<<<< Japan High-Tech Update>>>>
A monthly review of the latest developments in Japan’s IT, telecom, and life sciences sectors

April 2002 - Volume V, Issue IV

Triangle Technologies is the leading Japan Israel business development and investment advisory firm
www.triangletech.com

Dan's Desk

From Triangle's CEO

Well, I am on my way to the airport in a few hours to (surprise) Japan. I am nervous about this particular trip - I expect many of my business acquaintances are going to be asking me to explain what is going on in Israel-Palestine, and I don’t know exactly what I’m going to say even about the little that I do know. But as the days of “Operation Defensive Shield” tick by, with a whiff of a Lebanese-Syrian confrontation in the air, I am expecting that considerations of a vague "country risk" are going to creep into business negotiations with Japanese partners. I expect that the humanitarian/moral aspect of Israel's position will be discussed over sake and sushi; but the major considerations of Japanese business partners will have to do with (a) the physical safety of Japanese staff that must visit Israel in order to conduct business, and (b) potential disruptions to business processes due to reserve duty, damage to facilities, and a more intangible sense of unpredictability. I give Japanese corporations very low grades on social concerns at any level, but guaranteeing the timely supply of quality products to end customers is absolutely holy. So if any of you are already selling in Japan, you should be aware of the possibility that the entire chain of customers from your distributor via your integrators to your end customers may very well be getting nervous now, about whether they will get their supplies on time. Many of them don't distinguish necessarily between the sad scenes of destruction in the Genin camp with your office building. Herzegovina and Herzliya seem the same to them about now.

My advice is to proactively inform your partners about how you are doing, without ringing any alarm bells (Israeli companies have a remarkable record of being no worse at supplying quality products on time during times of conflict, than they are during times of peace); increase the level of communication with your Japanese partners; introduce a weekly update memo if it makes sense; schedule a conference call, not to discuss the conflict but to discuss new product features/marketing ideas, etc.; move up your next visit to Japan if you can; install a video conference system and use it; and send some digital images of your new products, new office, or whatever. If you can pull it off, get one of your partners to visit now - the relief that your partners will experience on hearing about the (usually) peaceful atmosphere in Israel will have a strong impact.

And good luck,

Dan

***ISRAEL-JAPAN NEWS***

+INTERWISE RAISES $1 MILLION FROM NTT

Israeli e-learning company Interwise has raised $1 million from NTT, adding to its $35 million 3rd round.

+SANYO INVESTS IN SHELLCASE

Japanese conglomerate Sanyo has invested $1 million in Israeli start-up Shellcase. Sanyo already manufactures cameras and cellphones with built-in cameras using Shellcase’s chip-sized packaging solutions.

+APRION RECEIVES BACKING FROM HITACHI, IBM

Aprion Digital, an offshoot of Scitex Corporation, has reportedly closed on $7 million in strategic investment from IBM and Hitachi.

***BUSINESS NEWS***

+ADSL USERS REACH 2.1 MILLION

According to the Multimedia Research Institute, there were 2.08m ADSL users in Japan at the end of February, up from 1.52m in December 2001. Cable TV Internet users rose from 1.3m to 1.39m. NTT has a 40% share of the market, with 830,000 users installed, and Softbank's Yahoo BB has 21.9% with 455,000 users.

+B2B AND B2C STATS

Japan's B2B market reached $253 billion and the B2C market registered $11 billion in 2001. The "mobile B2C" market in Japan for cell phone users reached $907 million in 2001, roughly double that of the previous year.

+CELLPHONE SUBSCRIBERS REACH 74.8 MILLION; J-PHONE GRABS SECOND PLACE

The Telecommunications Carriers Association announced that Japan's mobile phone subscribers reached 74.8 in March 2002. According to the TCA's report, J-Phone finally surpassed KDDI in market share, with a substantial part of its growth due to its camera-enabled “Sha-Mail “ devices (about one-third of J-Phone subscribers own Sha-mail devices).

+FORECAST: DIFFUSION RATE TO REACH 70% OF POPULATION

According to the MCPC forecast, diffusion of browser phones and third- generation (3G) cellular phones will reach 70.1 percent of the population, encouraging the cellular phone market to expand. The forecast says that the number of cellular phone subscribers will reach 72.94 million in 2002, 77 million in 2003, 80.09 million in 2004, and 82.62 million in 2005.

+ELECTRONIC COMPANIES SET UP SEMICONDUCTOR JV

METI along with five major electronics companies - are NEC, Toshiba, Fujitsu, Hitachi, and Mitsubishi Electric - have set up a joint corporation to develop cutting-edge semiconductor technologies. The five companies will put in JPY500m of capital, supplemented by an undisclosed amount of government capital.

+IT INVESTMENT DOWNTURN

According to a Nikkei survey, only 34.3% of major Japanese companies plan to increase their investment in IT this year. Furthermore, the survey found that 26.7% of companies will actually cut their IT investment.

