem of the downward trend in profit despite sales revenue inexcess of ¥1 trillion.
Sales departments naturally lean toward securing orders wheneverthey expect a certain amount of sales and profit. This puts pressure ontechnological departments, which then look to increase development
resources and undertake capital expenditure to meet delivery schedules.
They may also have to augment staffing while enhancing efficiency.
Although we typically encounter a variety of issues like the above in thecourse of business, we consider pursuing overall optimization key to successfully resolving such problems.
Our standard for optimization is determined by asking what factors weneed to prioritize to genuinely improve the profit margin. When making
judgments, we sometimes prioritize requests from sales departments andat other times those from technological departments. At the Sumitomo
Rubber Group, however, we also deem it essential to take the Purpose
into account as an axis for judgment.
Secondly, with regard to developing next-generation tires, we are wellaware of the growing social trend toward EVs. Accordingly, it is essential

49

Integrated Report 2023

to take full advantage of our unique technologies to stay at the vanguardof this trend and create products boasting unparalleled features.
Thirdly, we will accelerate efforts to scale up our SENSING CORE
Technology with the aim of expanding the scope of the operations throughwhich we take on new business fields as well as pursuits in our fields offocus. SENSING CORE is built on Deflation Warning System (DWS) technologies that were commercialized by the Sumitomo Rubber Group in
1997, and no other companies were developing similar technologies at thattime. This Technology is capable of analyzing tire rotation signals, assessing
the status of tire load, tire wear and other factors as well as road conditions,such as slipperiness, and providing vehicles and drivers with such data.
If data collected via SENSING CORE were utilized not only by tire manufacturers but also drivers, vehicles themselves and automakers, thebenefits arising from this Technology would grow even larger. Given the
recent social trend away from the simple sale of goods and toward theprovision of value-added services, we are confident that SENSING CORE
is a truly pioneering technology.
By combining SENSING CORE with our next-generation EV tires, we willcontribute to a next-generation mobility society in which autonomous vehicles are mainstream. Furthermore, we will strive to realize “TOWANOWA”—
a unique business model concept that connects big data utilization with
manufacturing to support a circular economy. This is how we endeavor toserve as forerunner in initiatives to realize a sustainable society.
As discussed above, the Transformation Project targets a diverse
range of issues, including those that must be addressed by our group at
this point in time and those that must be addressed in the future, as well
as social issues calling for collective efforts to create solutions.
Matsui As part of the pursuit of optimization via close collaboration
among manufacturing, sales and technological departments, we will also
strive to reduce the size of our Stock Keeping Units (SKUs).
We will review our current definition of the SKU for each product tomake it more efficient.
For example, we can update SKUs by verifying our process for globally
distributing products developed using new technologies after initiating the
manufacture of such products at our mother factory. Specifically, we will
examine the volume of necessary capital expenditure, distribution costs andother expenses by, for example, assessing various options for production• Automating Tire Inspections• Managing the Tire Maintenance
Cycle

Tire Wear

Tire Load

5th Sensor
Function
DetectingWarning Signs
of Wheel
Detachment

6th Sensor
Function• Detecting Warning Signs ofWheel Detachment

Hiroshi Matsui• Detecting Upcoming Patches ofSlippery Road

locations where we can intensively manufacture such products in an efficient manner, with all Executive Officers in charge of manufacturing, sales
and technology taking part in this assessment.
In terms of developing next-generation tires, SILENT CORE
Technology, which employs specialized noise-absorbing sponges
installed inside the tire, lends us a distinctive strength. The adoption of
SILENT CORE is particularly beneficial to EVs as an effective noise
countermeasure because, since they generate no engine sound, thenoise generated by the tires moving on the road is all the more noticeable. As a forerunner in this area, the Sumitomo Rubber Group has developed patents for this Technology, which it licenses to other companies.
We also consider our IMS (Instant Mobility System) Tire Puncture
Emergency Repair Kits to be a source of strength in light of the increasing
popularity of EVs. The IMS eliminates the need to carry spare tires. We
will further strive to ensure that both SILENT CORE and the IMS are
adopted by a growing range of vehicles.
With the aim of expanding the scope of the operations through which
we take on new business fields as well as pursuits in our fields of focus,
we are scaling up the business applications of our SENSING CORE
Technology. In this area, we expect that functions for detecting early signsof truck wheel detachment will be the first to be commercialized. In Japan,
annual statistics on traffic accidents include more than a hundred such
incidents involving wheel detachment. Previously, it was assumed thatincidents of this kind would be preceded by such signs as vibrations that
could be felt by the driver. However, our research revealed that detecting
early signs of wheel detachment is extremely difficult for the average drivers. This finding prompted us to develop a technology that would allow
the vehicle itself to detect the early warning signs of these incidents.
This technology thus came to fruition as a 5th sensor function, with our
proposal targeting truck makers garnering favorable reviews and resulting
in its ongoing development. We forecast that vehicles equipped with thisfunction could be released in several years. In addition, our development
team has become ever more spirited as their efforts thus far are expected
to result in the commercialization of a groundbreaking technology thatwill, in turn, resolve a social issue.
Going forward, we also intend to develop 6th and 7th sensor functions
while expanding the scope of customers who will benefit from them.
Through these endeavors, we aim to secure business profit of around¥10.0 billion from SENSING CORE-related operations in 2030.

