Iris Ohyama, whose wares are ubiquitous in Japanese homes, has relied on her usual offbeat methods during the COVID-19 pandemic and U.S.-China trade tensions to ride the telecommuting wave and bring production back from China.
Family-run, unlisted and based in the provincial city of Sendai, the fast-iterating maker of everything from rice to rice cookers has become the highest-profile company to sign up for government incentives to bring production home.
With newly labeled “made in Japan” face masks flying off the shelves alongside her other miscellaneous products, such as office furniture and air conditioners, Iris Ohyama forecast annual revenue of 700 billion yen ($6.7 billion). ), against 500 billion yen a year earlier.
Although pandemic-related demand is propelling Japanese sales this year, the company is seeing overseas markets expand to provide the bulk of its revenue, up from around 30% currently, its chairman Akihiro Ohyama said in an interview.
This shift is made possible by advances in factory automation and the growth of e-commerce, opening up markets such as the United States, where Iris Ohyama is expanding production of “made in the USA” items, including electronics and masks.
This change also provides a hedge against trade tensions between the United States and China. Japanese companies are deeply dependent on Chinese supply chains, which makes it all the more important to ensure that production there is free from disruption.
Iris Ohyama, for example, could expand production in Japan beyond plastic items and LED lighting.
“Unfortunately, many parts for items like washing machines and refrigerators cannot be purchased domestically,” Ohyama said during an interview in rural Miyagi Prefecture, where the factory space is being converted for the production of face masks.
Three-quarters of the cost of building the line of masks is covered by government subsidies – under a 60 billion yen ($570 million) program covering around 60 companies.
The company is also asking for new subsidies as the government expands payments under new Prime Minister Yoshihide Suga.
The company said it remained committed to China as both a production site and a market, with a new factory under construction in Tianjin.
But analysts say lower barriers to entry into the electronics market mean Iris Ohyama could be vulnerable to new competition.
“Iris Ohyama is still not such a big brand, and if cheaper and attractive products appear, it may be in a hurry,” said Hideki Yasuda, an analyst at Ace Research Institute.
Little known outside of her home country, Iris Ohyama cut her teeth in plastic products before moving into consumer electronics in 2009.
To hire engineers from manufacturers like Panasonic and Sharp, which were losing staff to Chinese and South Korean competition, he moved research and development to Osaka, in the industrial heartland of Japan, where those workers lived.
Company product proposals are approved or rejected on the spot during Monday meetings. It’s a seat-of-the-pants approach that industry insiders say the company’s unlisted status — and lack of investor pressure — makes possible.
Iris Ohyama launches more than 1,000 new products per year, which account for more than half of total sales.
The company’s focus on simple design and reasonable pricing has also proven a winning formula for companies such as furniture maker Nitori Holdings and Uniqlo’s parent company, Fast Retailing.
Although the total Japanese market for lines such as storage items has peaked, the company will continue to grow by expanding its product line, Ohyama said, adding that online shopping will help sales.
Japanese manufacturing has a reputation for quality but also for over-engineering. New products often include more and more features, and overseas competition has left players competing for the top end of items like televisions.
“The number of high-end brands will decrease over time,” said Ohyama, who in 2018 took over as chairman from his father, Kentaro, the company’s leader for more than half a century.
Competitors say they lean toward more expensive materials and work in larger teams than Iris Ohyama, who lured engineers by giving them the ability to directly design products.
“Iris sets a product price target and builds rigorously to meet it, when we tend to overshoot,” said an executive at a competing electronics maker.
The company, which employs around 13,000 people, plans to hire a record 640 more next year.
Industry insiders point to the difficulties of attracting engineers in the face of competition from larger peers and Chinese companies offering higher salaries.
“The lack of staff is the biggest problem; the business is growing but the workforce hasn’t kept pace,” Ohyama said.
Iris Ohyama sees annual sales reaching 1 trillion yen by 2022, a milestone that would elevate her to an elite group of companies that have thrived by targeting thrifty Japanese consumers.
“Our brand image is improving,” Ohyama said.
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