On July 1, Komatsu launched EARTHBRAIN, a new company for the digital transformation (DX) of construction sites. The new company will provide services that will lead to significant cost improvements by digitizing and analyzing data from construction sites.
The parent company of the new company is LandLog, an IoT (Internet of Things) open platform company established by Komatsu in 2017. The investors will be substantially replaced, and some members of Komatsu’s digital unit will be transferred to the new company.
After approval by overseas authorities, Komatsu will provide 54.5%, NTT DoCoMo 35.5%, and Sony Semiconductor Solutions and Nomura Research Institute (NRI) 5% each. The company is well capitalized with more than 15 billion yen. Newly added to the list are Sony and NRI. Sony has an advantage in image sensors. NRI will provide its expertise in developing digitalization solutions.
Construction sites are aging, and there is a shortage of young workers. It is estimated that within a few years, there will be a shortage of up to 1.2 million skilled construction workers, or one-third of the required number. In addition, with the spread of COVID-19, construction sites around the world are being urged to reform their work styles.
In the 2000s, the company turned things around by introducing COMTRAX, a system that uses IoT to track the whereabouts of construction equipment around the world and achieved an astonishing V-shaped recovery from a serious deficit of over 80 billion yen to an operating profit of 33 billion yen in just a few years. Times have changed since then, and the speed of competition is increasing. The key to growth will be whether or not the new company will be able to capture the needs of the global field.
Source: Nikkei Business
PSR Analysis: Digitalization is a field where it is difficult to differentiate between companies. However, Komatsu has a great track record of popularizing KOMTRAX, and users’ interest in and expectations for Komatsu’s next-generation technology are extremely high.
Sony, which has joined the newly established company, has an established reputation in sensing technology and would be a suitable partner, and NRI similarly has extensive knowledge in industrial IT solutions for digitization.
As in the automotive industry, it is no longer possible for a single company, even Komatsu, the industry giant, to develop next-generation functions on its own. The company plans to accelerate development and improve quality by teaming up with companies that have high technological expertise.
I am of the view that the results of these actions by Komatsu will become the global standard for what the next generation of construction equipment should be.
Komatsu’s rival, Caterpillar, is also promoting digitalization, and I believe that other construction equipment manufacturers will follow the lead of these two companies. I predict that standards will emerge in the future that will allow equipment from different manufacturers to communicate with each other. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
