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

October 2002 - Volume V, Issue X

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

Dan's Desk

From Triangle's CEO

Dear friends:

This Dan's Desk inaugurates a series of interviews with people who have insights about how to succeed in penetrating the Japanese market (that is, when I am too lazy to think of something original myself). To kick things off, I will report a short interview I conducted with Dr. Seiiji Frank Sanda. I met Frank about 6 years ago when he was founding Japan Communications Inc. (JCI), and we became close friends, sharing sushi, sake and sageness (usually in that order - the more sake, the sager we get, sometimes to the point where no one can understand us, we are so sage). Among other resume-items, Frank was CEO of Apple Japan and EVP of Motorola prior to founding JCI with financing along the way from Oak Investments, Jafco, Softbank, PAMA and others.

What is JCI? JCI is Japan's first wireless MVNO, focused entirely on the corporate market with over 1,000 corporate customers. An example from www.jcius.com is their sale to Baxter Japan of a wireless data service including sales force automation and other applications, as well as administrative functions such as billing. Definite proof that there is innovation and entrepreneurship in Japan, a thesis that I strongly hold.

Q: What are the three tips you would give to foreign tech companies in penetrating the Japanese market?
(Frank is full of surprises and gave these Delphic answers, which I will interpret)

A1. "Japanese business people care about keeping their face as much as anyone else." Interpretation: be careful about disagreeing with people, criticizing them, or embarrassing them in any way, especially in front of other people. That does not mean you cannot express disagreement, just know how and when to do it (see A3 below).

A2. "Don't let Japanese business counterparts 'grin-screw' you over by agreeing with you with a big smile." (actually, Frank used a juicier four letter phrase than screwing, which I had never heard before). Interpretation: Frank was in a feisty mood. Actually, in all seriousness, since it is difficult or impolite to disagree directly, sometimes you encounter the reaction of a broad smile and expansive friendliness when the intention is to say, "no." In many contexts this is called "tatemae", which in a nutshell is external politeness to save face. One website says that the "tatemae" concept comes from samurai days when an insulting slip of the tongue could lead to a slip of one's neck. So in a tatemae fashion, the Japanese counterpart says "Fine! Wonderful! Of course!" with a broad smile and in his inner self ("honne") is saying "no way!"

A3. "Sucking wind means 'no'." Interpretation: sucking wind means 'no'. Seriously, partly because it is considered impolite to disagree with someone or make them feel uncomfortable, the Japanese behavioral norms have evolved ways of implying disagreement. So when your counterpart takes a noisy breath, often they are saying no.

In future Dan's Desks I will interview other successful, interesting, and thought provoking people!

Good luck

Dan

***ISRAEL-JAPAN NEWS***

+NTT-ME ALLIES WITH RADLAN

NTT ME announced that it had formed an alliance with Israeli software developer Radlan Computer Communications to sell Radlan’s software in the domestic market. NTT-ME will provide domestic communication device manufacturers and other related companies with Radlan’s software.

***BUSINESS NEWS***

+FUJITSU LAUNCHES MVNO SERVICES

Fujitsu has launched mobile virtual network operator (MVNO) services based on PHS networks owned and run by DDI Pocket. Fujitsu’s MVNO service, Mobile Plus, offers 32 kbps and 28 kbps service. NTT Communications, a long-distance and overseas telephone business unit of NTT Group, is going to launch MVNO services also based on DDI Pocket’s PHS networks in late October.

+CAMERA-PHONES SPUR MOBILE MARKET GROWTH

According to a survey by Nikkei Market Access, production of camera-equipped mobile phones for the Japanese market will see growth to a range of 18.9 million units from 4.4 million units in 2001. It is expected that growth will continue in 2003 to 32.8 million units. The ratio of mobile phones with a built-in camera to all mobile phone handsets produced for the Japanese market will show a steep increase: 9% in 2001 to 46% in 2002, and to 81% in 2003. Mobile phone sales to end-users in Japan in the second quarter of 2002 rose 11.9% to 9.96 million units compared to the first quarter, boosted by the added camera function.

+DOCOMO TO RE-FOCUS ON LOCAL MARKET

According to analysts, overseas losses hit NTT DoCoMo this year, although investments abroad still hold the key to its future. Japan's largest mobile operator spent nearly $16 billion to ensure it could provide a global roaming network for its high-speed 3G service under the W-CDMA standard. DoCoMo's priority is now to focus on expanding its 3G mobile service in Japan, which would help promote the W-CDMA standard globally.

+J-PHONE TO LAUNCH 3G SERVICE IN DECEMBER

The Japanese government has granted J-Phone, a Vodafone company and Japan’s third-largest mobile carrier, a license for 3G commercial service. J-Phone will launch its nationwide 3G services on 29 December, after having provided an experimental 3G service in the Tokyo area since June.

+KDDI AIMS FOR 25% OF NEW USERS

Japan's second-largest wireless operator, KDDI, said it was aiming to sign up 25% of the nation's new cellphone users in the second half of 2002 to gain on dominant NTT DoCoMo. In September, KDDI added 510,000 new subscribers to its 3G service, a figure almost four times larger than DoCoMo’s 3G-subscriber base.

