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

June 2004 - Volume VII, Issue VI

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

Dan's Desk

From Triangle's CEO

Dear all:

Fan mail:

"Dan,
ALL of them are true lessons [From my Japan compatibility test-DI] !! I liked mostly the last one...it's better you did not take the risk and suggested only N/N options...I have seen this mistake in real life! [Meir is referring to taking Japanese visitors in Israel to Japanese restaurants -don't do it - DI]
All the best
Meir"

I recently published an article called "Entering the Japanese Market" in the Israel Venture Capital Journal. I kind of like what I wrote! (I dont always say that, in case you doubt my objectivity ;-) ). Click on www.triangletech.com/html/inthenews/news18.html for the full text. Here is a loose summary of the article:

1. The world economy is shifting to Asia. $13 trillion GDP vs $10.5 trillion for the US.
2. Watch out for China - there are many many problems for start-ups doing business there.
3. Japan is a mature, transparent, inexpensive (!), technologically sophisticated market with excellent human resources.
4. Japan is thorough, careful, quality-conscious (these may be considered advantages or disadvantages).

My advice to foreign technology oriented startups:

1. Have a strategic rationale for entering Japan - it is not just another big market (it is still #2 in the world!)
2. Manage expectations and strive to improve - perfection is not the goal, the process leading to perfection is. Be honest and realistic about what you can and cannot deliver.
3. Build relationships based on trust - this can be your major asset - hard to build, easy to destroy.
4. Use intermediaries - most interaction in Japan is mediated, either physically or symbollically (I will explain this some other time).
5. Commit to the market - dont just visit when you happen to be in the neighborhood.
6. Acquire respected customers - success with a leading customer will have a relatively large impact in Japan - this is one of the reasons that diffusion of technology has a long incubation period and rapid ramp
7. Get support from the board - since penetrating Japan takes time and resources, the board must support you.

Any comments?? Let me know. And good luck

Dan

***TRIANGLE TECHNOLOGIES NEWS***

A “strange” thing happens in our “news-machine”. In several of our projects we have significant news BUT we cannot disclose anything due to sensitive situation at wither the Japanese party or the Western party. We hope to publish some news after the coming summer holiday.

ISRAEL-JAPAN NEWS

+QLUSTERS ENTERS STRATEGIC RELATIONSHIP WITH ITOCHU TECHNOLOGY INC.

(Globes, June 7th) Enterprise cluster management company Qlusters Inc. announced a strategic relationship with Itochu Technology Inc. (ITI), the US-based business development and venture investing arm of Itochu Corporation, a Fortune Global 20 company. ClusterFrame minimizes IT costs by optimizing the operation of Linux clusters deployed on commodity hardware. Qlusters is a privately held corporation headquartered in Palo Alto, California, and its R&D center is in Tel-Aviv, Israel.

***BUSINESS NEWS***

+HEALTHY FIGURES AND TRENDS IN THE ELECTRONICS INDUSTRY

(Nikkei Electronics, June 28th) The ratio of PCs in the overall domestic electronics market dropped to about 11% over the last year. But the production value of the leading four digital home appliance items (digital cameras, colour TVs including flat panel TVs, car navigation systems and DVD players/recorders) sharply soared to 1.6 trillion yen-plus, with their stake in the overall electronics market reaching around 16%, more than double the rate a year earlier.

+HOW MITSUBISHI MOTORS PLANS TO SURVIVE

(Japan Inc.) As Mitsubishi is forced to raise new capital ((US$2.68bn) further to failed negotiations with Daimler Chrysler, an interesting phenomenon takes place: Members of the Mitsubishi group Kinyokai (Friday Club, defined as the informal meeting of 29 core Mitsubishi company's CEOs) started to assist the motors company. Several members such as Bank of Tokyo-Mitsubishi, Mitsubishi Corporation and Mitsubishi Materials announced that they will participate in the funds-raising.

+FOREIGN INVESTORS AT RECORD HIGH

(Nikkei, Jun 17th): The foreign ownership of Japanese shares, by value, is at a record high according to the country's 5 major stock exchanges. Foreigners' share ownership rocketed by 93% up to March this year, to JPY80.6trn ($US73.2bn) – surpassing the amount of shares held by all Japan's nonfinancial companies. Foreign ownership of some firms is reaching surprising levels, such as 35% of Hitachi Ltd., 36% of NEC Corp., and 18% of Mitsubishi Electric Corp. In contrast, the amount of shares held by Japanese banks hit a record low of 5.9%.

***GENERAL TECHNOLOGY NEWS***

+PROBLEMS IN JAPAN SPACE PROGRAM

(Yomiuri Shimbun): highly embarrasing failures experienced by the Japan Aerospace Exploration Agency has led the agency to do a major cut-back of its space program. Apparently the agency will focus on smaller satellites and turn to other countries for launches of major communications and spy satellites. The November 2003 blow-out of the H2A launch rocket destroyed a very expensive payload of two sophisticated spy satellites.

+IMPROVEMENT IN IP TRADE

(nikkei.co.jp, Jun 12th) The Ministry of Trade has released figures showing that in fiscal 2002, Japanese firms earned a a record JPY125bn ($1.13bn) in Intellectual Property licensing revenue. The increase is still an overall deficit for IP trade, with Japan having a net outflow of JPY88bn ($800m). However, another strong year like FY2002 should put Japan IP balance positive for the first time.

+TOSHIBA PLANS TO INTRODUCE METHANOL-POWERED LAPTOP BY YEAR-END

(Bloomberg, June 3rd): Toshiba Corp., Japan's largest maker of laptop computers, plans to introduce a model that uses methanol for power instead of a battery by the end of the year. It will initially be available only in Japan. The so-called micro fuel cell is one of a new class of energy storage devices under development by Toshiba and other battery makers, as well as companies focusing on the technology, such as Mechanical Technology Inc.'s MTI MicroFuel Cells unit in Albany, New York. The Toshiba micro fuel cell will last about 10 hours, or about twice as long as most new rechargeable lithium-ion batteries currently available. Lithium-ion batteries account for about $2.7 billion of the $4.5 billion market for rechargeable batteries, according to Paris-based market research firm Avicenne Developpement. Fuel cells are different from traditional batteries because they generate electricity by consuming fuel rather than by storing electricity and releasing it through a chemical reaction. Once the fuel is exhausted it can be replenished by replacing a cartridge or refilling a reservoir -- an operation that can take just seconds rather than the hours sometimes needed to recharge a battery.

***LIFE SCIENCES AND ENVIRONMENT NEWS***

+MICRO BLOOD DIAGNOSTICS SENSOR

(nikkei.co.jp, Jun 18, 2004): A research group at Keio University has developed a new micro sensor which can instantly diagnose blood samples in amounts as small as 0.01cc of blood. The new device measures glucose, acidity and lactic acid levels. The new device, which measures just 4 x 2.5cm will be available for clinical testing as early as next year.

+BIRTHRATE HITS NEW LOW

(Yahoo.com, June 10th): Just as immigration is picking up, the Health and Welfare Ministry has announced that Japan's birthrate fell to a record low of just 1.12m babies -- translating to a rate of about 1.29 children per couple - down from 1.32 in 2002. The figure is now officially the lowest in the world and is worrying the government because it impacts the likelihood of the pension system being able to support the expected number of retirees in coming years. The current pension system is predicated on a minimum birth rate of 1.32 in 2003.