What Is “TOWANOWA”—the Sumitomo RubberGroup’s Unique Business Concept Supporting a
Circular Economy
Muraoka The transition to a circular economy has become a pressing
issue requiring the response of not only the tire industry but all other...
7th Sensor(Functional
Function Expansion)• Improving Tire Life & Promoting
Retreading• Responding to the Needs ofSports Cars & Other
High-Performance Vehicles• Responding to the Needs of
CASE: Detecting Tire Damage(for Heavier EVs)

industrial sectors.
The Sumitomo Rubber Group has taken a progressive approach to theutilization of sustainable raw materials ahead of other companies. For
example, in 2013 our group released the world’s first 100% fossil
resource-free tire made from all-natural materials and, in 2019, became
the first in the world to release tires incorporating Cellulose Nanofiber, abiomass material. However, we had not forecast that the shift toward a
circular economy would gain momentum as rapidly as we are seeing
today. We feel that the pace of transition has drastically accelerated.
Basically, initiatives undertaken by manufacturers to support a circular
economy seem to be largely similar, because they share a somewhat
similar perspective as manufacturers. You will see them naturally gravitate
to questions about such issues as what materials they should use, how
to procure energy for manufacturing and how to treat manufactured
products. Against this backdrop, it is a major struggle to set ourselvesapart from others in this area.
On the other hand, as the trend toward a circular economy is now
becoming mainstream in society, moving our group in another direction
would be untenable, even if we wish to differentiate ourselves.
These thoughts led us to identify the utilization of big data as a technological concept for better leveraging the Sumitomo Rubber Group’s
strengths. Specifically, we have decided to develop a built-in mechanism
supporting our value creation initiatives based on the full use of ourstrengths in sensing and AI-based technologies and the mutual coordination of various data, which has previously been utilized in a piecemeal
manner. The data gleaned from tires could possibly offer a variety ofinsights that, in turn, could help us deliver benefits to a broad range ofcustomers if this data were effectively connected with other types of data
across society. This big picture will, I believe, set our business concept—

Integrated Report 2023

50

Value Creation Approach Practiced by the Sumitomo Rubber Group

Roundtable Talk among Officers in Charge of Technological Development

we call it “TOWANOWA”—apart from those of other companies.
Although we expect other companies to announce similar concepts
going forward, we would like to definitely maintain our position as a forerunner. In this light, securing connections with diverse range of external corporations as well as service users will be key to success. Our strength in thisfield will therefore hinge on how far and fast we can expand the scope of
external data connections.
Matsui The creation of the TOWANOWA concept started with anacross-the-board assessment of the status of circular economy-related
business endeavors now under way that enabled us to distinguish areasof co-creation from areas of competition. This, in turn, helped us define
the new business model.
For example, the recycling and reuse of tires already involves collaboration with other companies. We cannot roll out such an undertaking on a
global basis with the power of the Sumitomo Rubber Group alone.
Accordingly, these are considered areas of co-creation.
On the other hand, the development of data connections will be anarea of competition. Fortunately, no other tire manufacturer is in possession of a technology like our SENSING CORE. However, if this technology
becomes widespread in society, our endeavors in this area will naturally
shift toward co-creation.
If this happens, we will then be called upon to tackle the issue of what
services we can deliver through the utilization of data gleaned via
SENSING CORE and how to create value that has never been before via
connections with business fields that had never before been in the
Sumitomo Rubber Group’s radar.
Mizuno We expect that, once realized, TOWANOWA will enable us tosignificantly increase the speed of our development efforts to betteraccommodate customer needs.
Currently, we are striving to survey the market to verify the severity ofdamage incurred by the rubber of a tire in the course of regular use, tothis end recovering tires used in various conditions and collecting samples from them to assess and analyze resulting changes in the rubber’s
physical properties. Although these tasks are extremely time-consuming,
we leverage collected data to provide feedback that informs our development activities via the use of simulations and other analytic methods.
However, if the above data could be automatically collected and utilized
to generate feedback on driving conditions, development departments
would greatly benefit from the fresh data input and be empowered toachieve their development targets in significantly shorter periods of time.
Matsui We anticipate that our approach to joint technological development involving automakers will evolve going forward along with theupdating of our approach to in-house development. Traditionally, we
have engaged with automakers’ chassis development divisions and jointly developed tires with them. In contrast, development projects associated with SENSING CORE will position us to engage with vehicle andbusiness planning divisions and others tasked with upstream design processes. In short, joint projects of this kind will enable us to take part inthe creation of new vehicles and new businesses from the early stages ofconcept building, instead of limiting our role to merely a producer of a

