Hiroshi Mikitani about how Japan should become more competitive
Hiroshi Mikitani: presentation of his new book = Competitiveness
Today Hiroshi Mikitani, Founder and Chairman of Rakuten, gave a talk at the Foreign Correspondents Club about his Japan Association of New Economy (JANE) and about his new book authored with his father entitled Competitiveness. Mikitani is also member of Prime Minister Abe’s Competitiveness Council.
Overall Mikitani explained some very reasonable sounding suggestions for changes towards overcoming Japan’s current 15 year stagnation. He made clear, that the No. 1 reason for Japan’s stagnation is not lack of technology or lack of innovation, but is due to insufficient quality of top managers/executives of Japanese companies. Therefore most of Mikitani’s suggestions for improvements focus on increasing the quality of top executives at Japanese companies both via education and also via bringing in more non-Japanese competition. Mikitani also emphasized his close relationship with Prime-Minister Abe, he mentioned having had dinner yesterday with Prime-Minister Abe, and expressed is confidence in Prime-Minister Abe’s abilities and his power to execute. One of the questions the audience asked during Q&A was that similar suggestions for improvements have been heard over many years, and asked whether this time these suggestions will be implemented.
Hiroshi Mikitani
Mikitani is Representative Director of the Japan Association of New Economy (JANE).
Japan Association of New Economy (JANE) has three focus areas:
Innovation
Entrepreneurship
Global standards
Mikitani emphasizes that the major reason for Japan’s stagnation is not lack of innovation, but top management with low capability and no vision. – Japan’s No. 1 problem are Japan’s executives.
To increase the competitiveness of Japan:
Japan does not lack technology, but global business management capability and business innovation
Current system protects top management with low capability and no vision. Top management needs to be renewed.
Efficiency of industries must be increased via competition
Japan must select Key Performance Indicators (KPI) and measure improvements in competitiveness against these KPIs. Must set targets, and measure progress.
Corporate tax rate in Japan should be lowered, and should target to be the lowest level of developed countries
Japan must improve global expansion and must improve quality of management:
Join TPP
Accelerate introduction of International Financial Reporting Standards (IFRS)
Increase quality of top business managers and human resources
Attract top talent from around the world: reduce tax progression, introduce stock based remuneration
Educational reform: improve English education, improve IT education, cultivate strategic thinking
Terrestrial digital media broadcasting (“Chi-Degi”, One-Seg)
Medical
Communication networks, NGN
Radio spectrum
Open up capital markets, bring market mechanisms into corporate management:
Ban extreme anti-takeover measures, ban poison pills etc
Reduce cross-shareholding
Japan needs education reform and needs to cultivate world-class business people:
Japan’s education system is ranked on 43rd position (out of 144) by the World Economic Forum (2012).
Quality of management schools is ranked on 80th position (out of 144) by the World Economic Forum (2012).
Hiroshi Mikitani submitted detailed materials to the Industrial Competitiveness Council Meeting on January 23, 2013. These materials can be downloaded here: http://jane.or.jp/img/english/pdf/jane20130129.pdf
Japan went 100% nuclear free since Monday, Sept. 16, 2013. When nuclear reactors will be restarted is totally unclear.
Kansai Electric Power (KEPCO) on Sunday Sept 15, 2013 at 16:40 started to reduce power output of Japan’s last remaining active nuclear power reactor (Oi No. 4 reactor), and stopped operations of this reactor on Monday Sept 16, 2013 morning.
Since Monday September 16, 2013 Japan is nuclear free, and will remain so for the foreseeable future. It is unclear currently, when and if nuclear power will be restarted again in Japan.
Japan is strongly polarized over nuclear power
The reason Japan is currently nuclear free is not a policy decision by the Government of Japan or the Prime-Minister, the reason is mainly technical and a consequence of Japanese local politics:
Japan’s nuclear reactors are stopped every 13 months for checks, cannot be restarted in the current political and legal climate
Japan’s nuclear reactors are switched off for routine maintenance and security checks once every 13 months. In order to restart each reactor after this periodic maintenance both Japan’s nuclear safety agency, and also “the local community” have to give their formal agreements. Before the Fukushima disaster, both these two agreements were a formality and given quickly. Since the Fukushima disaster however, the approval by the newly formed Nuclear Safety Agency has been a far higher barrier to overcome.
However, more importantly, it has turned out that “the local community” who’s approval is also necessary is in some cases not well defined. Therefore many community authorities which in the past did not raise their voices, now join in the decision making process. In addition, some regional administrative leaders, such as the Governor of Niigata-ken, have expressed their very strong distrust in current management of nuclear power stations, and are refusing to give their agreement, without which the restart of nuclear power stations within the Prefecture they govern is impossible.
Nuclear power is mainly replaced by LNG
For the time being, nuclear power is replaced predominantly by electricity generation from Liquid Natural Gas (LNG). As a consequence Japan’s payments for LNG are at an all-time high.
You will find detailed statistics and analysis of Japan’s electricity and energy situation in our report on Japan’s Energy Sector.
Japan’s last operating nuclear power station was switched off on Monday Sept 16, 2013. source: https://www.eurotechnology.com/store/j_energy/
Japan’s last operating nuclear reactor (No. 4 reactor at KEPCO’s Oi plant) was switched off on Monday, Sept 16, 2013. Since then Japan is nuclear free. It is unclear when nuclear power plants will be operated again in Japan.
Read detailed analysis in our report on Japan’s energy sector:
In this newsletter David Uze, President for Japan & Korea of the global semiconductor electronics company Freescale, shares his success story in Japan, and his perspectives on Japan’s electronics industry sector….
Perspectives on Japan’s electronics sector by Freescale’s President for Japan & Korea, David Uze
Question (Gerhard Fasol): I have read several of your articles and interviews, and see that you express much optimism about Japan’s semiconductor industry. On the other hand, the retired Elpida-CEO Yukio Sakamoto said in an interview on Sept 5 in Nikkei, that the sale of Elpida to Micron was the best option for Elpida, while Renesas is also in a period of reconstruction.
How do you see Japan’s semiconductor sector, and where do you see its future?
Answer (David Uze): Japan’s semiconductor players have incredible IP portfolios. To not leverage such assets would clearly be missed opportunity for the Japanese economy.
Despite the pain and complexity of consolidation and restructuring, such actions usually force evolution. This leads to better product portfolios and the operational scale necessary to make the critical investments that fuel innovation. In the words of Friedrich Nietzsche, “What doesn’t kill you makes you stronger.” Similarly, in Japanese, “雨降って、地が固まる.” (in English: Rain makes the ground stronger).
Clearly, Japan will continue to be a chip design leader. Whether Japan returns to a prominent position in semiconductor manufacturing, relies largely on the priorities of the Japanese government and “Japan Inc.”
Question (Gerhard Fasol): At least until “Abenomics” and now the Olympic fever, a lot of companies globally are quite pessimistic about Japan’s growth. How do you see growth for your company in Japan? What do you feel about the future economic growth in the Japanese electronics sector?
Answer (David Uze): Freescale is working very hard to meet and exceed our Japanese customer’s expectation. Our belief and commitment to Japan is best embodied by the Japanese concept of being a “死に物狂い” partner to our customers (translation: a partner who never gives up, fights until death if necessary). Not a vendor. Our customers repeatedly tell me they want less “vendors” and more “true partners”. We are seeing business benefit from taking this path.
Japanese ingenuity and a technology savvy customer base has been and will continue to drive product innovation and ensure that Japan will remain a prominent player in the global marketplace.
