A Fortress for Start-ups in Tokyo’s Shitamachi
One business located in the heart of Tokyo’s shitamachi (working class neighborhoods) is engaging in innovative projects using sophisticated technology. With strengths in sheet metal and press processing, Hamano Products Co., Ltd. utilizes digital machines such as 3D printers and has won a laser processing contest sponsored by the Embassy of Austria.
The company has set up a general support facility, Garage Sumida, to help companies and research institutions do prototyping and development. This facility is now attracting much attention from start-ups.
We sat down with Keiichi Hamano, CEO of Hamano Products and founder of Garage Sumida, to ask him about the facility’s technical characteristics as well as the regional characteristics of Tokyo.
Editor ：Thank you for taking time out of your busy schedule to be with us today. I was impressed that by using the network your company established, Garage Sumida is organically linking businesses and research institutions, helping them take their business into the world, while also changing the impression people have had about small and mid-size factories.
First, could you please me tell a little about the monozukuri (manufacturing and craftsmanship) in which your company is engaged?
Keiichi Hamano: (hereafter, “Hamano”) ：At first, our company started working with metal molds. We have been engaged in press processing, sheet metal and other metal processing for over 40 years. As times have changed, we have adopted the use of laser processing machines, machining centers, and electric discharge machines. Now, our strength lies in possessing a wide range of facilities and equipment, such as digital machine tools including two types of 3D printing machines and Computer Numeric Control processing. That is why we receive diverse requests, from those related to semiconductors to those from the fields of medical, aerospace, and designer products.
Editor：Isn’t it unusual for small factories to have 3D printers?
Hamano：Yes, it is. The advent of 3D printers has been a threat to many small factories, and they are said to be like a bitter enemy to small and medium-size companies. However, our company doesn’t view this technological innovation as a danger but rather as a wonderful technology. Instead of fearing 3D printing, we adopted the use of the equipment to make the most of our business. We’ve accumulated production experience using 3D printers. Since different technology will be required depending on the machining process and the product’s application, we concluded that 3D printers are not a panacea. Our company therefore blends the metal processing know-how that we have cultivated over the years with the use of these new technologies, endeavoring to support our customers’ applications and situations.
Editor：So, one of your company’s strengths is a flexible response that weaves together new and old technology. What kind of products have you been working with that have taken advantage of those characteristics?
Hamano：Just like many small factories, we had been working on processing items for mass production but, in 2000, we changed the direction of our business. Instead of doing solely mass production jobs, we started working in the field of prototype product manufacturing and product development.
We are particularly focused on the projects we’ve received from research institutions. For example, we delivered neutrino observation equipment–for use in Antarctica—to the International Center for Hadron Astrophysics, an institution with researchers from countries worldwide. In this international joint experiment, we received a rough sketch of the design from Chiba University, which is in charge of the equipment design, and then gave Chiba University proposals for the design and production method. We have also received requests from other research institutions and universities, such as in the areas of regenerative medicine and agriculture.
We’ve taken part in planning for collaborations with industry, academia, and government, such as the electric vehicle Hokusai and the unmanned deep sea survey submersible Edokko-1, which was the first in the world to succeed in photographing deep sea creatures at 8,000 meters underwater. Moreover, we are helping individual designers, such as a calligrapher who is producing hiragana-shaped earrings. When our main business concerned mass production items, we were doing business with only four companies, but now we have received business from over 3,000 companies.
Editor：That’s tremendous growth in just 16 years. What was the impetus for the growth of your business?
Hamano：I’m often asked about the timing of our growth but there is no magic that will turn things around in the manufacturing industry. Since we had just two staff in the beginning, if a customer suddenly came into the factory with a new order, we didn’t have enough facilities or staff to accept it. When we tried to take on more employees, we might add two employees but then lose one, so we’ve had to grow little by little, adding equipment and employees. This has led to where we are now.
As you know, the manufacturing industry has been facing difficult times recently. In Sumida Ward, where our company is located, there were about 9,800 small factories at most, but now there are just 2,800 companies. This situation is the same in all areas. As large manufacturers move overseas where production bases are much cheaper to operate, small factories have been steadily decreasing.
Editor：It’s common knowledge that the price of land in Japan is high and labor costs are expensive.
