Leader Interview: Hirotoshi Nakamura

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Director,Senior Executive Officer
Hirotoshi Nakamura

[Q] How do you think Gigaphoton’s business will expand in the future?

There is a lot of big news flying around in our industry. We see a lot of drastic changes. Semiconductor device makers are becoming larger, and manufacturing equipment makers are consolidating in hopes to reduce development costs.

In May of 2013, our largest customer acquired our competition. This even will no doubt have a various impacts on our business. I believe our primary focus as a company centered around technology development ought to be investing in as much R&D as we can to continue developing exceptional products. We need to be constantly in tune with the market needs and trends, while at the same time constantly thinking about new ways to expand our existing technologies or apply our core technologies to consistently develop new products and technologies. To facilitate this, we have to ensure we can maintain a solid profitable business from our current Excimer laser products.

[Q] What do you think is the most important aspect of expanding our business worldwide?

When doing business globally, one thing we have to be sensitive to is transfer pricing. The issues that pertain to transfer pricing deal with distribution of profits gained from a single business entity operating in multiple countries.

For example, Gigaphoton operates in Korea and Taiwan through local subsidiaries which means there is a transfer price for items purchased from headquarters. In Gigaphoton, earnings applicable to intangible assets such as development, manufacturing, hardware sales, quality assurance, and inventory belong to headquarters in Oyama. In other words, most of the profits earned belong to headquarters. In this case, our subsidiaries operate like resellers and there are rules that govern the amount of profit and loss these business entities are allowed to have. We have to make sure they stay within a specific level of profitability. But when we do this it becomes difficult to evaluate the actual performance of these subsidiaries because their financials only reflect profits based on transfer prices. So in order to properly assess the business performance of local subsidiaries, we extract and evaluate the “regionally consolidated” financials between headquarters and our respective businesses in Korea and Taiwan. We expect this will alleviate negative perception by the local subsidiaries that regardless of how hard they work most of the profits are “sucked up by headquarters” and help to boost employee morale. I believe the worldwide teamwork can only thrive when we performance is evaluated in a fair and proper manner.

[Q] What do you value the most in the Control Group?

Frankly, I think Finance people are the last stronghold of a company. We have a very important responsibility of adding the final touches to the company’s business. When I was a new employee my boss often impressed on me that I have to constantly keep on eye on the flow of goods, flow of records, and the flow of money (i.e. list of accounts). This is still important today and I have been echoing the same message to my subordinates as well. If you fully embrace these three flows, for example, if someone in the company wants to know whether doing business in a particular way causes any issues with accounting, you will be able to sort out and construct the necessary accounting methods applicable to the situation. Furthermore, people in Finance have to think one step ahead and foresee potential risk areas and determine how to control them. In that respect, I think this job is analogous to Management Control. Once you are really able to do this then you are full-fledged Finance person and if you have this this kind of mindset you should do well.

[Q] What kind of skills will be necessary for Gigaphoton employees in the future?

I think it is effective international business skills. 80% of our hardware sales and 70% of our parts and service revenues come from overseas. This means that anyone in our company is a possible candidate for working abroad. When you are in Japan someone is always around to help you but when you are stationed overseas help will not be as easy to find or even available. Hence, you must be well prepared with complete understand your job and additional related knowledge or technical skills. The company should put in place a strong language learning and other relevant educational programs to prepare employees for overseas work.
Furthermore, I believe that all management level employees regardless of their function should also have some level of knowledge and skill in accounting. They will not be able to understand the state of their own company without the ability to read and understand financial data. I don’t expect them to be professional accountants but they should at the minimum be able to read Balance Sheets and P&L Sheets. The other day we performed training for new managers and I’m pleased that they were eager to understand the basics of accounting.
Finally, I think it is important for employees to have strong understanding abilities and motivation. What do I mean by “understanding abilities?” My feeling is that a person with true understanding ability is able to not only listen to and understand what someone says but also provide a value-added response. Also, in my view “motivation” is analogous to “curiosity.” If you train yourself to interact with people with curiosity, you will be able to absorb more information and your ability to make decisions will also improve.

[Q] What appeals to you about Gigaphoton?

First is Development Strengths. At Gigaphoton there are many people with PhDs and we have very broad external connections that facilitates our ability to effectively researching information and technologies that don’t exists in our company and discover ways to combine them with our existing technologies. How a product maker grows largely depends on its development strengths and this and our perseverance to follow through with everything until the end is where I feel our company is strongest. I think this is very important and one of the biggest reasons for our success in establishing a strong foothold in this market consisting of only two players in the world.
Another important aspect of our company is the high level of teamwork we are able to achieve between internal departments and between companies. This is especially true for our overseas subsidiaries where we have highly synchronized collaboration and support operations. The professional attitude of each employee translates to providing extremely high quality support that our customers have come to appreciate. I think this is another quality that is appealing about Gigaphoton.