Question (Gerhard Fasol): In my opinion, Japan has some incredible creativity – for example mobile internet which today is a major global growth industry, essentially was invented in Japan in 1999 by DoCoMo, KDDI and J-Phone, and Shuji Nakamura invented almost single handedly the GaN LED revolution which is revolutionizing the global lighting industry. How much R&D does Freescale do in Japan?
Answer (David Uze): In Japan, we have partnered with global technology leaders like Fuji Electric, Alps Electric and most recently Rohm Semiconductor. We continue to develop new technologies and solutions with these great companies and will expand our R&D partnerships in Japan.
Freescale is partnering with Tokyo University, software/hardware ecosystem partners and our customers in the automotive industry to develop solutions for next generation collision avoidance and other active safety applications.
Question (Gerhard Fasol): Tell us a bit more about your company Freescale if you like. What are your most exciting products now? Where would you like to drive your company in the future?
Answer (David Uze): Automotive makers/system suppliers and end-users are keenly interested in ADAS (advanced driver assistance systems), especially radar- and vision-based safety solutions. Freescale provides radar and logic chips for the most advanced safety solutions in the market. If your car has collision warning or parking assist features, they are likely based on Freescale technology.
Freescale has an intensely competitive culture. We won’t stop innovating and working to satisfy our customers until we are #1 in all market segments in which we participate. Of course, we won’t stop there.
Question (Gerhard Fasol): How big is your company in Japan now?
Answer (David Uze): Geographically, Freescale has offices in Tokyo, Nagoya and Sendai. Furthermore, we have extensive nationwide coverage via our excellent team of distribution partners including Avnet Internix, Marubun Corporation, Tokyo Electron Device and Toyota Tsusho Electronics as well as Chip-One-Stop as an e-tailer.
From a business scale perspective, Japan is one of Freescale’s largest and fastest growing markets. We have strong positions in Automotive and Digital Networking and are quickly expanding our footprint in Industrial and Consumer Electronics.
Question (Gerhard Fasol): Several times a week technology, software, energy, semiconductor companies approach my company with plans to enter Japan’s market, or to grow faster in Japan. What would be your most important advice to foreign technology companies thinking of entering Japan’s high-tech markets, or seeking to accelerate growth in Japan?
Answer (David Uze): Be sincere. Honor your commitments. Work hard.
Invitation to the races: The Asia Le Mans @ Fuji Speedway – international car racing event on September 20-22, 2013 free admission for all pre-registered Freescale guests
Question (Gerhard Fasol): You are holding a very interesting event at the Fuji Speedway on September 20-22. I know that you and Freescale are heavily engaged in R&D car racing. This sounds like a lot of fun, but there must be a very serious side also. Can you tell us why Freescale invests in car races, and what Freescale and Freescale customer get out of the car races?
Answer (David Uze): We are involved in Japan’s SuperGT racing series primarily to drive innovative R&D outcomes in automotive safety. Our focus is on contributing to a “Zero Fatality” vehicular future. Racing provides the most challenging environment for automotive systems due to the speed, vibration, g-forces and other environmental factors. Many revolutionary technologies have been borne from auto racing including; industrial utilization of the carbon fiber material, anti-lock brake systems, traction control, active suspension, seat belts and many other safety advancements.
Racing also provides a rallying point for our employees, partners and customers to work together as One Great Team (OGT!). We host 100’s of customers and partners during each race weekend where we have the opportunity to share ideas while fostering camaraderie. Off the track, our guests compete fiercely with one another. While at the track, they collaborate. This truly makes our Freescale OGT! Racing Program unique in both the racing industry and semiconductors.
Question (Gerhard Fasol): I heard you would like to invite our subscribers and readers to your Fuji Speedway event on Sept 20-22. Can you tell us a bit about what participants can expect, and how they can register?
Answer (David Uze): We’ll be offering very unique experiences to a broad range of people including current and future customers/partners, race fans, their families and even students. It is a combination of
David Uze invites our readers and subscribers to join the team for an exciting weekend of car racing at the legendary Fuji Speedway on September 20-22, 2013. You can have fun watching the races, attend a dance party hosted by musician & DJ Suzuki Ami and enjoy many fun family activities. This is also an opportunity to learn hands-on about the future of automotive technology and car electronics.
Details about the event and registration here: http://www.freescale.com/TheFreescaleExperience (日本語) http://www.freescale.com/webapp/sps/site/overview.jsp?code=DWF_TFE (English)
The Blue Laser Diode, by Shuji Nakamura and Gerhard Fasol, Springer Verlag
The story and physics background of the discovery and development of the GaN LEDs and lasers
Since I have been working for many years on GaAs research, as soon as I heard Shuji Nakamura’s talk at one of Japan’s applied physics conferences, I understood the importance, visited Shuji Nakamura in Anan where he was working at Nichia Kagaku Kougiyou, and became friends with Shuji Nakamura. Shuji Nakamura also introduced me over curry lunch to Founder and Chairman Nobuo Ogawa (小川 信雄), who at that time was about 83 years old.
I asked Chairman Nobuo Ogawa why he had agreed to pay for Shuji Nakamura’s proposed research on GaN blue LEDs, and pay for Shuji Nakamura learn MOCVD at the University of Florida in Professor Ramaswamy’s group. Nobuo Ogawa’s answer: “How did you chose your wife?”
I wrote a number of articles about Shuji Nakamura’s development of GaN LEDs and lasers in SCIENCE Magazine and the Deutsche Physikalische Blätter.
“Physikalische Blätter” initially rejected the first report on GaN LEDs – German experts had never heard about this discovery before, therefore rejected it as incredible
I also wrote an article for the Journal of the German Physical Society, at that time “Physikalische Blätter”, for which I was regularly writing articles and reports from Japan. The Editor initially rejected my article. He told me that he had consulted with German experts, and these experts had told him that they had never heard about a successful blue GaN LED, and that this was therefore impossible, and wrong. The Editor asked me rhetorically: “Do you think these German experts are wrong?” – I answered “Yes, they are wrong – you should publish this article”, and sent him some background information in support of my article. He finally published the article, and you can find it online here:
Gerhard Fasol: “Japanische Herbstkonferenzen in Angewandter Physics (Japan’s autumn conferences on applied physics)” Physikalische Blätter, 50, p. 1118-1119 (December 1994) (my first report on Shuji Nakamura’s GaN work in Germany’s Physikalische Blätter)
Through my articles in Science Magazine and Physikalische Blätter, Claus Ascheron, Physics Editor of Springer Verlag became aware of my work in Tokyo, and asked me if I can help him win Shuji Nakamura’s agreement to write a book on his GaN work.
Blue laser book – how it came about
Claus Ascheron and myself went to visit Shuji Nakamura, and we had a lunch with Shuji Nakamura, Chairman Nobuo Ogawa, Claus Ascheron and myself. During lunch Claus Ascheron asked Shuji Nakamura, if he would be interested to write a book for Springer Verlag. Shuji agreed, but said that he needs Chairman Ogawa’s agreement. He asked Chairman Ogawa straight away, and Chairman Ogawa said “No. You can’t write this book, I don’t give my permission”. So I intervened and asked Chairman Ogawa for the reason of this refusal. Chairman Ogawa said: “Nakamura-san is researcher, he must do research and develop new products, he cannot waste his time writing books”. So I offered to help as a co-author, so that this would take less of Shuji Nakamura’s time. Chairman Ogawa agreed to this arrangement, and gave his permission.
As a result, Shuji Nakamura and myself worked many night-sessions over Christmas and New Year 1996/1997, and the first edition of the Blue GaN Laser book was published in January 1997, to be ready for the annual Book Fair in Frankfurt.
“The Blue Laser Diode – GaN based light emitters and lasers” (1st Edition),
S. Nakamura, G. Fasol
(Springer-Verlag, January 1997, ISBN 987-3-662-03464-4)
You can also read some of the background of Shuji Nakamura’s invention and the development of the solid state lighting industry in our Solid State Lighting report.
