"Top Talk" Chihiro Kanagawa (Asahi Evening News/Jan.21.2001)

By TOSHIMICHI MATSUMOTO
Asahi Evening News Senior Staff Writer

Shin-Etsu Chemical Co., a chemical company known for its profitability, leads the world in the production of polyvinyl chloride(PVC) and silicon wafers for semiconductors.
"Maintaining steady growth and aiming for maximum profitability are my top corporate priorities," says President Chihiro Kanagawa, who intends to keep reinforcing his company by adding materials and components for optic communication to its mainstay line of products.

Q: How is business?
A: Among our flagship items, silicon wafers are doing very well. For the current fiscal year, which ends in March, we should be able to register a record net income , or net profit, for the entire Shin-Etsu group. This will be our sixth consecutive year of record-breaking net profit - no mean feat in the face of shifting economic circumstances.

Q: Last autumn, Shin-Etsu stock placed No.1 in Japan and fourth in the world in the so-called market capitalization ranking of global chemical companies. How do you feel about this?
A: As president, I am naturally very pleased. Some Japanese chemical companies boast higher sales than we do, but in terms of net income per share, we are rivaled by none. Obviously, the market understands the significance of this fact.

Q: How did you become such a high-profit operation?
A: While taking up and developing profitable new businesses, we have been pursuing endless rationalization in every possible area. Some people associate rationalization with cutting back on office supplies like envelopes and copying paper, but that's nonsense - that's just being stingy.
Real rationalization entails things such as factory automation, energy saving, improving the production process and so on. That is what we have been doing.
Once such steps are taken, you can expect long-term results, and that gives you an edge over your competitors.

Q: Which of your products leads the global market?
A: We lead the world in the production of PVC and silicon wafers which are used to make semiconductors. Our global market share for PVC is about 12 percent, and about 25 percent for silicon wafers.

Q: What are your current plans regarding PVC?
A: Shintech Inc., our U.S. subsidiary, is currently building its second plant in Louisiana. Half of this new factory commenced operation in December. When the whole plant is completed at the end of this year, the entire Shin-Etsu group's total PVC output will reach 3.19million tons annually, putting us way ahead of even our closest competitor.
The market price of PVC tends to be volatile, which means your profit is unstable. But since our plants are spread out in Japan, the United States and Europe, we are able to determine the most efficient production plan by comparing the market prices in the three regions.

Q: Your silicon wafer business is also quite solid, isn't it?
A: Yes, indeed, thanks to brisk semiconductor demand from makers of personal computers and cellular phones. Silicon wafers with an eight-inch diameter are the mainstream at present, but semiconductor makers have started moving on to 12-inch next-generation type for greater production efficiency. We were the first in the industry to build a factory for 12-inch wafers, and this facility is scheduled to commence full-scale operation soon. We are already being swamped with orders.

Q: Are there any new areas of business that seem particularly promising?
A: The optic communication area is just such an example. We are currently No.2 in the world in the production of optical fiber preforms. A preform is a synthetic quartz material. A preform with a length of 1.5 meters and a diameter of 16 centimeters can be formed into a 2,000-kilometer-long optical fiber.
Our new preform production plant is now under construction. Together with optical isolators that are used as optical fiber joints, materials and parts for optic communication present a new, lucrative business area where we expect a lot of growth.

Q: What is your assessment of the overall operating structure of the Shin-Etsu group?
A: My basic business philosophy is never to rely just on a single business area or a single product. To illustrate my point: Our silicon wafer output rose considerably last year, and so did sales. But in order to minimize any financial damage to the entire company during a low period in the so-called global silicon cycle, we must be able to fall back on other areas of business where we can expect stable profit.
In our case, our organic and non-organic chemicals department, which produces PVC, is one such area.
In most cases, silicon wafers and optical fiber preforms have different demand cycles. This means the chances of both demands falling simultaneously are relatively small. I believe one of the reasons we have been making stable profit is that we have multiple stable businesses we can rely on.

Q: What is the ratio of your overseas operations to domestic operations?
A: Of the entire Shin-Etsu group sales, 51 percent are on foreign currency basis, mainly U.S. dollars. This serves as a buffer against international monetary fluctuations, and is another factor that contributes to our stable profitability. I personally think our overseas-domestic ratio is just right.

Q: Where do you think your greatest strength lies?
A: We are essentially a materials maker. Where our basic technology is concerned, the types of technologies we have developed to date are unrivaled in originality.
In addition to our silicon-wafer technology, we possess an extremely wide-ranging technology that extends over many aspects of semiconductor production - from photoresists to photomasks, synthetic quartz for stepper lenses and so on.
Nobody else in the industry possesses such an extensive technology. And the sheer versatility we boast translates into tremendous synergy.

Q: What is your foremost corporate priority?
A: State-of-the-art products are nice to make, but there is no point if they don't bring any profit. By the same token, there is no point expanding your business if that doesn't improve the bottom line. I do not believe in blaming slack business on the slack economy. In order to earn a stable profit even when the economy is in the pits, we have constantly sought to enhance our operating efficiency and develop new businesses.
Raising our sales and improving our profitability will always remain our foremost priority as we continue to try to further reinforce our business base.
And we will also keep our eyes open for possible partnerships and mergers and acquisitions with solid companies, both domestic and overseas.