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A monthly review of the latest developments in Japan’s IT, telecom, and life sciences sectors

May 2005 - Volume VIII, Issue V

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

Dan's Desk

From Triangle's CEO

Hello everybody!

Keep tuned here - we expect a few more deals to close in the coming weeks. We'll keep you posted, but business is good.

I have been fascinated by the development of China - I am always so ambivalent about it. Japan seems safe and stable comparatively. Recently I read a great Gartner report (5/05) analyzing the relationship between China and Japan and how this relationship might affect the IT industry. You know, you may have noticed that there have been some recent flare-ups of old deep seated tensions between the two countries. Some points from the report:

1. There is a big disconnect between the political relations between China and Japan, which are bad, and their economic relations, which are deep and broad.
2. The two countries are highly dependent on each other economically: each is the other's #1 supplier. So the #1 source of imports to China is Japan, and vice a versa (when will you parochial VC's stop saying that the defining market is the US?). There is $213 bio of bilateral trade.
3. Japan's FDI in China (FDI=foreign direct investment) is $48 bio (compared with $44 bio from the US).
4. Japan supplies technologies and tools to China, China serves as a manufacturing outsource. This has been one of the key drivers of the return to profitability by the Japanese manufacturers.
5. By the way, did you know that Japan and China are the 2nd and 3rd largest consumers of global energy? (Extra credit - who is #1?)
6. Or that Japan's economy is STILL 3x as large as China's (with 10% of the population). That means 30x GDP per person!

The Gartner report proceeds to outline three scenarios and how they impact IT - the three scenarios are (1) improvement of relations, (2) continuance of the bickering, and (3) deterioration. In each of the scenarios, Gartner in general recommends that IT companies diversify their sources of supply and their markets, and India stands out as one of the major alternatives.

My own opinion - it is difficult for me to imagine that, in the short or medium run, two such intimate economic bedfellows will give up all of that bilateral action just because of some old skeletons (literally) in the closet. So I don't expect much change, unless of course the yuan is allowed to appreciate in value - then all hell might break loose.

Anyway, good luck!

Dan

***TRIANGLE TECHNOLOGIES NEWS***

No ready-to-publish news this month

***ISRAEL-JAPAN NEWS***

Due to the Golden-Week followed by Passover, no news.

***BUSINESS NEWS***

+JAPAN BANKRUPTCIES FALL 28TH MONTH IN ROW IN APRIL

(Reuters, May 18) - The number of Japanese corporate bankruptcies fell for the 28th straight month in April, Improved governmental assistance helped keep bankruptcies in April to 948 cases, down 20.3 percent from a year earlier and below 950 cases for the first time in over 13 years, Teikoku Databank said. Japanese corporate bankruptcies hit their lowest level in over a decade in the business year ended in March. Total debt of failed firms in April also fell 36.5 percent from a year earlier to 388.27 billion yen ($3.61 billion).

+JAPAN'S MAJOR BANKS SEEN POSTING 1ST COMBINED PROFIT IN 4 YEARS

(AFX quoting the Nihon Keizai Shimbun, May 15th) - Japan's seven largest banking groups are estimated to have posted a combined consolidated net profit of 600 bln yen for the year ended this March. The improvement is mainly due to a 43 pct drop in losses from bad-debt disposal to some 2 trln yen. Problem loans as a percentage of total lending are believed to have declined to 2-3 pct at each group, well below the target of less than 5 pct set by the government, with the balance of such loans falling below 2 trln yen for each group.
The bulk of the losses from bad-loan disposal was posted by Sumitomo Mitsui Financial Group Inc and UFJ Holdings Inc, with losses of 950 bln yen estimated for Sumitomo Mitsui and 970 billion yen for UFJ. Sumitomo Mitsui's net loss is estimated at 240 bln yen, while UFJ is believed to have recorded a net loss for the fourth consecutive year. Resona Holdings Inc, which posted 1.3 trln yen in such losses in the year to March 2004, saw profit stemming from unused loan loss provisions exceeding disposal losses. Mizuho Financial Group Inc slashed disposal losses by 80%. Capital adequacy ratios at the seven groups stood at 9-12 pct, higher than the minimum of 8 pct required for banks with international operations, the Nikkei reported.

+DAIEI LIKELY TO SELL RECRUIT SHARES TO 3 COMPANIES

(Kyodo News, May 15) - Supermarket chain operator Daiei Inc is selling its equity stake in job information enterprise Recruit Co to three companies. Daiei, currently rehabilitating its business under supervision of the Industrial Revitalization Corp of Japan, has already entered into talks with Recruit over sales to Norinchukin Bank, Aozora Bank and Advantage Partners Inc.