Feed in tariff Japan for renewable energy are about three times higher than in Germany
Approvals peaked just before the latest feed in tariff reduction
The figures below show an overview of renewable energy sources currently installed and operational in Japan (the majority of which is water power), and also renewable energy projects approved by Japan’s industry ministry METI under the renewable energy feed-in-tariff (FIT) law, which started in July 2012.
Approvals peaked just before March 31, 2013
The figures below clearly show that approvals peaked in March 2013, and dropped off dramatically from April 2013. The reason is most likely the decrease of FIT-tariffs from April 1, 2013: it seems that many applications were rushed in order to take advantage of the higher FIT-tariffs for projects approved up and until March 31, 2013.
Renewable energy capacity approved so far under the FIT-law will increase renewable energy capacity in Japan approximately by 70%, including water power. 94% of renewable energy projects approved under Japan’s feed-in-tariff programs are for solar energy generation (see our past blog analyzing FIT approvals).
The figures below show, that almost no fresh generation capacity was approved during March, April and May 2013: the approval of new renewable energy capacity is drying up.
Thus, companies seeking to build solar power stations in Japan based on pref-approved METI-projects, are faced with a fixed pool of approved projects, with almost no additional projects being added until May 2013.
Accumulated total generation capacity of approvals for renewable energy projects under the feed-in tariff law until May 2013 in comparison with installed renewable energy in Japan. Approvals seem to have dried up: almost no new capacity has been approved during March-May 2013.Figure shows the accumulated generation capacity of solar energy projects approved by Japan’s Industry Ministry METI under the renewable energy FIT law. Approvals seem to have dried up: almost no new capacity has been approved during March-May 2013.Approvals under Japan’s renewable energy feed-in-tariff law per month. Figure shows that approved generation capacity drops to a low level after March 2013 – the most likely explanation for the dramatic drop of approvals after March 2013 is the reduction of FIT-tariffs from April 1, 2013: it looks likely that many applications were rushed to meet with the higher FIT tariffs available for projects granted at the higher rates up to March 31, 2013 (42 yen/kWh in case of large scale solar)
Masayoshi Son threatened to set himself on fire in Japan’s Post and Telecommunications Ministry? Is it really true?
by Gerhard Fasol
Masayoshi Son is known for his unbreakable will to achieve his and his companies’ business goals, and the will to take risks.
Masayoshi Son threatened to set himself on fire in the Ministry?!? Spectrum allocations for KDDI and SoftBank:
Currently Masayoshi Son, Founder of Softbank, is battling for a revision of a decision by Japan’s Ministry of General Affairs (Soumu-Sho) to award a new tranche of radio wave spectrum to KDDI’s subsidiary UQ, rather than sharing the spectrum equally with SoftBank‘s subsidiary Wireless City Planning.
Masayoshi Son threatened to set himself on fire in Japan’s Post and Telecommunications Ministry? Asking Masayoshi Son directly:
For a long time, I knew of a story about Masayoshi Son threatening to set himself on fire inside Japan’s Postal and Telecommunications Ministry (now merged into Japan’s Ministry of General Affairs (Soumu-Sho) since administrative reforms some years ago) in order to underline his request for a particular telecommunications license, or access to NTT exchanges, or similar matters Masayoshi Son was applying for at the time. I was long puzzled whether this story is true or not, so some years I go I had the chance to check this story out directly with Masayoshi Son, via the Chief- Editor of BusinessWeek, Mr David Rocks.
David Rocks, Editor of BusinessWeek in 2004 came for three weeks to Japan because BusinessWeek’s technology correspondent had tragically died of illness, in order to fill the gap of reporting about Japan. On the first day of his three weeks work in Japan he had Chinese dinner with me in Hibiya. Next day around noon he phoned me for advice of which questions to ask Masayoshi Son during an interview, and one of the questions that I suggest was: “Is the story true, that you (=Masayoshi Son) threatened to set yourself on fire in the Japanese Telecommunications Ministry”. A day later David Rocks told me, that Masayoshi Son’s answer was: “Yes, the story is true, I did threaten to set myself on fire inside the Telecommunications Ministry, but I did not take any petrol along!”.
The photograph of Masayoshi Son is used under Creative Commons license according to Wikipedia.
Copyright details are:
Description English: Masayoshi Son on July 11, 2008
Date 11 July 2008, 12:11:02
Source iPhone 3G Masayoshi Son Masaru Kamikura (http://www.flickr.com/photos/kamikura/2658524938/)
Author Masaru Kamikura (http://www.flickr.com/people/20119192@N00) from Japan
This file is licensed under the Creative Commons Attribution 2.0 Generic
(https://creativecommons.org/licenses/by/2.0/deed.en) license.
Japan banks need to register with the Ministry of Finance, so we know exactly how many banks there are in Japan, and we know address and all details about each one (contact us if you need help)
One of our clients asked us, how many banks there are in Japan, when discussing possibilities for obtaining finance.
Banks in Japan need a license, therefore all Banks are registered, and details are published, there is a straight answer to this question: 198 + 1 (as of July 1, 2013).
Note that Japan’s banking sector is consolidating, especially regional banks, so there is some change over time.
Total number of banks in Japan = 198 (as of July 1, 2013) (not including The Bank of Japan)
Since a banking license is required, the number, names, addresses etc of all banks of Japan are easy to find.
For historic reasons the number of banks in Japan is quite large, and the Bank of Japan and the Government of Japan have mentioned recently, that they consider the number of banks too large, and consolidation of local banks is under consideration.
Bank of Japan
Not included in the listing above is the Bank of Japan.
The Bank of Japan is the central Bank of Japan, and has three main responsibilities:
issue bank notes (not the yen coins, the coins are minted by the Mint of Japan)
carry out currency and monetary control
act as settlement banks between all Japanese banks: “to ensure smooth settlement of funds among banks and other financial institutions, thereby contributing to the maintenance of stability of the financial system.”
Trends and consolidation
As a consequence of the Japanese banking crisis following the “crash of the bubble”, many Japanese banks were in difficulties resulting in a wave of mergers of Japan’s mega-banks – as a consequence, three top banks were created:
Mizuho Financial Group (blue)
Mitsubishi UFJ Financial Group (MUFG) (red)
Mitsui Sumitomo Financial Group (green)
Regional banks are increasingly under pressure as local economies stagnate and contract, winners and losers emerge, and we expect waves of mergers among mid-sized and small-sized local banks.
Emerging new banks
With the development of fintech and online banks we see new giants emerge, examples are Rakuten Bank, and others.
On the Galapagos islands, Charles Darwin noticed a number of species which were extremely beautiful, had evolved on the Galapagos islands locally, and were not able to live anywhere else.
Similarly, due to language, culture, comparatively small interchange between Japan’s markets and foreign markets, some technologies and some products evolved in Japan differently than in other markets.
In part, Japan chose unique Japanese technology standards (e.g. PDC and PHS for mobile phones, 1-seg for mobile TV, FeliCa for RFID contactless and mobile payments) in the hope to achieve global adoption of these Japanese standards, and at the same time to make market penetration of Japan’s markets more difficult for foreign companies in these fields – thus giving an competitive advantage to Japanese companies in their home market Japan.
Japan Galapagos effect: Telecom industry
Japan’s telecommunications industry for a long time used wireless communication standards, and mobile data standards, and frequency bands quite different than those used in other parts of the world. This had several effects:
Foreign companies hoping to enter Japan’s market, had to invest and develop mobile phone and other equipment specifically for the Japanese market, which could not be marketed anywhere else. Thus competing Japanese mobile phone makers and base station makers had a (temporary) competitive advantage in their home market, Japan. However, because of Japan’s limited market size, this competitive advantage in their home market seduced these Japanese companies to neglect global business development. As R&D costs, and especially software development costs increased, lack of global scale made it more and more difficult for these companies to continue viable business.