Hamano：Tokyo in particular has the highest labor costs in Japan, and there isn’t enough space for factories. Furthermore, since people are living next to the factories, noise is an issue. Changing such circumstances is difficult, so small factories are continuing to go out of business. And, unlike in fields such as IT, manufacturing companies have to purchase land and equipment as well as employ craftsmen, so once these companies disappear it is very hard for them to return. Moreover, people do not expect young entrepreneurs to enter this field.
Certainly, the experience and intuition of craftsmen is utilized in production methods in a very small fraction of companies and communities but, with the development of machine tools and software, the gap between Japan and overseas locations quickly closes. If the current situation continues, cars used locally will have been assembled in local plants. Monozukuri is expected to rapidly transition to a model based on local production for local consumption.
One could look at these circumstances and say that Tokyo is not a region that is best suited for monozukuri. If you try to do the same thing as others, it’s obvious that sooner or later you’re not going be able to keep going; you have to be unique. Small to mid-scale factories like us have to make the most of our regional characteristics to survive, and engaging in practical monozukuri is the strategy that will enable us to succeed over other companies.
Editor：One cannot deny that, as you pointed out, Tokyo is not a region that is best suited for monozukuri, but are there any advantages to conducting monozukuri in Tokyo?
Hamano：In thinking about advantages, first you have to thoroughly understand the characteristics of the region. Certainly, there are difficult conditions if we view Tokyo from the perspective of sites and cost. However, Tokyo is home to universities and research institutions unparalleled globally, with many teachers and researchers who are researching cutting-edge technology. Until now, we survived by following large companies but, with changes in the environment, that schema is starting to break down. In light of these circumstances, we are working on monozukuri that is connected to universities and research institutions to take advantage of Tokyo’s characteristics. This is a new market and the greatest advantage to doing monozukuri in Tokyo.
Moreover, Tokyo has a dense concentration of people. In such a place where people gather, information also gathers. When information gathers, business opportunities are always created. This is the greatest resource in Tokyo so, by utilizing these local advantages, we can discover the meaning and significance of doing monozukuri in this community.
Editor：Until now, your company has been working with projects for numerous research institutions. How have those organizations found out about your company?
Hamano：We have many connections to start-ups with bases in universities and research and development centers but we felt it was necessary to create a mechanism that could support them. One of those pillars is Garage Sumida, which we started in 2014. This facility is a test production facility with various machine tools, including the latest 3D printers, but we didn’t set it up solely for our production. We want the facility to support others in monozukuri, such as researchers and graduate students who want to make hardware or want their research to lead to business. One business that moved into Garage Sumida is already trying to set up a joint stock company. Representative director Atsushi Shimizu used to work at a large electronics manufacturer but quit his job after the Great East Japan Earthquake of 2011 to support the creation of Japan’s electricity through accident-free electric power generation. He is now working on the development of new systems for wind power generation.
Editor：His idea involves developing the world’s first wind power generation that uses typhoons, and this is one of the start-ups attracting most attention, isn’t it? Was Mr. Shimizu involved in monozukuri at his previous company? (http://challenergy.com/)
Hamano：Apparently Mr. Shimizu has experience researching fluid mechanics at the University of Tokyo’s graduate school and was working in research and development. In other words, he does not have any connection to monozukuri that involves metal processing. Since the results of his research materialized into a product outside his area of expertise, we’ve been responsible for handling the processing of the prototype.
When such start-ups have a prolonged period of development, it becomes very difficult to recover funds. Moreover, without sufficient expertise in processing, there is a tendency to try and make everything with a 3D printer. However, as I mentioned earlier, in monozoukuri, processing that matches applications, new technology is not always the right answer. Also, if one is fixated on the final output, it is possible to overlook the importance of drawing management that is recorded in the process of making mistakes. This is the key to monozukuri. If you don’t understand that monozukuri is the result of a process, you won’t be able to make products that are all the same, and it will be impossible to ensure quality. Being thorough about drawing management helps businesses accumulate know-how for follow-up after delivery, as well as for new product development.
Small factories such as ourselves build our business on these accumulated experiences. The strength of start-ups is that they have academic expertise. That’s why when companies move into Garage Sumida, we let them leave the work, from the planning stage to processing, to us. We want them to make sufficient use of their expertise.
Editor：In other words, you combine your respective strengths to establish a system for collaboration?
