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

Septembet 2003 - Volume VI, Issue IX

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

Dan's Desk

From Triangle's CEO

Hello this month.

For the last half of August I was away at my childhood home in Woods Hole Massachusetts on Cape Cod catching and eating bluefish. Being there reminded me that I had tasted my first sashimi 38 years ago on the steps of the renowned Marine Biological Laboratory (MBL) in Woods Hole - it was an hour-fresh bluefish caught by my friend, Chris Szent-Gyorgyi, and filleted by his father and now my friend also, Csuli, a Hungarian biologist known for his internationally eclectic tastes.

By coincidence, this summer at the MBL one of our clients, QuantomiX (www.quantomix.com) was demonstrating its breakthrough electron microscopy capsule (about 50 meters from the site of my first sashimi), while Quantomix's CEO Ory Zik and I sampled the swimming in the brisk waters of Buzzards Bay, around the corner. Thinking of sushi (sashimi with rice) reminds me that many otherwise discerning people still view Japanese people as lacking innovation and creativity. This could not be further from the truth!!! Food, architecture, cinematography, games, GPS, iMode, robotics, fashion, industrial processes, industrial design, digital cameras, blue lasers - these are all just some evidences of Japanese innovativeness and creativity.

While I was relaxing far from the Middle East, and further from the Far East, a lot seemed to be happening in Japan. Triangle was suddenly closing or on the verge of closing a large number of deals. Our pipeline had suddenly filled up.

Here is a line up:

In a few weeks we expect to close:

Maybe I should just keep looking for bluefish and let the many competent professionals of Triangle Technologies continue to do their amazing work.

Good luck!

Dan

***TRIANGLE TECHNOLOGIES NEWS***

+CIVCOM SIGNS OPTO SCIENCE AS DISTRIBUTOR OF ITS OPTICAL COMPONENT AND SUBSYSTEM PRODUCTS IN JAPAN

Opto Science Inc., a leading Japanese distributor of optical component and subsystem products, and Civcom, a pioneer in the development and manufacturing of cost-saving dynamic optical solutions, announced that they have entered into a strategic partnership agreement for the Japanese market. Triangle Technologies Ltd. assisted Civcom in establishing the relationship and negotiating the agreement with Opto Science. Under the terms of the agreement, Opto Science will distribute Civcom's Free-X™ all-optical switch, and its Free-Light™ tuneable transponder and its customized dynamic solutions in Japan. The two parties expect significant revenues from the distribution of Civcom’s products over the next 3 years. Dr. Tsutomu Kobayashi, Vice President of Triangle Technologies, commented, “Civcom has superior technology for both optical switches and transceivers, while Opto Science is a reputable distributor dedicated to marketing optical products. This makes it a perfect match for partnership that will increase sales of Civcom products in Japan.” Triangle Technologies is responsible for developing Civcom’s marketing activities and strategic alliances in Japan, and has established lab trials and supported sales activity of Civcom’s products in this region.

ISRAEL-JAPAN NEWS

+New joint Israel-Japan R&D fund TO BE established

Minister of foreign affairs Silvain Shalom and Japanese minister of economy, trade, & industry Takeo Hiranuma have agreed to set up a new joint Israel Japan R&D fund. Hiranuma accepted Shalom’s proposal for a joint committee staffed by the economics ministries of the two countries. The committee will foster cooperation and bilateral activity between the two countries, and activities opposite developing countries. The Japanese minister stressed that Japan attached great importance to Israel’s high-tech capabilities, and planned to strengthen trade and economic ties between the two countries.

+RAKUTEN, ZEND IN ALLIANCE FOR PHP SCRIPTS

Rakuten and Zend Open Source Systems Japan have forged an alliance to develop techniques for using PHP scripts on gigantic websites such as Rakuten's. Specifically, the two partners will collaborate to assess PHP technologies, test LAMP tools, hold joint seminars, and introduce Zend products to websites.