Because of high investments, and the will of consumers to spend large amounts on mobile communications, and because of Japan’s innovative power and other factors, many mobile technologies and business models were invented in Japan, or came first to market in Japan. These include:
Japanese handset makers and mobile phone base station makers were until recently protected in Japan’s market, Japanese mobile phone operators preferentially purchased Japanese equipment. Japanese mobile phone handset makers and base station equipment makers were not able to compete in the much larger global market.
Necessary consolidation did not take place, so Japanese mobile phone handset makers and base station equipment makers did not scale globally.
Japan Galapagos effect: Galapagos phones (Galake, ガラケ)
Japan introduced mobile internet in February 1999, much earlier than any other country. “Galapagos phones” (Galake, ガラケ) are mobile phones (“feature phones”) typically based on the legacy Symbian operating system, and including a very rich set of features:
Mobile operator specific services, such as DoCoMo’s Concierge services
and more
Galapagos-phones are losing market share against iOS/iPhone and Android smartphones, and we expect Galapagos-keitai (galake) to disappear from the market within a few years to be replaced by iOS, Android, and other smartphones.
Kei car, K-car, 軽自動車 (meaning “light automobile”) is an automotive class, which exists only in Japan. Kei-cars enjoy tax advantages, and Japanese automobile manufacturers are creating very innovative and attractive Kei-cars, however this class of automobile is only restricted to Japan at this time, and cannot achieve global scale at this time.
Positive aspects: Japan Galapagos effect as an opportunity
Mobile internet, electronic money, camera phones and many other advanced technologies were invented and/or first brought to market in Japan, earlier than in all other countries, because of the positive aspects of the Galapagos effect. Japanese companies could develop and bring these new products to market without being slowed down by global standards. Creativity can run free in Japan because of Japan’s Galapagos effect.
Japan post-Galapagos effect working group
The “Post-Galapagos working group” was organized by Takeshi Natsuno (one of the three developers and long-years manager of DoCoMo’s i-Mode mobile internet service) during the years 2008-2009.
The Post-Galapagos working group consisted of about 15 Committee members (Gerhard Fasol was the only non-Japanese Post-Galapagos working group member), met once a month for about one year, and in mid-2009 prepared an released a set of reports with recommendations for
Gerhard Fasol: The Galapagos Effect (talk given for the American Chamber of Commerce in Tokyo, Tokyo Westin Hotel, July 12, 2010, 12:00-14:00), read the article here in the ACCJ Journal
NEC is one of NTT’s traditional four equipment suppliers
NEC is one of NTT’s traditional suppliers of telecom equipment, and one of Japan’s flagship electronics companies. In the early days of the PC age, NEC dominated Japan’s PC market with the 98 series of PC, which had a NEC-proprietary variation of MicroSoft’s MS-DOS operating system.
NEC was the first ever Japanese joint-venture company with foreign capital: NEC started as a joint-venture with Western Electric Company
Interestingly NEC originally started as a joint-venture with Western Electric Company of the United States – NEC was the first Japanese joint-venture company with foreign capital.
NEC revenues and income overview
Here is an overview of NEC’s financial performance over the last 15 years, the period FY1998 – FY2012 – NEC’s business shrunk from YEN 5000 billion in FY1998 to YEN 3000 billion in FY2012, while on average reporting annual net losses of YEN 39 billion (US$ 390 million)/year over these 15 years.
During the 15 years FY1998-FY2012, NEC revenues declined from YEN 5000 Billion to YEN 3000 Billion, while reporting on average annual net losses of YEN 39 Billion/year. Source: our research report on Japan’s electronic industries. Purchase and download here: https://www.eurotechnology.com/store/j_electric/
Recently NEC attempted negotiations with Lenovo, to jointly manage a new NEC-Lenovo smart phone joint-venture company, into which the NEC smartphone division would be merged.
NEC reported that these negotiations with Lenovo had failed, and NEC now reports that it will terminate NEC smartphone production, but will continue to manufacture “Galake” feature phones. Our expectation is that NEC Galake feature phone production will also be terminated at some point in the not too distant future.
NEC smartphone failure: What has caused NEC’s fall from No. 1 to an impending exit from the mobile phone sector? Several factors in our view:
NEC focused mobile phone production on Japan’s domestic market, especially NTT-docomo, since NEC is one of the NTT-Groups traditional suppliers, NEC thought that NEC will also remain among NTT-docomo’s preferred suppliers.
NEC failed to build viable global mobile phone business outside Japan. NEC hoped to ride NTT-docomo’s global introduction of i-Mode, supplying NEC-i-Mode phones via NTT-docomo to the world. However, since i-Mode’s global introduction failed, this strategy fell flat.
NTT-docomo recently decided to focus on two core handset suppliers: Samsung and SONY. Since NEC is not included in NTT-docomo’s two core handset suppliers, NEC essentially lost docomo’s sales support.
Unlike Google/Motorola and Apple, NEC does not control the OS-software, and therefore always depended on others to supply the OS software, which is of course an achilles’ heel type vulnerability. Still, Samsung is successful without using its own OS, although Samsung is working hard along various paths hoping to create a viable OS and ecosystem, such as Tizen.
Patents: NEC does not have a strong mobile phone patent position to stand up to Apple, Google or Samsung in the mobile phone patent wars.
Lack of scale: while NEC was a temporary No. 1 in Japan, NEC never had sufficient scale on a global level in mobile phones or smartphones.
Lack of focus: NEC is active in a large number of business areas, and smartphones is a small part of total activities of NEC. Thus NEC does not have the focus on smartphones which would be necessary to create global success. Probably NEC considers smartphones and feature phones a secondary business.
Neither has NEC sufficient financial strength to build a global smartphone business at this stage.
Here is an overview of NEC’s financial performance over the last 15 years, the period FY1998 – FY2012
During the 15 years FY1998-FY2012, NEC revenues declined from YEN 5000 Billion to YEN 3000 Billion, while reporting on average annual net losses of YEN 39 Billion/year. source: https://www.eurotechnology.com/store/j_electric/
For a detailed analysis of Japan’s electronics industry sector including NEC, see:
Japan LNG import costs – we analyze Japan’s official LNG import data
Japan LNG import costs increase 77.5% from 2011-2013
Here we analyze Japan’s liquid natural gas (LNG) costs, which have been driven to record heights – mainly by the very high LNG prices Japan has to pay, and driven even higher by the low YEN exchange rates. If you are interested in precise numerical analysis: you can find detailed graphics and analysis in our Japan-Energy report, based on import data direct from Japan’s Ministry of Finance.
Japan LNG import cost reduction strategies
To reduce Japan’s extremely high payments for energy, Japan’s Government is following several strategies: Japan’s Government seeks to reduce LNG prices by developing new LNG sources, increase coal usage, increase development of renewable energy sources – and work towards restarting nuclear power plants.
Solar projects dominate renewable energy development for now. Our company currently alone is working with a number of clients on a pipeline of about 50 solar projects with a total of approx. 950 MegaWatt – and growing.
For insights into why Japan’s energy situation has come to where it is today, download the handouts of our talk “Japan’s Energy – Myths vs Reality”, given at the Embassy of Sweden in Tokyo (Alfred Nobel Auditorium) in cooperation with Stockholm School of Economics on June 19.