+DOCOMO INTO THE CREDIT CARDS BUSINESS

(Eurotechnology, May 4th) At industry conferences DoCoMo explained all the benefits and convenience of wallet phones for customers, but did not explain DoCoMo's own commercial logic for the massive wallet phone program.
Recently DoCoMo announced plans to acquire a controlling 34% of Mitsui-Sumitomo Credit Card Company, Japan's second largest Credit Card operator, for YEN 98 Billion. DoCoMo also announced plans to acquire a stake on the order of 10% in JCB, Japan's largest Credit Card operator.

+FADE-OUT FOR JAPAN'S DIGITAL CAMERA EXPLOSION

(Bloomberg News, MAY 18) - Canon, Sony and other Japanese makers expect growth in shipments of digital cameras to slow this year as U.S. and domestic demand falls. Canon predicts that shipments will grow 20 percent to 16.8 million units in 2005, compared with a 63 percent jump a year earlier. Sony said shipments would rise 7.1 percent to 15 million units in the year ending March 31, down from a 40 percent rise a year earlier.
Digital camera makers in Japan, home to four of the top five sellers of the devices, are struggling to lift sales in a market where half of all households are already owners. Growth may come from markets such as Europe, where about a quarter of households are equipped. In the United States the figure is about a third. Domestic shipments are expected to rise only 1.8 percent to 8.7 million units this year, down from a 29 percent rise in 2002, the Tokyo-based Camera & Imaging Products Association said.
Olympus, which was overtaken last year by Eastman Kodak as the third-biggest seller of digital cameras, according to market researcher IDC, last year doubled its shipments to 8.9 million units. This year, it expects growth of only 6.7 percent, to 9.5 million units. Nikon expects shipment growth this business year to slow to 15 percent, to 7.6 million units, from a near-25 percent increase a year earlier. Fuji Photo Film, ranked sixth, said camera shipments would rise 17 percent to 7.7 million units this year, compared with an increase of almost a third a year earlier.
Falling prices and slowing demand are curbing profit or causing a loss at some digital camera makers. Olympus said that it planned to cut 30 percent of its camera unit's work force, mostly in China, after it reported a full-year loss. Unit prices of digital cameras fell 17 percent in the year that ended March 31.
Canon and its rivals aim to attract customers by introducing more sophisticated models, which may help slow price declines. Canon expects revenue from shipments of single-lens reflex cameras to make up more than a third of its digital camera shipments this year, compared with 30 percent in 2004, and 21 percent in 2003.

***TECHNOLOGY NEWS***

+SONY UNVEILS IPOD RIVAL WITH 20-GIGABYTE HDD

(Kyodo, April 7th) Sony unveiled a digital music player to compete with Apple Computer Inc's popular iPod in the portable music market. Slightly smaller than a cigarette pack, the new product will go on sale in Japan on April 21 for about 35,000 yen. The Network Walkman NW-HD5 has a 20-gigabyte hard disk drive capable of recording up to around 13,000 tracks of music. In the area of battery life, the NW-HD5 can continuously play music for a maximum of 40 hours.

+TOYOTA TO SEEK 20% CUT IN CO2 EMISSIONS

(Kyodo News, May 14) - Toyota Motor Corp said it will aim to cut carbon dioxide emissions from its production by 20% in fiscal 2010 to March 2011 from the level in fiscal 2001.

+SMART POWER MONITOR

(JCNN, May 18th) - Sharp Corporation introduced new line-up of power conditioners equipped with 'Smart Power Monitors' designed to allow users to see how much energy they are saving as they monitor the status of their solar (photovoltaic) power generating system. The monitoring unit uses a 5-inch color LCD screen to provide two display functions - the industry's first Energy Savings Tracker that enables users to set a target power consumption level and then track how closely actual consumption matches it on a daily basis, and a Real-Time Status Display that provides a numerical read-out of the power being generated by the solar panels, the power being consumed by the household, the power sold back to the electric utility, and the power purchased from the utility.