+JAPAN’S OS PACKAGE MARKET TO REACH $308.8M IN 2006

According to a survey done by IDC Japan, the size of the Japanese OS package software market in 2001 was approximately $264.7M and it is expected to expand beyond $308.8 million in 2006.

+JAPANESE CAR NAVIGATION SYSTEM MARKET INCREASES 21% IN 2002

A survey conducted by Nikkei Market Access estimates the total shipments of car navigation systems will increase by 21% on a year-to-year basis to 2.7 million units in 2002. The car navigation market is expected to continue expanding, with a smaller growth at a 6% to 10% annual rate, to have output of 3.8 million units in 2007.

+DSL SUBSCRIBERS IN JAPAN: 4.2M AND GROWING STEADILY

The number of subscribers to DSL services in Japan rose to 4.2 million as of the end of September from 3.9 million a month earlier, according to the Ministry of Public Management, Home, Affairs, Posts and Telecommunications. This increase reflects the continued steady rise in users of broadband Internet. DSL subscribers continued to increase by about 300,000 a month.

+SOFTBANK GROUP REPORTS A MILLION ADSL USERS

Softbank reported that at the start of October, its "Yahoo! BB" ADSL Internet service became the first Japanese ADSL service with more than 1 million subscribers. Softbank's ADSL subscribers stood at 885,000 at the end of August.

+JAPANESE WILLING TO PAY FOR W-LAN

According to a study of over 10,000 people owning portable computers and PDAs, Japanese consumers are becoming aware of wireless LAN services but are looking for cost-effective ways to access them. The survey found 63% of all respondents familiar with the term "Wireless LAN," with 60% willing to pay for a high-speed wireless LAN package if priced below 2,000 yen per month. Even greater awareness and interest was found among business users, 96% of whom were familiar with WLAN.

+TOKYO CHEAPEST FOR BROADBAND

Tokyo offers the cheapest broadband connections among major international cities, according to the Ministry of Public Management, Home Affairs, Posts and Telecommunications. Prices for cable Internet in Tokyo are also cheaper than in New York, London and Paris, reportedly.

+SONY CHIP UNIT EXPECTS PURCHASE OF $20B-WORTH OF CHIPS IN 2006

Sony Corp.'s chip unit expects to purchase $20.1 billion-worth of chips in the year ending March 2006 to meet rising demand for digital cameras and liquid crystal displays. Sony, the fastest growing PC company in the world, currently spends between $6.4 billion and $8 billion annually to buy chips for its consumer electronics products.

+ROCHE GROUP ACQUIRES CHUGAI PHARMACEUTICAL

Switzerland's Roche Group gained a major foothold in the world's second largest drug market after taking a 50.1% stake in Japan's Chugai Pharmaceutical Co. The new company, which maintains Chugai's name, aims for the top spot in Japan's pharmaceutical industry, dominated by domestic companies such as market leader Takeda Chemical Industries.

+JAPAN TO BOOST ANNUAL BIOTECH FUNDING

Japan's government plans to boost annual research funding for biotechnology five-fold to some $16.1 billion by 2006. The government’s goal is to enhance the competitiveness of the sector and develop it into a major industry comparable to automobiles and information technology, aiming to establish a domestic biotechnology market worth $200.8 billion by 2010 and creating some one million new jobs.

***GENERAL TECHNOLOGY NEWS***

+BROADBAND TV TO START PRESENTLY

Softbank has announced that it will start TV broadcasting over its Yahoo! BB ADSL broadband network. The company will start with movies and music for 500 selected subscribers, with regular paid service starting in November. The service will also include Internet data and VoIP connectivity.

+KDDI TO LAUNCH VOICE INTERFACE

KDDI Corp. will begin a service in mid-October to enable users to carry out Net searches by issuing voice commands. The new service will let users search for restaurants, train stations, amusement parks and other popular spots by speaking their names into cell phones. Maps and other data for the destinations will then appear on the mobile phone screens.

+SONY DEVELOPS 3.8" SYSTEM-ON GLASS PANEL

Sony Corp. developed a 3.8-inch, low-temperature polycrystalline silicon system-on-glass LCD panel, which integrates all peripheral circuits to be on a glass. Integrated on the panel are peripheral circuits such as: gate driver, source driver, timing generator, RGB interface circuit, reference driver, and Vcom driver. The company said it plans to start volume production around January 2003.

+DOCOMO TESTS 100MBPS 4G SYSTEM

NTT DoCoMo announced that it has tested its wireless access system for the fourth-generation mobile communications system to be commercialised in 2010. In the indoor test, the operator succeeded in packet communications at a maximum 100Mbps in the downstream direction and at a maximum 20Mbps upstream.

+DOCOMO INTRODUCES NEW ANTI-SPAMMING FUNCTIONS

NTT DoCoMo and its eight regional subsidiaries announced that they will introduce a new function that will allow users to block "wangiri" (one-ring) calls. The new function allows users to register up to 19 offending telephone numbers on a dedicated DoCoMo network, which will immediately intercept calls placed from these numbers and play a recording that informs scammers that calls will not be accepted by the receiving party. As the scammer will be charged a connection fee, the service is expected to deter offenders from placing "wangiri" calls.