Liquified gas import costs increased 77.5%
Japan’s monthly payments for LNG imports increased 77.5% from 2011 to 2013. Source: https://www.eurotechnology.com/store/j_energy/
Nuclear power has been replaced largely by electricity produced from imported LNG. Japan’s payments for LNG have dramatically increased. We have analyzed Japan’s official data, and found that the increase is mainly due to increased prices and exchange rate, and much less due to increased volumes.
Japan pays higher LNG prices than at the 2008 peak
Japan pays higher LNG prices today than at the peak in September 2008. Source: https://www.eurotechnology.com/store/j_energy/
Japan pays very much higher prices for LNG than Europe or US. The LNG prices Japan pays today are about twice as high as during the slump following the Lehman shock, and are higher than at the peak just before the Lehman bankruptcy in September 2008.
Japan’s liquified gas imports have increased 23%
LNG import volumes currently are about 23% higher than before March 11, 2011. Source: https://www.eurotechnology.com/store/j_energy/
Due to intensive electricity saving measures, LNG imports have actually increased far less than would be necessary to replace all switched off nuclear power. Today’s LNG import volumes by weight are only about 23% higher then before the March 11, 2011 crisis, while costs are about 77.5% higher.
This shows that Japan’s extremely high payments for LNG imports are much more caused by high prices than by increased import volumes. Therefore Japan’s Governments and private industry strategies to decrease LNG prices for Japan are the way to go for the short term.
Another approach to liberalization is currently on its way – as described in our detailed report and analysis of Japan’s energy markets
Longterm of course, it is necessary to rebuild Japan’s energy architecture, which has been created in 1952 under orders from McArthur’s military Government, and has been essentially frozen in since 1952. Attempts to liberalize Japan’s energy markets, including electricity, have been largely ineffective.
Thank you to all those who attended the event “Japan’s energy – myths vs reality” at the Embassy of Sweden – an event organized by the European Institute for Japanese Studies of the Stockholm School of Economics.
We had about 120 registrations for 100 seats in the Alfred Nobel Auditorium of the Embassy of Sweden – participants included an official from Japan’s Prime Minister’s Cabinet Office, Officials from several Embassies including the Swedish, US, Norwegian, Swiss, Hungarian and more Embassy, executives from Japanese and European telecom and energy companies, including also several independent power producers (IPPs), legal professionals, and groups of students and MBA students from Tokyo University, Hitotsubashi University and others.
We had very vivid discussion, and continued the discussions over nijikai.
Detailed data, statistics and analysis of Japan’s energy markets:
All the data of the talk are from our reports on Japan’s energy sector:
European Institute of Japanese Studies Academy Seminars presents:
Japan’s Energy – Myths vs Reality”
Speaker: Dr. Gerhard Fasol, President, Eurotechnology Japan K.K.
Wednesday, June 19th, 2013
18:30 – 21:00
Embassy of Sweden, Alfred Nobel Auditorium
Stockholm School of Economics, European Institute of Japanese Studies for details and registration click here
Announcement on the webpage of Stockholm School of Economics
Gerhard Fasol “Japan’s Energy – Myths vs Reality” Embassy of Sweden
About the talk:
Japan’s electricity companies earn about US$ 200 billion annually in revenues, and until the Fukushima nuclear accident, about 30% of energy was generated by nuclear power plants, which are currently switched off except for two nuclear plants in Kansai region. Renewable energy sectors expect the rapid built-up of renewable sources in Japan to continue, ie; solar energy, wind, geo-thermal and other sources to follow. METI is also working on liberalization of Japan’s energy markets. Japan’s energy sector undergoes rapid changes and presents large opportunities. In the presentation, we will hear some of the myths about electricity and energy in Japan, and the realities. We will also hear how foreign companies can succeed in Japan’s energy sector.
About the speaker:
Dr. Gerhard Fasol is physicist and entrepreneur who has worked since 1984 with Japan’s high-tech sector. He worked on the entrance strategies into Japan’s environmental and energy sector for one of Europe’s largest engineering multi-nationals, and for US investment funds and venture companies on market entry into Japan’s energy sector. Gerhard also builds the Ludwig Boltzmann Forum as a global leadership platform.
Gerhard graduated with a PhD in Physics from Cambrige University/Trinity College. He was tenured faculty member in Physics at Cambridge University, and Associate Professor at Tokyo University’s Electrical Engineering Faculty and led a JST-Sakigake project on spin electronics before founding Eurotechnology Japan KK.
Date: Wednesday, June 19th, 2013
Time: 6.30 p.m. – 7.00 p.m. Drink & Snack (served before lecture)
7.00 p.m. – 9.00 p.m. Lecture and Discussion
Place: Alfred Nobel Auditorium, Embassy of Sweden
10-3-400 Roppongi 1-chome, Minato-ku, Tokyo 106-0032
Five-minute walk from Tokyo Metro Nanboku Line Roppongi 1-chome Station
Five-minute walk from Tokyo Metro Hibiya Line Kamiya-cho Station
Fee: JPY3,000 per person, payable at the door
Free for those who are from sponsoring companies (*)
Free for students, please bring your student ID
Language: English
(*) EIJS Academy 2011-2012 and 2012-2013 Sponsoring companies
Gadelius Holding Ltd., Ericsson Japan K.K., Nihon Tetra Pak K.K., Sandvik K.K.,
Höganäs Japan K.K. and in cooperation with the Embassy of Sweden
Feed-in-tariffs for renewable energy where introduced in two stages in Japan. Large scale introduction of feed-in-tariffs (FIT) started with the Law entitled “Special measures concerning renewable energy electric power procurement by operators of electrical utilities law” which came into force on July 1, 2012. However, subsidies and feed-in-tariffs were already in place earlier for residential solar (mostly on roof-tops of private homes). Projects approved under the FIT program of July 1, 2012 amount to an increase of 41% in nominal renewable electrical generation capacity. Feed-in-tariffs however are not the whole story, because there are also programs for financial support, special finance arrangements, and tax benefits, and other support programs.
Renewable energy projects approved under Japan’s feed-in-tariff program increased renewable energy generation capacity by 41.4% sofar. source: https://www.eurotechnology.com/store/j_renewable/
Under the law feed-in-tariffs are periodically reviewed and adjusted. In fact, feed-in-tariffs for solar energy have already been reduced by about 10% this year and are likely to be decreased further next year. For some types of feed-in-tariffs however, increases are under discussions – thus the FIT-tariffs for off-shore wind maybe increased in the future.
Since feed-in-tariffs for solar are set for a period of 20 years, and are decreased periodically, there is great incentive to start solar installations as early as possible, in fact some Mega-Solar plants were switched on on July 1, 2012 to use every possible day. Currently there is a rush of solar operators starting up and expanding in Japan – exactly the effect the Government had intended by setting high feed-in-tariffs.
Project approvals under Japan’s feed-in-tariff program for renewable energy are 93.8% for solar plants. Source: https://www.eurotechnology.com/store/j_renewable/
The renewable energy mix approved under the FIT program is very different to Japan’s traditional renewable energy mix, which was predominantly large scale water power plants
Prior to the introduction of feed-in-tariffs, renewable energy in Japan was predominantly large scale (greater than 1 MegaWatt) water power. source: https://www.eurotechnology.com/store/j_renewable/
Renewable energy Japan report
detailed statistical data for installed renewable capacity and electricity generation and analysis
Japan has more broadband fixed internet subscriptions than all of the European Union + Switzerland + Norway + Iceland
FTTH Japan Europe: While Japan initially was late in waking up to the commercial introduction of the Internet – Japan was fast to catch up and overtake
How much broadband (ADSL, xDSL and FTTH) is installed in Japan? Find the answer and detailed statistics and market shares in our report on Japan’s telecom industry.
