DONGGUAN, China (Reuters) - Their technical skills helped Japan’s corporate giants sweep all before them in the 1980s, and now thousands of ageing Japanese engineers are finding a new lease of life in booming China.
“My profession is going out of business in Japan,” said 59-year-old Masayuki Aida, who made moulds for a Tokyo-based firm for 30 years but has spent most of his 50s in Dongguan, a gritty manufacturing hub in southern China’s Pearl River Delta.
With the incessant noise of car horns and a pervasive smell of chemicals, the dusty streets of industrial Dongguan are a far cry from Tokyo or Osaka. Construction sites dot the city while beggars clutching tin cans approach cars at every intersection.
For Aida and many like him nearing the national retirement age of 60 the choice was simple - face a few years without an income as Japan raises the age at which employees get their pension or work for mainland Chinese and Hong Kong companies.
“People aren’t making products in Japan anymore,” said Aida, who makes moulds for goods ranging from toys and earphones to coffee machines. “I wanted to pass on to younger generations all the knowledge and technology about moulds I had obtained.”
For Japan, marred by two decades of economic stagnation, the little reported exodus of engineers means rival Chinese firms are getting an injection of the technology and skills behind “Made in Japan” products.
Japanese government data shows 2,800 Japanese expats living in Dongguan alone, a city of more than 8 million people.
“From Japan’s perspective, emerging countries are getting a free ride of the benefits we nurtured. So yes, it is a problem,” said Yasushi Ishizuka, director of the intellectual property policy office at the Ministry of Economy, Trade and Industry.
Japan suffered its first tech brain drain about 20 years ago when South Korean firms such as Samsung Electronics (005930.KS) and LG Electronics Inc (066570.KS) poached scores of front-line semiconductor and white goods engineers from big Japanese electronics firms.
Since then South Korean electronics manufacturers have bounded into the global top ranks, helped along by this human technology transfer.
Japan’s tech giants, meanwhile, have floundered. Sony Corp (6758.T), Panasonic Corp (6752.T) and Sharp Corp (6753.T), Japan’s three main TV makers, are expected to have lost $21 billion between them in the fiscal year that ended March 31, partly because of Korean competition.
Many of the Japanese engineers finding a second life in China do not have the cutting-edge technology that would deal another crushing blow to Japan Inc yet, analysts say, but the long-term impact could be severe because they will give Chinese manufacturers the skills to make high-quality goods efficiently.
China has pushed its own companies to innovate, but many experts cite an educational system that prizes rote learning as an obstacle. For many firms, buying talent is the quickest fix.
“Skills related to production, like making moulds, are something that companies obtained after years of trial and error,” said Morinosuke Kawaguchi, associate director at management consultancy Arthur D Little in Tokyo.
For example, the slightest tweak to a mould could lead to mass production of faulty items, said Kawaguchi, himself a former Hitachi Ltd (6501.T) engineer who used to make household appliances.
“This exodus of Japanese engineers will raise the quality of products made by Chinese companies and allow them to produce efficiently,” he added.
Aida said the skills of Chinese engineers have improved over the past 10 years.
“When I first came to China, a product was considered good as long as it didn’t fall apart,” said Aida, one of seven Japanese engineers in Dongguan interviewed by Reuters. “They’ve caught up rapidly since then.”
That shows in recent trade numbers. China’s exports of higher valued machinery and electronic products rose 9.1 percent in the first quarter from a year ago, when they gained 7.6 percent, to $253 billion, according to trade data.
Stemming the outflow of engineers to Chinese manufacturers appears to be impossible.
Sany Heavy Co Ltd (600031.SS), Geely Automobile Holdings Ltd (0175.HK) and BYD Co Ltd (1211.HK) (002594.SZ) all told Reuters they had employed Japanese engineers to boost their technological know-how. They declined to comment further.
In addition to the large companies, there are thousands of smaller manufacturers across China. While not all have the deep pockets to hire expat engineers, some might find the cost of importing technology may not be as high as it used to be.
For one, there is no shortage of supply. Millions of Japan’s “baby boom” generation which makes up nearly a 10th of the country’s population are starting to retire, with many engineers among them.
It is not just financial considerations, but a desire to keep working beyond the rigid retirement age in Japan that prompts many to take up the offer of a move to China.
“I‘m working longer hours but actually making less now than I was making back in Japan,” said Aida, puffing on a cigarette in a simple conference room at his Chinese company’s office.
Tomio Oka, an engineer who specialises in making moulds for components used on items such as mobile phones that require precision to one one-thousandth of a millimetre, quit his job at a unit of what is now Panasonic Corp (6752.T) in 1998, to work for a Taiwanese company in Dongguan.
“Everyone in my family opposed this. I was working at a reputable company, making a stable income. My wife even threatened to divorce me at one stage,” Oka said, grimacing as he recalled what happened.
“But I wanted to open the doors to my future myself. I didn’t want to lead a life on some rail track set by others.”
Taking up a second career in Guangdong province, China’s export hub, is not without its challenges.
The comforts and convenience found in most Japanese cities are hard to come by in the industrial district on the outskirts of Dongguan where Oka and Aida live, 100 km (60 miles) north of Hong Kong.
Buses are the only public transport. Most taxis operate without licences, making foreigners easy prey for overcharging. Pick-pocketing and burglary are common.
“I grew up in post-war Japan when things were just as chaotic. So the surrounding environment was never an issue for me,” Aida said.
Many Japanese expats in Dongguan have left their families back home. They live in what would be seen in Japan as rundown apartments and spend their spare time playing golf or drinking with fellow countrymen in the few Japanese restaurants located around the city.
Some have hired waitresses from these eateries to work part-time as domestic helpers or maids.
There are also dozens of so-called KTV lounges, or karaoke night clubs with young hostesses, that cater especially to Japanese men.
“What else is there to do here after 7 p.m. besides drinking with friends or going to karaoke?” said one expat, sipping a popular Japanese alcohol sochu in a dimly-lit KTV lounge, fitted with sofas, karaoke machines and a billiard table.
“It can get really lonely watching DVDs all alone in my apartment,” he said, as a fellow engineer, his arm around a young hostess in a tight skirt, sang a popular Japanese tune.
Critics called the wave of Japanese engineers who went to South Korea as “traitors” for passing on technology to rivals. While the China-bound engineers have not been so vilified, some on the blogosphere question their motives.
Oka says most just want to support their families.
“We face retirement at 60 but what are we supposed to do until 63 or 65 when we can start receiving our pension?” he said.
Japan is burdened with debt of $10 trillion, or twice the size of the economy. That has forced the government to gradually raise the age people can get their pension from 60 years of age, leaving many salarymen temporarily income-less after retirement.
“There isn’t so much a feeling of guilt on our part. What’s wrong with working for someone who’s offered you a job?” Oka said.
Japanese employers, like the government, say there is little they can do to stem the outflow of skills and technology.
“Technology gets passed down,” said Satoshi Tsuzukibashi, director of the industrial technology bureau at Keidanren, Japan’s biggest business lobby. “One can argue that’s how Japan obtained its technology from the United States.”
Aida says the Japanese culture of wanting perfection from its products has left many engineers exhausted.
“Japanese demand for quality is excessive,” he said. “It makes one not want to work there.”
Additional reporting by Samuel Shen in Shanghai; Editing by Jason Subler and Alex Richardson