Hamano：That’s right. Even before Garage Sumida was launched, we had been supporting a university’s robot production but, due to their financial circumstances, it wasn’t a business. Our company wanted to help them as much as possible but, if there is no mutual win-win relationship, activities cannot continue.
To resolve this problem, our company served as a judge in the Tech Grand Prix business contest of aspiring entrepreneurs. Large companies sponsored this contest and, since auditors and venture capitalists participated as judges, the participants’ business plans—which included the steps to starting the business and their financing plans—were examined intensely. The winner would receive financial assistance of about 20 million yen, including prize money, removing the obstacle of startup capital that is usually a bottleneck for start-ups. In other words, it was possible for the companies with a thorough plan and without any financial problems to receive continuous assistance. The university team I mentioned earlier was fortunate enough to win the top prize in the first Tech Grand Prix, so we invited them to be part of Garage Sumida.
Editor：How many companies have entered Garage Sumida? Are there any conditions for entering?
Hamano：Currently there are five start-ups that pay rent every month in Garage Sumida. Resident companies do not need to participate in any sort of contest, but they do need social responsibility. Having a way of benefiting society, such as addressing people’s needs after a disaster, wanting to making children’s dreams come true, or helping solve problems in the world is the criteria we use to evaluate the companies.
Rather than work that involves creating massive numbers of blueprints because someone wants something cheaper by a few yen, we feel that there is value in supporting young entrepreneurs who aim to venture out in the world.
Editor：How have companies rated the facility?
Hamano：Not only has the assistance we provide in monozukuri been rated favorably, but our company’s network has also been well-received. About 10,000 people visit our factory each year, and we are introducing organizations and people who will be of benefit to our tenant companies. In particular, since we’ve been featured on TV and many other forms of media, we try to have our tenant companies featured as much as possible.
Furthermore, using our personal connections as a small factory with roots in the community, we encourage cooperation with government and financial institutions, and promote relationships between tenant companies and the community. We’ve seen successful results, and heard from tenant companies that “If we enter Garage Sumida, Hamano Products can introduce us to media channels and people.” We believe that we are supporting the companies in their communication of information and fund-raising.
Also, we work to provide an open response regarding technical aspects. If we judge that another company would be more beneficial than us for the tenant company, we will introduce companies with whom we have a collaborative relationship.
Editor：I’ve heard that the reason why so many start-up companies have congregated in Silicon Valley is about not just technology but also the connections among business people. It seems that Japan’s venture capital has a tendency to be biased towards financial assistance but, in the US, venture capital serves companies that are strong in hardware and companies that specialize in software. Introductions make the most of both characteristics.
Hamano：That’s correct. A very rational arrangement has been set up in Silicon Valley and that is the area’s greatest merit. Currently, providing support for monozukuri is our company’s primary objective but, in the future, we would like to go even further and involve other businesses, regions, governments, and financial institutions. If we can do that, we can create fertile ground that makes it easy for start-ups to develop in Japan as well.
Editor：Garage Sumida is one strategy for enhancing your company’s corporate value. How do you think Hamano Products will change in the future?
Hamano：For example, ryotei (traditional Japanese restaurants) are long-established shops that are adapting to change the way they have always done business. Likewise, our company wants to do a good job of matching the technology we have cultivated to society, paying attention to how the world is changing while understanding the characteristics of our community. If we do this, there has to be something that we can do, whatever the era.
More and more Japanese companies are venturing abroad. We are also trying to improve our communication skills from the bottom up by hiring new graduates who are returnees from overseas and proficient in foreign languages.
Moreover, we are seeking to construct a system that enables overseas start-ups to do monozukuri in Japan.
Editor：So through Garage Sumida, you are not only working to help Japanese companies go overseas, but are taking on the challenge of trying to attract companies from abroad to come to Japan. Thank you very much for sharing your views with us today.
Hamano Products Co., Ltd.
Business activities: Sheet metal/frame/housing design, various kinds of assembly processing, precision sheet metal processing/laser processing, metal press mold production, metal press processing, cutting/machine processing, complex machining, development/design, prototype production
Established: September 1978
Factory headquarters:4-39-7 Yahiro Sumida-ku Tokyo Japan 131-0041
Garage Sumida:4-36-21 Yahiro Sumida-ku Tokyo Japan 131-0041