Japan was first to roll-out mobile internet with i-Mode in February 1999
Similarly, Japan was far in advance of other countries in laying the foundations for the mobile internet, with the introduction of the DoPa (DoCoMo Packet) packet switched network on March 28, 1997, several years before packet switched networks were introduced in EU and elsewhere. However, Japan’s electronics and telecoms industries largely failed to capture global value from this pioneering work. Essentially only Softbank with the SPRINT acquisition now has hope to capture such global value.
A very interesting point is that in EU there are many discussions and uncertainties how broadband fiber investments can be profitable. Japan has solved this problem: FTTH business in Japan is profitable. We see arbitraging opportunities in capturing value from Japan’s know-how, similar to Softbank’s “time shift” investments, arbitraging the time shift of internet roll-out in US vs Japan vs China, as explained in our Softbank-report.
FTTH Japan Europe: about 30% more FTTH subscriptions in Japan than in all of EU + Switzerland + Norway + Iceland. Source: https://www.eurotechnology.com/store/jcomm/
Japan has 30% more FTTH fiber broadband subscriptions than EU + Switzerland + Norway + Iceland…
Several years ago the EU engaged our company Eurotechnology Japan KK to benchmark EU vs Japan in fixed and wireless broadband. Our summary was that broadband connections are the lifeblood of our information society, and that Japan was far ahead of EU in providing and using both fixed and wireless broadband, and broad band fiber connections were much faster and cheaper in Japan than in EU. Although both have progressed since our benchmarking work for the EU, Japan is still very far ahead of EU in terms of fast fiber broadband penetration.
Capturing global value – Japan’s Galapagos effect
However, provision of broadband fiber connections is only one side of the coin. The other side of the coin is capturing value and creating wealth for the society. The really important point is, whether Japan’s electronics, telecoms, content and service industries can capture global value from the advanced deployment of broadband infrastructure. As we discussed in detail in the “Post-Galapagos working group”, Japan is being held back by the “Galapagos effect” – and the trick will be to make the necessary changes to break out from this trap.
Detailed analysis in our report on Japan’s telecommunications sector:
“Overview of Japan’s Data Center Landscape” (Opening keynote) Speaker: Gerhard Fasol May 22, 2013 9:15-9:45 Tokyo Convention Hall, Great Hall on 5th Floor, TOKYO SQUARE GARDEN, 3-1-1 Kyobashi, Chuo-ku, Tokyo Data Center Summit Tokyo Data Center Summit Tokyo (Japanese text only)
Japan’s electronics giants: as large as the economy of Holland, but 17 years of stagnation. No growth & no profits.
Daniel Loeb: SONY’s uninvited guest gives Japan’s business culture a jolt
Japan’s electronics giants combined are as large as the economy of Holland, but did not grow for about 17 years, and on average lost money all these years: no growth – no profits.
SONY abruptly created global headlines (e.g see New York Times), because US activist investor Daniel Loeb publicly encourages SONY’s CEO to speed up change. Mr Loeb’s Third Point LLC fund is SONY’s biggest shareholder at this time – surprising many, maybe even surprising SONY’s CEO, Mr Hirai. Mr Loeb’s encouragement was well timed: Mr Hirai’s will present SONY’s new strategy on May 22.
As we analyzed in our newsletter a few days ago and in more detail in our Electronic Industry Report, which was picked up by EE-Times and by the BBC, SONY recently earns its income, and offsets losses from the electronics and mobile phone businesses, mainly from asset sales and from subsidiary SONY-Finance – which sells life-insurance and credit cards. Therefore many believe that iconic SONY is undervalued, and needs much deeper and more fundamental change.
Japan’s iconic Big-8 electronics giants posses amazing technologies and engineers. However, their current situation is very much less than amazing, indicating huge opportunities. A few days ago the Big-8 all announced their results for FY2012, which ended on March 31, 2013 – lets look at the results together here.
long slow path to recovery for Japan’s “Big-8” electronics giants
Japan’s electronics giants: Averaged over the last 15 years, Japan’s Big-8 created net losses of YEN 104 billion/year
Subtracting losses from profits, and averaged over the last 15 years, Japan’s Big-8 created net losses of YEN 104 billion/year (US$ 1 Billion losses/year)
For the last two financial years the Big-8 created net losses as follows:
Financial Year ended combined net losses
FY2012 March 31, 2013 YEN 1143 Billion (US$ 11 Billion)
FY2011 March 31, 2012 YEN 909 Billion (US$ 8.9 Billion)
Hitachi’s smart transformation
Hitachi’s smart transformation (find an overview in our report) indicates that change can bring rapid improvement.
Japan’s “Big-8” electronics makers combined are about the size of Holland’s economy – with one difference: Holland’s economy grows, but Japan’s electrical giants shrink and lose money at the same time
No growth
No growth: combined revenues of the Big-8 fell by YEN 1510 Billion (US$ 15 Billion) in the 15 years between FY1997 and FY2012 (assuming constant value YEN)
Many expect that “smart transformation” and globalization, and opening-up to the global society – combined maybe with a rejuvenation of “the Japanese model”, can release the potential for growth, which has been held back for 15 years.
In our electronic industry report we compare the Big-8 electronics companies with the Big-7 electronic parts manufacturers and show that their situation is much better, however the parts manufacturers face decreasing margins, also indicating the need for changing the business models and/or operations.
Japan’s “Big-8” may be seen as undervalued
Japan’s Big-8 electronics makers combined have far lower market capitalization than Apple, Microsoft, Google or Samsung
We produced the figure above for the presentation at the Foreign Correspondents Club in Tokyo about the “Apple-Samsung Patent War and Impact on Japans Industries”. We used the figure above to visualize the might of the Apple and Google/Samsung camps vs Japan’s Big-8 today. 15 years ago, the power of Apple vs Samsung vs Japan’s Big-8 was exactly opposite.
There is no reason why Japan’s electronics sector cannot regain global strength and value – IF absolutely necessary changes are made. This situation represents outstanding opportunities, which no doubt are attracting Mr Loeb and his Third Point fund, and others.
Understand Japan’s electronics sector: top 8 giants, and top electronic component makers
Study our report “Japan electronics industries: mono zukuri” (approx. 230 pages, pdf file)
Mobile subscription data released last week show, that the SoftBank group continues to gain market share while incumbent NTT-docomo continues to lose market share – an upward trend for SoftBank, and a downward trend for NTT-docomo essentially unbroken since SoftBank acquired Vodafone-Japan and succeeded with the turn-round.
SoftBank’s market cap has also steadily increased recently and is now close to NTT-docomo’s, exceeding it on some days:
SoftBank group exceeds 40 million mobile subscriptions
Bringing eMobile and PHS operator Willcom under its group umbrella, and by creating the new operator Wireless City Planning (WCP), Softbank group subscription numbers now exceed 40 million, and have overtaken KDDI
PHS operator Willcom joins the SoftBank group
PHS operator Willcom registered for bankruptcy administration essentially because of the high investments in upgrading the legacy PHS network infrastructure, and is currently in corporate reconstruction with SoftBank as the reconstruction sponsor.
Wireless City Planning (WCP) is a wireless operator owned partially by Advantage Partners and SoftBank and other investors, and representing the next generation network Willcom hoped – but could not afford – to develop.
While negotiating the SPRINT acquisition, SoftBank tricks out KDDI to take control of eMobile
While Masayoshi Son was secretly negotiating his offer for SPRINT, he discovered that KDDI was in negotiations to acquire new entrant eMobile. While continuing the SPRINT negotiations, he was a faster decision maker than KDDI, and could win the eMobile acquisition right under the eyes of KDDI.
Since a few weeks ago, iPhones on SoftBank‘s network automatically log into both SoftBank’s and eMobile‘s LTE radio networks, greatly enhancing data transmission rates and coverage.