51

Integrated Report 2023

component for a single vehicle type. We are therefore confident about
SENSING CORE Technology’s potential to lend us a profound strength in
the context of how to navigate our Tire Business into the future.
To secure our abilities to fulfill our expanded roles in these development
endeavors, we intend to nurture teams of technicians equipped withexpertise in DX and other leading-edge fields and capable of providing
automakers with proposals related to the utilization of the Sumitomo
Rubber Group’s technological solutions. These teams will be developed
at our bases around the globe.
As part of specific initiatives to this end, we have launched a new
Technical Response Task Force while establishing the Advanced
Technology Development Department. Aiming to commercialize the
SMART TYRE CONCEPT, the latter will act as a business unit independent from other departments and specialize in promoting advanced
development projects with an eye to achieving tangible results by 2030.
To this end, engineers from business units charged with creating truck,bus and light truck tires as well as passenger car tires will join the ranks
of development staff.
Muraoka Today, development divisions are being called upon to meetradically evolving needs at an ever-faster pace. Because of this, we needto undertake the drastic reform of conventional development processes.
Ultimately, it is desirable to have an overarching framework that connects
various processes ranging from the planning to manufacturing stages
through a database or ensures data coordination among such stages.
Furthermore, automakers do not request the preparation and verificationof prototype tires at every stage. They put our tires on their vehicle models toverify if they fit. If our tires are good, they will tell us to deliver the same tires a
week later. This means that we must be ready to launch mass-production
only a week after proposal and verification. As such, we are called upon todevelop tires at an extremely swift pace. Accordingly, we need to allocate
more resources, including human resources, via the use of a forward-­
looking approach that takes the required pace of development into account.
We have identified SENSING CORE, Active Tread, Performance
Sustaining Technology, Airless Tires and Tire Life Cycle Assessment(LCA) as five key elements of the SMART TYRE CONCEPT—our technological development concept announced in 2017. All of these are technologies unmatched by any other company, and four of the above fiveare at the commercialization stage.
We will place particular focus on developing SENSING CORE into aneven larger business. On the other hand, we have always known that the
SMART TYRE CONCEPT would one day cease to be a pioneering concept. It is time to consider developing the next technological concept.
Recently, we shifted many of our employees at technological researchdivisions to forward-looking development projects. Although the remaining
members tasked with the development of existing products are facing
extremely harsh conditions due to this transfer, we intend to promote DX
and enhance operational efficiency with the aim of better motivating theentire workforce through a shift to a more creative mode of manufacturing.
To that end, we need to create an exciting work environment for engineers. We will therefore strive to provide a place for young engineers toacquire robust technological insights at the early stages of their careersand help them discover a sense of excitement in taking on the challengeof manufacturing that leverages diverse ideas. We expect our engineers
to achieve personal growth through these pursuits.
Mizuno Under my supervision, the Material Research & Development
HQ is doing its best to promote operational streamlining.
Previously, our recipes for rubber compositions had been prepared atexperimental facilities through trial-basis compositing and kneading while
confirming the various aspects of the resulting rubber’s physical properties. It had thus taken several weeks to complete each recipe. Several
years ago, however, we introduced software capable of immediately calculating predicted values of physical properties once the data on the proposed rubber composition was entered into a personal computer. This
software relieved us from kneading every composition, enabling us toreduce the associated workload at experimental facilities by approximately
30%. Currently, we are striving to further improve this software. In theseand other ways, we are working to thoroughly streamline our operations
so that greater resources can be allocated to teams tasked withforward-looking development.