***BUSINESS NEWS***

+JAPAN TELECOM HOLDINGS AND RIPPLEWOOD HOLDINGS AGREE ON JAPAN TELECOM SALE

Japan Telecom Holdings Co. and Ripplewood Holdings LLC have reached agreement on the leveraged acquisition of Japan Telecom Co. by an affiliate of RHJ Industrial Partners, a Ripplewood fund dedicated to making investments in Japan. Japan Telecom is the wholly-owned fixed line subsidiary of Japan Telecom Holdings. As a result of the transaction, Japan Telecom Holdings will receive $2.23bn in cash and warrants.

+LISTED VENTURE FIRMS IMPROVE PROFITS

According to a Nikkei survey, 64% of the companies listed on Japan's 3 venture markets (Mothers, Hercules, and JASDAQ) had profit improvements in the April-June quarter this year. The average revenue growth for these companies was 14%, significantly higher than the 2% average for TSE companies over the same period.

+NTT CORP. EYES BUYING STAKE IN IIJ

According to a Japanese business daily, NTT is negotiating with Internet Initiative Japan (IIJ) to acquire a 30% stake in the Internet service provider for anywhere between $85mn and $170mn. IIJ once attempted to form a telecom alliance to counter NTT. NTT has denied the report.

+FUJITSU BOND DOWNGRADED

Standard & Poor's has cut Fujitsu Ltd.'s credit rating to "BB plus pi" from "BBB minus pi". S&P said that Fujitsu is weak and would take a while to improve its financial position. On a similar note, Fujitsu has launched a drive to slash manufacturing costs by 30% by the end of March 2006 as a way to maintain its domestic output ratio of information and telecommunications devices at the current level.

+INTERNET AD MARKET TO HIT $855MN

According to Nikkei, Japan's Internet advertising market will hit $855mn within this year, up about 20% over last year. The advertisers most active on the Internet are companies which are trying to reach the youth market. Internet advertising accounts for about 1.5% of the total market.

+IC TAGS EXPECTED TO CREATE $265BN DEMAND

A telecom ministry panel released a report saying that "integrated circuit (IC) tag" technology may create $265bn in demand in the Japanese economy in 2010. The advisory panel predicted IC tags will come into wide use from around 2007.

+SUBSCRIBERS TO YAHOO! BB ADSL SERVICE TOP 3 MIL.

The number of subscribers to the Yahoo! BB ADSL high-speed Internet access service operated by the Softbank group exceeded 3 million in August. Run by Softbank BB Corp. and Yahoo Japan Corp., the service took about 23 months to win more than 3 million subscribers since it began operating in September 2001.

+BROADBAND SUBSCRIBERS REACH 11MN; FTTH GROWS WHILE ADSL SLOWS

According to a survey by the Ministry of Public Management, Home Affairs, Posts and Telecommunications, the number of broadband Internet users in Japan increased by 416,261 from the previous month to reach 11 million as of the end of July 2003. Since December 2002 the monthly net increase of ADSL subscribers has been declining, with the exception of April 2003. By contrast, the monthly increase of FTTH subscribers is continuously rising, reaching 531,332. The average monthly increase of the CATV Internet service subscribers is quite stable, attracting some 50,000 people every month during the last two years.

+CELL PHONE SHIPMENTS SURGE 40.3% IN JULY

Domestic shipments of cell phone handsets surged 40.3% in July from a year earlier to 5,254,000 units for the ninth straight monthly gain. It is the third time on record that domestic shipments of mobile phones, including PHS handsets, have surpassed 5 million units in a month.

+'AU' SUBSCRIBERS TOP 15 MILLION, OUTPACING DOCOMO KDDI Corp.

Announced in late August that the number of subscribers to the "au" cellular phone service exceeded 15 million as of Aug. 15 – an increase of about 200,000 subscribers in August and of one million in four and half months. By comparison, NTT DoCoMo ended up with worse results for August (190,000 new subscribers), despite its vigorous marketing of new handsets.