SONY’s first profits in 4 years come from selling assets and buildings
SONY results for FY2012- BBC interview
SONY announced annual financial results today, and BBC interviewed me twice to comment on the results (read comments here on the BBC website).
After 4 years of net losses, it is comforting to see SONY report profits again. However, lets look in detail where the profits come from.
SONY reports YEN 230.1 Billion (US$ 2.4 Billion) in operating profits, and YEN 43.0 Billion (US$ 0.46 Billion) in net profits.
SONY FY2012 Profits come from revaluing or selling assets and buildings
Where do these profits come from? SONY sold the US headquarters building, sold a HQ building in Tokyo-Osaki, sold a chemicals division, and sold the investment in the mobile social games company DeNA, sold part of the investment in the (fascinating) cloud-based medical IT company M3 and restated the value of the remaining investment. All these transactions resulted in combined operating profits of US$ 2.6 Billion = almost equal to the reported operating profits. So it seems to me that the return to profits was achieved by asset sales and revaluations – not by selling revolutionary new products.
Read below for more details.
What are the reasons for SONY’s problems?
In a nutshell, value moved from hardware manufacturing to software and platforms. SONY was in theory well positioned about 10 years ago to create a SONY platform, such as APPLE has created. However, SONY (a) missed that boat and (b) SONY-DNA and Japanese Government policy were and partly still are focused on “mono zukuri” – hardware manufacturing, which in itself is a good thing – as long there is even more passion for software and software platforms, and as long as market share guarantees pricing power and economy of scale as for Samsung.
SONY: profits from life-insurance sales, real estate and asset sales dominated in FY2012
SONY’s profits come mainly from SONY-Finance (selling life insurance and credit card services), from asset sales and revaluations of investment holdings
The figure above shows operating profits/loss for SONY’s different divisions. Not that SONY changed the way its divided up into divisions in FY2012.
We can see above that for FY2012 (ending March 31, 2013), the biggest part of profits comes from the real estate and share holding sales. Regular business profits are mainly from SONY-Finance, which is a domestic Japanese company selling life-insurances, credit card services and online banking. The mobile phone division and the home electronics and TV division are heavily in the red, and shockingly the game division is essentially a non-profit business (the games division profits are the thin line between “Devices” and “other” in the Figure above) – while at the same time there is a global boom in mobile (smartphone) games. Its equally depressing, that SONY’s smartphone division is also recording massive losses.
To add insult to injury, a recent study on how consumers value brands in Japan by NIKKEI ranked APPLE as No. 1 both for 2012 and 2013, while SONY was ranked No 20 in 2012, and No. 22 in 2013, two places below the mayonnaise brand “KEWPIE” in terms of brand power in the BtoC category for Japan.
Looks like SONY has a tough road ahead…
Read our report on Japan’s electronics industry sector:
SoftBank aims for global No. 1 position…acquiring SPRINT on the way to the top
SoftBank: towards global No. 1 with a 300 year vision
To understand SoftBank, and the planned SPRINT acquisition, you need to understand Masayoshi Son – and Masayoshi Son says: “I am a man – and I want to be Number 1”. SoftBank announced FY2012 financial results a few days ago – read below and in our SoftBank-report for analysis, but lets first look at Masayoshi Son.
Yes, Masayoshi Son threatened the Japanese Telecomms and Postal Ministry to set himself on fire inside the Ministry
A few years ago, the Chief-Editor of BusinessWeek visited Japan to interview Masayoshi Son, and the night before the interview over dinner he asked me to suggest interview questions. I suggested to ask if it is true that Masayoshi Son threatened to set himself on fire inside Japan’s Government Ministry for Telecommunications if he is again refused the telecommunications license he needed to build a telecommunications business. Masayoshi Son’s answer: “yes, its true, I threatened to set myself on fire inside the Ministry – but I did not bring any fuel along into the Ministry”. This story shows Masayoshi Son’s passion and extreme determination – and my suggestion became the headline of the article in BusinessWeek – and can still be found online here. https://www.bloomberg.com/news/articles/2004-10-31/setting-fire-to-the-cell-phone-market
Faced with such passion and determination, Vodafone never had a chance in Japan – can you imagine the Chairman of Vodafone coming over from London to Tokyo to threaten to set himself on fire inside Japan’s telecommunications ministry? Not to mention the demanding customers: several times I personally saw complaining Japanese customers shout down Japanese Vodafone-staffers until these burst into tears and had to be consoled by Vodafone-coworkers… unbelievable, but true.
Japan can be tough for foreign companies…
BusinessWeek: “Apple would never talk to a “small fry” like SoftBank”. Really?
Around the same time, I had to ask BusinessWeek to print a correction to BusinessWeek’s statement, that Apple would never talk to a “small fry” like SoftBank – read the correction here. Well, Apple did talk to the “small fry” SoftBank – and as a result the iPhone is the best-selling mobile phones for two years in a row, and SoftBank is on the way now to become No. 1 in Japan. Read here about a Press Conference discussing the original iPhone introduction by SoftBank to Japan.
SoftBank aims for global No. 1 position: Japan’s most successful venture start-up – with a 30 year and a 300 year plan
SoftBank had already received a spectrum license and had intended to build up a mobile phone network from zero, when Masayoshi Son grasped the opportunity to acquire Vodafone’s struggling Japan operations – the former Japan-Telecom and J-Phone. Almost overnight Masayoshi Son arranged US$ 15 Billion in loans to fund the acquisition.
The acquisition was announced on Friday March 17, 2006, and the following Monday, Masayoshi Son moved all the remaining staff (minus most expatriates) from the Vodafone-Atago-office to Softbank’s offices in Shiodome, and shut down the Atago-offices to make a clear break. It took Masayoshi Son only a few months until it was clear that the turn-round will be successful. And now with the planned SPRINT acquisition, Softbank is on track to target global No. 1 position.
The photograph of Masayoshi Son is used under Creative Commons license according to Wikipedia.
Copyright details are:
Description English: Masayoshi Son on July 11, 2008
Date 11 July 2008, 12:11:02
Source iPhone 3G Masayoshi Son Masaru Kamikura (http://www.flickr.com/photos/kamikura/2658524938/)
Author Masaru Kamikura (http://www.flickr.com/people/20119192@N00) from Japan
This file is licensed under the Creative Commons Attribution 2.0 Generic
(https://creativecommons.org/licenses/by/2.0/deed.en) license.
SoftBank seeks to win, where Docomo failed – taking Japan’s telecoms know-how global
Japan telecom sector financial results: very very healthy
With SoftBank and DISH battling for US mobile operator SPRINT, the eyes are on Japan’s very healthy mobile phone sector, which a few days ago announced financial results for FY 2012. Japan’s mobile operators combined achieve about US$ 120 billion in revenues and income margins are among the highest globally.
The size, success and extremely advanced state of Japan’s mobile phone sector, SoftBank’s excellence, and Masayoshi Son’s midas touch give SoftBank the strength to go for an acquisition of SPRINT – and to aim for the large scale globalization which DoCoMo tried, but could not achieve about 10 years ago.
Japan’s mobile operator revenues are about US$ 120 billion and growing
Japan’s mobile phone operators are protected by government licenses, but within this scope, there is passionate competition and there are many M&A actions. With high investments in infrastructure, Japan’s mobile phone sector is among the most advanced in the world. Japan initiated the global mobile internet revolution.
Combined, Japan’s mobile operators achieve about US$ 120 billion in sales annually
Combined, Japan’s mobile operators achieve about US$ 120 billion in sales annually, and the size of Japan’s mobile industry has been growing steadily ever since mobile phones started in Japan.
