■Company Overview

1. Company Overview and History

Shinko Kogyo (6458) is a central air conditioner manufacturer for large-scale buildings, and manufactures and sells air conditioners, contract construction of air conditioning work, and design/construction/maintenance management of heat medium natural circulation systems. The main products are large AHUs that air condition the entire floor composed of blowers, heat exchangers (coils), filters, humidifiers, etc., and small FCUs that air condition each room composed of blowers (fan motor units), coils, and air filters. In addition, they also manufacture and sell heat pumps AHUs, ice heat storage devices, cooling towers, etc. that combine the characteristics of central air conditioning and individual air conditioning, and undertake equipment renewal work and maintenance of existing buildings. Since a rich selection of products for air conditioning huge and complex spaces and technology to design and manufacture according to individual customer requests are required, the air conditioner industry is being consolidated into specialized companies, etc. Above all, the company has maintained a top market share in the domestic market for many years, with strengths such as accumulated know-how, abundant experience, and an integrated system from design to manufacturing, sales, and maintenance.

The company was established in 1938 by Fujii Noriyoshi (Fujii Noriyoshi) for the purpose of importing and selling heating equipment. Operations that had been suspended due to World War II were resumed in 1949, and the company was founded in 1950 and embarked on the manufacture and sale of commercial air conditioners. After that, FCU was developed for the first time in Japan in 1951, and AHU (current factory production type) was developed for the first time in 1957, and the business expanded along with the development of the Japanese economy, such as expanding production bases, incorporating maintenance work, and expanding overseas. As risks such as the spread of the novel coronavirus infection (hereinafter, COVID-19), high raw materials, shortage of materials, and depreciation of the yen are rolling around, it seems that demand has entered an expansion period, such as semiconductor factories where large-scale urban redevelopment and domestic regression are progressing in Tokyo and Osaka, etc., and data centers where demand is intensifying as the digital environment becomes more sophisticated. Above all, demand for large-scale, high-speed, high-capacity hyperscale data centers requiring greater power seems to be intensifying due to the spread of generative AI, etc. Also, demand for renewal work and maintenance is expected to expand in the medium to long term.

Deploying environmentally friendly water AHUs for large-scale buildings

2. Business areas

Air conditioners are divided into household and commercial use, and the most suitable equipment is selected depending on the scale and operation of the building. Home use is a so-called room air conditioner, and there are many products from major consumer electronics manufacturers that are often seen in TV commercials. Commercial use can be further divided into individual air conditioning and central air conditioning. Individual air conditioning is a method of installing an outdoor unit and an indoor unit for each room/area requiring air conditioning, and although alternative CFCs, etc. are used as heat carriers, design and construction are easy, and the machine room can be made smaller. It is mainly used in small and medium-sized buildings with a total floor area of 20,000 square meters or less, and air conditioner systems are composed of general-purpose products such as packaged air conditioners and multi-air conditioners for buildings.

Central air conditioning captures the building as an integrated unit, generates heat collectively by centrally installing heat source devices (primary side air conditioning system), sends cold and hot water (water) to each floor as a heat carrier, adjusts indoor temperature/humidity by applying wind generated by AHU or FCU fans (secondary side air conditioning system), and centrally manages and controls the overall air conditioning (instrumentation system). It is a large-scale building with a total floor area of 20,000 square meters or more used. In such large-scale buildings, requirements are different for each floor and location, so custom-made design and manufacturing technology that responds to individual specifications and requests is essential in order to construct an optimal system.

The company's main business area is secondary-side air conditioning systems within central air conditioning. The main advantages of central air conditioning include the possibility of precise temperature/humidity control that cannot be used as an alternative fluorocarbon used in individual air conditioning, the ability to generate high-quality air quality, a high degree of freedom in installation and design, and efficiency and high maintainability due to the fact that air conditioners can be installed centrally in the machine room. Additionally, since water, which is a natural refrigerant, is used as a medium to transport heat rather than an alternative fluorocarbon with a very high greenhouse effect, it can also be said that it is an advantage that it is an “environmentally friendly” system that prevents global warming. Although alternative fluorocarbons do not destroy the ozone layer, they have a greenhouse effect that is 100 times to 10,000 times larger than CO2, so switching to non-fluorocarbons or media with low greenhouse effects has become an issue around the world from the viewpoint of climate change response.

The company is actively expanding its business into individual air conditioning areas used in small to medium sized buildings. This is because in individual air conditioning, simple systems and general-purpose products are used compared to central air conditioning, but since detailed specifications are often required individually for external air conditioners, there is a basis for utilizing the company's know-how accumulated in the field of central air conditioning. Also, it is expected that individual air conditioning systems will continue to be adopted in the future in large-scale buildings where efficiency is not improved even when heat source equipment is concentrated. Therefore, the company entered the manufacture and sale of heat pump AHUs through a business and capital alliance with Daikin Industries (6367), and is actively developing it as a strategic product to capture the individual air conditioning market. However, even in the area of individual air conditioning, which tends to put a load on the global environment, the company is proceeding with the design of systems that are friendly to the global environment, leading to conversion to heat carriers with a low global warming coefficient and reduction in the amount of alternative CFCs used.

Maintaining top market share among secondary-side air conditioner manufacturers

3. Central air conditioning industry structure

The players in the industry from the viewpoint of central air conditioning are clients, design firms, general contractors (construction companies), subcontractors (equipment companies), and air conditioner-related manufacturers (primary side/secondary side/instrumentation). When constructing large buildings, the specifications of air conditioners must be adapted to various architectural designs, and it is necessary to participate from the design stage. Therefore, air conditioner-related manufacturers often have direct relationships with clients/design firms faster than general contractors. However, since the order flow is usually “client → general contractor → subcomputer → air conditioner related manufacturer,” commercial contract parties often become subcontractors, and even if they are involved at the design stage, they may not be directly connected to equipment adoption. Also, it is susceptible to fluctuations in demand in the construction industry, and the domestic market is maturing in the same way as the construction industry. Since it is such a market, in addition to the company, secondary air conditioner manufacturers are being consolidated into Kubota Air Conditioning Co., Ltd., Daikin Industries, Kimura Koki (6231), Heating/Cooling Industries Co., Ltd. The company maintains the top domestic market share among such secondary-side air conditioner manufacturers.

(Written by FISCO Visiting Analyst Miyata Hitomitsu)