+45GB HD DVD-ROM DISC AND DOUBLE-SIDED HYBRID DISC

(JCN Newswire, May 18th) - Toshiba Corporation announced development of a triple-layer HD DVD-ROM (read-only) disc with a data capacity of 45 gigabytes, 50% more than the 30-gigabyte dual-layer HD DVD-ROM disc already announced and enough to record twelve hours of high-definition movies on a single disc. The new disc adds a high-end option to the previous HD DVD-ROM disc lineup that includes the 15GB (single-layer, single-sided) and 30GB (dual-layer, single-sided). These two discs are already approved and standardized at the DVD Forum. Toshiba also announced a double-sided, dual-layer hybrid ROM disc comprised of dual-layer HD DVD-ROM side and dual-layer DVD-ROM side. The hybrid disc can store 30GB of high-definition content on the HD DVD-ROM side and 8.5GB of standard-definition content on the DVD-ROM dual layer side. More than 84 million DVD players and recorders were produced worldwide in 2004 alone.

+MOBILE PHONE CARRIERS ANNOUNCE RESULTS OF CELLULAR DAMAGES

(www.medicalnewstoday.com quoting JCNN, April 28th) - Four leading Japanese mobile phone carriers NTT DoCoMo, KDDI, Vodafone and TU-KA Cellular Tokyo jointly announced the results of their interim study on radio wave and its effects on human body. Through the latest cell experiments that used four different types of human-derived cells, no effect of radio wave on cell proliferation, gene expression profile or DNA single-strand breaks was identified. Since the radio waves emitted from mobile phones and base stations are much weaker than the one used in these experiments, the four carriers concluded that the safety of radio waves is guaranteed. Detailed study results will be presented at the Bioelectromagnetics (BEMS) Annual Meeting 2005 to be held in Ireland from June 19 to 24

***LIFE SCIENCES AND ENVIROMENT NEWS***

+JAPANESE VENTURE CAPITAL CONTINUE TO INVEST IN BIOTECH

(nikkei.co.jp, May 3)- Softbank Investment will increase its current JPY4.2bn fund to JPY10bn (US$95m) by December. SBI says that it will invest into at least 30 companies, including manufacturers of artificial bones.
Japan Asia Investment recently launched a 10-year, JPY3bn (US$28.6m), the company's 7th biotech fund. And Jafco has a JPY10bn (US$95m) fund, which was set up last year.

+PALO AZUL PLUS, TOKIWA PHARMACEUTICAL'S NEW HEALTH SUPPLEMENT

(JCNN, May 12th) - Tokiwa Pharmaceutical announced that it will begin marketing Palo Azul Plus, a new health supplement product, through drug stores across Japan on June 1. Palo azul is a kind of herb found in part of Paraguay. Richly containing calcium, magnesium, sodium and potassium, palo azul tea is regularly consumed in Central and South America. The new product, which contains an extract of palo azul and alpha-lipoic acid, helps those who are concerned about the intake of carbohydrate and lifestyle-related diseases and want to pursue a healthy diet.

+TECHNO MEDICA DEVELOPS AUTOMATED URINE ANALYZER

(JCNN, May 11th) - Techno Medica announced that it has developed automated urine analyzer UA ROBO-700i and will begin shipping it in October. The new device can complete qualitative analysis in 30 seconds (120 seconds for a leukocyte test). In addition, The ROBO-700i can isolate samples for quantitative analysis and urine sedimentation. Use of barcode labels helps prevent mix-ups of samples. The analyzer can process 200 samples per hour. The new product was unveiled at the 54th JAMT (Japan Association of Medical Technologists) Congress to be held on May 13 and 14.

+DISCOVERY OF QUERCETIN GLYCOSIDE AIDS QUERCETIN ACTIVITY IN BODY

Tokyo (JCNN, May 16th) - Suntory announced the results of its latest research on quercetin glycoside. Quercetin is a kind of polyphenol found in vegetables and fruits that has a strong antioxidant effect but lower absorbability into the body. The mice experiment the company conducted shows that quercetin glycoside has properties to facilitate the absorption of quercetin and intensify the antioxidant activity in the blood.

+POSITIVE EFFECTS OF LONG-TERM INTAKE OF GERMINATED BROWN RICE AGAINST DIABETIC NEPHROPATHY

(JCNN, May 16th) - FANCL announced on May 12 that its Central Research Center has confirmed a unique property of germinated brown rice in collaboration with the Nihon University College of Bioresource Sciences. Using type-2 diabetes mellitus model rats in their experiment, the joint research team discovered that a long-term intake of germinated brown rice helps inhibit the blood sugar level rise and insulin resistance. Further, the intaking effectively slows the loss of renal function. The company and the university have concluded that the long-term intake of germinated brown rice can inhibit the development of diabetes and prevent diabetic nephropathy.