+NEC, FUJITSU, OTHERS TO BOOST OUTPUT OF IP TELEPHONY DEVICES

NEC, Fujitsu and two other major communications equipment makers plan to increase production of IP telephony devices to meet demand from large companies to build in-house IP telephony networks, according to the Nihon Keizai Shimbun.

+WIRELESS ACCESS POINTS IN JAPAN TO DOUBLE BY DECEMBER

Intel Corp. expects the number of cafes, airports and other areas where consumers can get wireless access to the Internet in Japan to double by December. Intel expects the number of Internet “hotspots” to double to 7,000 by the end of the year.

+METI RELEASES REPORT TO PROMOTE USE OF OPEN SOURCE SOFTWARE

The Ministry of Economy, Trade and Industry (METI) released a report in August on the present situation and problems regarding use of open source software in Japan. Its aim is to promote the use of open source software. In related news, Japan, China, and South Korea have reportedly agreed to work together to sponsor a North Asia effort to replace Microsoft's Windows with a locally augmented operating system based on Linux. The 3 governments are concerned about security and costs created by using a commercial OS.

***GENERAL TECHNOLOGY NEWS***

+J-PHONE TO LAUNCH 3G INTERNET SERVICES IN OCTOBER

J-Phone Co. announced that it will launch new “Vodafone live!” mobile Internet services in early October on its W-CDMA 3G cellular phone service. J-Phone is changing the current brand name of the service, J-Sky, to the Vodafone brand on Oct. 1.

+NEC SETS WORLD RECORD FOR PROCESSING SPEED OF SERVER

NEC Corp. said it has set a world record for the running speed of a computer server with its Intel Itanium processor-based TX7/i9510 model. The 32-processor server runs at 171.61 GFLOPS under a standard benchmark measurement called Linkpack-HPC.

+HITACHI SHIPS WORLD'S SMALLEST HARD DRIVE

Hitachi has shipped the world's smallest hard disk drive, weighing just over 16 grams and equivalent in size to a matchbox. The 4GB Microdrive has a data transfer rate 70% higher than the previous generation of Microdrives.

+HITACHI DEVELOPS RFID MU-CHIP WITH EMBEDDED ANTENNA

Hitachi announced on that it has developed a new version of its RFID u-chip. This newly developed version of Hitachi’s original u-chip features an internal antenna, enabling chips to operate entirely on their own, making it possible to embed them in bank notes, gift certificates, documents, and whole paper media. Hitachi and Renesas Technology announced that they have jointly developed an IC dedicated to reading data of the new u-chip.

+HITACHI-MITSUBISHI JOINT VENTURE AIMS FOR $1.7BN MICROCHIP INVESTMENT

Renesas Technology said it was negotiating with Hitachi and Mitsubishi over $1.7bn spending on its state-of-the-art factory in Hitachinaka, 100km northeast of Tokyo. The project aims to make 90-nanometer chips using 300mm wafers.

+NTT EAST TO OFFER TV VIA FIBER-OPTICS

NTT East will launch a service using fiber-optic cables to transmit television programs and offer ultra-high-speed Internet connection by Dec. 1, when terrestrial digital broadcasting starts. The new service is based on NTT Group technology that utilizes the differences in light wavelengths.

+FREQUENCY SHORTAGE A PROBLEM FOR WIRELESS TELECOM

While wireless telecommunications rapidly spread, the shortage of available frequencies is emerging as a serious problem. The Telecommunications Council reported in late July that mobile phones alone will require more than five times as many frequencies 10 years from now. With 80 million mobile phones currently in use, frequencies for them are already on the verge of falling short. The expected introduction of super-fast 4G mobile phones, entirely based on the Internet, is expected to make matters even worse. The Ministry of Telecommunications has begun a fundamental review of the allocation of frequencies.

+DOCOMO TO RESTRICT CELL PHONE E-MAIL SPAM

NTT DoCoMo said it would start restricting the number of e-mails sent from a cell phone via its i-mode mobile Internet service to less than 1,000 per day from Oct er as part of its efforts to crack down on spam. This latest measure comes after complaints from customers began to increase again this spring.