+CELLULAR MARKET SURVEY

The upgrading cycle for cellular phone/PHS handsets has expanded to as long as 22.6 months, according to a November 2001 survey conducted by the research unit of Nikkei BP Consulting Inc. The growth of the number of subscribers in the cellular phone/PHS market has been declining steadily, and the demand from users who buy new models in exchange for older units has been stagnant. Among reasons cited for buying a new mobile phone: large and improved color LCDs, a folding feature, and Internet access services.

+KIDS CELLPHONE USAGE STATISTICS

According to Japanese daily Yomiuri Shimbun, 80% of high schoolers, 40% of middle schoolers, and 18% of sixth-year primary school students in Osaka have cellular phones. The survey covered 40,000 kids. The same survey also found that only 3% of parents said they thought their children actually used their cell phones.

***GENERAL TECHNOLOGY NEWS***

+NTT EAST TO CONDUCT IPv6 TEST WITH 15 MEMBERS

NTT East recently started a technical verification test for the next-generation Internet protocol version6 (IPv6) applications jointly organizations, universities and enterprises. The experiment will last through Aug. 2002, and will be conducted over the IPv6 network built by NTT East covering Tokyo and Kanagawa prefectures.

+ALL-WEATHER CAMERAS TRANSMIT IMAGES TO CELLPHONES

Matsushita announced networked outdoor cameras that can be viewed and controlled from cell phones. The KX-HCM130/170 models are waterproof and allow users to pan and tilt over an always-on ISP connection.

+HOT-SPOT WIRELESS ACCESS STARTS

Mobile Internet Services of Kanazawa launched on April 1 a new Hot Spot (IEEE802.11b) service called "Genuine." The service will initially be available in a limited number of Tokyo's 23. Connectivity is at 1-2Mbs, within a radius of 100 meters of a base station.

+MITSUBISHI TO BEGIN SETTLEMENT SERVICES USING MOBILE PHONES

Mitsubishi Corp. plans to begin a settlement service using mobile phones and bar codes in September, in collaboration with convenience store chains. Users of this service will download two-dimensional bar codes into their mobile phones and have the codes scanned at convenience stores to pay utility bills and others. This settlement service will cut the costs of traditional settlement procedures, which require mailing paper bills with bar codes to customers.

+DOCOMO TO LAUNCH PUBLIC WIRELESS LAN TRIAL SERVICE

NTT DoCoMo's wireless LAN trial service, lasting April 15 to June 30, will use terminals based on the IEEE802.11b standard, allowing use of the 2.4GHz frequency band to realize transmission speeds of up to 11Mbps DoCoMo will offer "hotspot services" that will enable users to connect to the Internet or to access applications remotely.

+DOCOMO TO UPSCALE PAYMENT APPLICATIONS

NTT DoCoMo may issue a password-activated credit application on its 3G SIM cards, and is also contemplating a separate chip on its handsets to carry Sony's contactless Edy e-purse.

+DOCOMO DEVELOPS MOBILE VIDEO-CONFERENCING PLATFORM

NTT DoCoMo has developed a 3G mobile communication platform that enables several people to participate in a wireless videoconference, and aims to commercialize the platform in future. DoCoMo said its mobile video-conferencing platform is the world's first cellphone platform for video teleconferencing, and can also work with some fixed-line videophones.

+DOCOMO SILENT PHONE

NTT DoCoMo has announced that it has developed a cell phone fitted with sensors that allow someone to make noiseless phone calls. The unit scans the user's facial muscles and interpolates the movements into words with a sound processor. The new phones will be available within 5 years.

+J-PHONE DEVELOPS MEDICAL IMAGE TRANSFER SYSTEM

J-phone has developed a system to transfer medical images via its cellphone network. By connecting a phone to medical equipment, such as X-ray machines, CT scanners and magnetic resonance imagers (MRIs), the technology allows the transfer of two-dimensional digital images for remote diagnosis.

+KDDI STARTS CDMA2000 1X CELLPHONE SERVICE IN APRIL

KDDI and Okinawa Cellular Telephone Co. have completed development of CDMA2000 1X, an upgraded version of cdmaOne. KDDI will launch 1X service in all major cities Japan in April.

+KDDI STARTS FASTER WIRELESS ACCESS SERVICE

KDDI begins offering wireless Internet services at faster data transmission speeds in April, aiming to attract 7 million users by March 2003. The new service will offer the ability to download movie previews, news and video games at more than double the speed currently available. Five phone models will be available to subscribers of the new service at the outset.

+HITACHI SUBSIDIARY TO INTRODUCE INTERNET-CAPABLE APPLIANCES

Hitachi Home & Life Solutions Inc., a new electric home appliances manufacturer, will release network-capable home appliances, which the company is jointly developing with Matsushita Electric Industrial Co., Ltd., in the autumn of 2002. It will debut network-capable air conditioners this autumn and refrigerators, washing machines and microwaves in the spring of 2003.