Futuristic Tires That Optimize Their Performance
Based on Road Conditions and Temperature
Mizuno We are assiduously developing Active Tread as part of the
SMART TYRE CONCEPT. In anticipation of the popularization of autonomous vehicles, we believe that for us to ensure driving safety, it will beessential to ensure identical tire performance irrespective of external conditions. In this regard, Active Tread is currently drawing immense attention. We are confident that Active Tread, along with Performance
Sustaining Technology, will be an optimal and essential tire technology
supporting autonomous driving and car sharing.
Rubber’s physical properties change in response to changes in theexternal environment, including air temperature and road conditions.
Based on the composition of a tire’s rubber, Active Tread proactively
adapts these physical properties to support driving safety.
For example, when the vehicle transitions from a dry to a wet road,
Active Tread reacts to the presence of the water and adapts the physicalproperties of the tires’ rubber to exert greater wet grip performance. In
this way, Active Tread ensures identical grip performance on both dry
and wet roads. In this way, we are endeavoring to realize futuristic tires
that boast an unprecedented feature.
Matsui It will also be possible to create all-season tires that provide
greater grip performance in low-temperature settings, such as when driving on snow or ice, via the use of Active Tread.
In low-temperature environments, the energy efficiency of EVs
decreases due to deterioration in battery performance, while tires’ rolling
resistance increases. However, if we can control the stiffness of rubber atlower temperatures via the use of Active Tread, we will be able to create
EV tires capable of curbing deterioration in energy efficiency in low-­temperature environments.
Mizuno We plan to disclose concept tires equipped with technologies
to ensure identical performance on both wet and dry roads in 2023, andto release these tires on the market from 2027 onward. Moreover, in2024, we aim to release tires employing similar technological concepts toachieve improved performance for driving on ice in extreme low-­temperature conditions. These tires will be the first successor series of
the “ALL SEASON MAXX AS1.” In 2027, all-season tires could be standard for EVs.
Muraoka Active Tread will bring direct benefits to drivers . We are aiming for the ultimate form of tires that drivers can use with confidence driving the way they would on a dry road even when it’s raining or snowing.
Although this may result in lower sales of winter tires, we believe that theprovision of tires of that kind is a matter of greater significance, both to
the Sumitomo Rubber Group and society, considering our long-held conviction that we should efficiently use the Earth’s limited resources and,
therefore, our tires should be used over the long term.

Transitioning from Dependence on Human
Techniques to AI-Based Development Blazes
a Pathway toward a New Future of Joy and
Well-Being for All
Muraoka In the course of developing motorcycle tires, test riders try
out the prototype tires and provide comments on driving comfort,
response, stiffness and other factors, a process also known as sensory
assessments. Design engineers then improve prototypes in response tothese comments. However, such comments often include highly individualvague, often onomatopoeic, expressions describing the sensations ofstiffness, softness or other tire properties. Engineers trying to identify
areas requiring improvement and then update tire designs based on theirinterpretations, had to rely on their accumulated experience, know-how
and human intuition.
To accomplish development targets, engineers thus repeat a cycle ofidentifying issues based on sensory assessments, discovering the root
causes of such issues, developing hypotheses, creating improvement

measures and verifying them in actual driving tests. The more engineers
gain experience, the fewer rounds of this cycle they need to undergo tofinish projects. In sum, the development of tires has long been dependent
on human perception.
Today, we are facing the pressing need to pass down the techniques,experience and know-how of seasoned design engineers to the next
generation. AI now plays an essential role in providing functions previously
fulfilled only by veteran engineers with years of experience in interpreting
results of sensory assessments.
In general, it is thought that machine learning and the ability to analyze
enormous amounts of data enables an AI to generate correct answers.
However, if a technological theory is absent, we cannot tell whether AI
chose a specific answer based on correct reasoning or it did so by
chance. Accordingly, we have striven to visualize a veteran design engineers’ thinking process.
We have categorized and organized the items used in sensory assessments as well as the improvement measures created based on suchassessments. Through these and other efforts, we have endeavored to
improve the AI’s learning data. As a result, our AI has become able to linksensory assessment results with design parameters. This is, we believe,a remarkable technological advancement.
To become able to interpret the comments provided via sensory
assessments, engineers had to undergo on-the-job (OJT) training furnished by veterans capable of passing down necessary techniques. It
usually takes five to 10 years to nurture professionals in this area.
Although we do believe that our conventional ways of passing down
techniques from veterans to younger engineers are worthy of preservation, we also consider enabling the latter to acquire these techniques ateven earlier stages an integral part of our mission.
As part of the above-mentioned steps for visualizing the thinking processes of veteran design engineers, we have also developed mechanisms for predicting their choice of solutions from among multiple options
for addressing the root causes of issues discovered in prototype tires andwhat improvements to make so that young engineers can learn fromstudying the paths taken by their predecessors and quickly realize theirshortfalls or failures. This has made it possible to equip young design
engineers with proficiency at earlier stages of their careers, achieve higher
development efficiency and concentrate on more sophisticated technological development.
The utilization of data regarding the results of sensory assessments
undertaken by actual humans is not only instrumental to tire development
but also beneficial to other business operations conducted by our group.
In particular, the analysis and utilization of data regarding people’s widelydiffering modes of behavior and sensory responses could be of great
help in our Sports business and nursing care services.
Acquiring technologies like those described above will help us secure a
profound strength going forward while empowering us to create “a futureof joy and well-being for all” in line with our group’s Purpose. Therefore,
let all of us pull together to do our best in these development endeavors.

Integrated Report 2023

52