The Figure above clearly shows the growth of SoftBank from a small venture to one of the world’s largest telecom operators, and the acquisition and turn-round of Vodafone-Japan.
SoftBank aims for US$ 10 billion operating income/year
SoftBank is on track to achieve the target of YEN 1 Trillion operating income/year by FY 2016
FY2012 financial results announced a few days ago show that SoftBank has overtaken KDDI in terms of operating profits, is on track to overtake DoCoMo and to achieve its target of YEN 1 Trillion (US$ 10 Billion) in operating profits by 2016 – this while investing heavily in infrastructure in Japan, and paying down debt remaining from the acquisition of Vodafone-Japan.
On April 30 Japan’s electricity operators announced their financial results for the financial year that ended on March 31.
Japan’s ten regional electricity operators again announced combined net losses in excess of US$ 15 billion for the Financial Year ending March 31, 2013, similar in size as the previous year: energy remains one of Japan’s most pressing problems.
For Financial Year FY2010, which ended March 31, 2011 three weeks after the March 11, 2011 disaster, Tokyo Electric (TEPCO) already announced net losses in excess of US$ 10 billion as an immediate consequence of the nuclear disaster at their Fukushima nuclear power station. In FY2010 other electricity operators beyond TEPCO were not yet substantially affected.
In FY2011 (ending March 31, 2012) and FY2012 (ending March 31, 2013) all electricity operators (except Okinawa Electric Power Corporation) were directly affected by the stop of all except 2 of Japan’s nuclear power stations, and by the replacement of nuclear power with thermal power stations – mainly fired by LNG.
Currently all Japanese regional electricity operators, except Hokuriku Electric Power Corporation and Okinawa Electric Power Corporations show net losses.
These losses drive dramatic actions to reduce fuel cost, to introduce renewable energy, to introduce demand management and smart-grids, and liberalization of Japan’s electricity sector.
Net margins are negative for all but two electricity operators
Only Okinawa Electric Power Corporation (which operates no nuclear power stations and is not linked to any other region) continues to announce profits. Hokuriku Electric Power Corporation announced very small profits, while all other eight regional power companies show large negative margins.
All but two regional electricity operators announce losses. Source: https://www.eurotechnology.com/store/j_energy/
Electricity revenues show no slow-down
Electricity revenue statistics show a striking slow-down as a consequence of the Lehman shock. No such slow-down occurred as a consequence of the March 11, 2011 Tohoku disaster. Partially of course revenue increases are due to price increases to offset increased fuel costs.
Unlike the Lehman shock, March 11, 2011 did not impact revenues. Source: https://www.eurotechnology.com/store/j_energy/
Japan’s top 8 electronics companies combined are as large as the Netherlands economically, but have shown zero growth and zero income over the last 14 years – thus represent “sleeping giants” – or dinosaurs, depending on the point of view, and depending on whether these companies succeed to reinvent themselves.
We have updated our report on “Japan’s electronic manufacturers: mono zukuri” to analyze Japan’s electronics manufacturing sector, and to explain who the winners and who the losers are. Read a short summary in this newsletter below.
apan’s electronics companies combined are as large as Holland economically
Japan’s top electronics companies combined are as large as the Netherlands economically, but have not shown any revenue growth over the last 14 years
Japan’s electronics sector still today is largely guided by national industrial policy, and by the management principles created long ago by charismatic founders such as Matsushita and Ibuka.
Intellectual Japan: smart transformation at Hitachi led by the CEO and by the Chief Transformation Officer CTrO
Hitachi’s “Chief Transformation Officer” (“CTrO”) at a recent presentation, explained that until 2 years ago Hitachi benchmarked its financial data purely domestically – until 2 years ago, Hitachi only compared performance with competitors such as Panasonic and Toshiba.
Only 2 years ago, Hitachi started to benchmark performance with global competitors such as GE and Siemens.
Japan’s top 8 electronics companies combined lose YEN 50 billion/year since 1998
Japan’s top 8 electronics companies lost an average of YEN 50 billion/year over the last 14 years
Intellectual Japan: electronic component makers
Japan’s electronics component makers, such as Kyocera or Murata, which is on the official supplier list of Apple, report positive income – although margins are declining and the component industry sector is much smaller than the top 8 electronics manufacturers.
Drastic transformation is necessary to revive Japan’s electronics industry sector. Drastic change will happen one way or another and represents important opportunities. More details in our electronics industry report
Industry Ministry METI announces renewable energy sources admitted to the feed-in-tariff program
Reversing the decline of renewable energy in Japan
A few days ago Japan’s industry ministry METI announced the most recent data on renewable energy sources in Japan admitted under the feed-in-tariff (FIT) regulations introduced on July 1, 2012. We have updated our report on “Renewable energy in Japan” to take account of these most recent data – read a short summary in this newsletter below.
Since the introduction of the feed-in-tariffs of July 2012, the installed capacity for renewable electricity generation in Japan has increased by about 23% if hydropower is included, and by about 70% if hydropower is excluded.
Since solar plants are quickest to install, and the permission process is by far the easiest, about 91% of renewable electricity installations permitted under the FIT program by METI are for solar electricity, while only 9% are for other sources such as wind or bio-mass.
Wind, hydro and geo-thermal installations require a lengthy planning, permission, environmental impact process, and far longer construction phase, so that the impact of the FIT program will be seen only in a few years time.
126% were added to Japan’s solar electrical generation capacity since July 2012
Solar electricity generation capacity more than doubled due to FIT
Solar electricity generation capacity increased by 126% since July 2012 due to the introduction of new feed-in-tariffs and other regulations promoting solar energy. Note that previous to July 2012, about 83% of Japan’s solar electricity generation capacity was residential, while only 17% were industrial solar installations.
Japan’s renewable energy generation is overwhelmingly water power
Japan to reverse decline of renewable energy. The ratio of renewable power generation has decreased from 25% of total electricity generation in 1970 to 10% today. Extremely aggressive feed-in tariffs (FIT) for renewable energy introduced in July 2012 are showing first modest results to reverse this trend – initially solar energy projects dominate FIT projects, since solar projects are fastest to build.
Larger projects, such as off-shore wind power, or geo-thermal projects, take a very much longer time to plan and build – on the order of 10 years or longer. More below and in our report on “Renewable energy in Japan”.
Japan’s electricity generation from renewable sources
Japan’s ratio of electricity generation from renewable resources has dropped from 25% to 10% over the period 1970-2012
Over the years, electricity generation from nuclear and thermal sources has grown much faster than from renewable sources in Japan. As a result, electricity generation from renewable resources has dropped from around 25% in 1970 to around 10% in 2012. In 2012, Japan’s Government and industry associations have announced aggressive plans to reverse this trend
.
Japan’s electricity generation from renewable sources
Water power dominates renewable energy in Japan
This figure shows all electricity generation in Japan from renewable sources: Japan currently relies overwhelmingly on water power for renewable energy, which varies between 5% of total electricity in winter and around 12%-15% of total in summer, with an overall decrease since 2006. The figure shows that other renewable energy sources (wind, solar, geo-thermal and bio-mass) are still in the very early stages of development.
Japan replaced almost all nuclear energy with liquid natural gas imports
Increased LNG import costs due to declining yen
Japan gas imports: Japan replaced almost all nuclear energy with liquid natural gas imports at very short notice. Japan pays far higher costs for liquid natural gas imports than most other regions in the world (find a detailed explanation why this is so, and how Japan’s LNG import prices are composed, in our J-Energy report). ‘Abenomics’ (Prime Minister Abe’s economy policy package) have increased the costs of imports further due a decline in the value of the yen.
Consequently, Japan makes all out efforts to find the optimal energy mix, in particular searching for domestic sources of energy including renewables, and reducing the cost of imports. More below.
Detailed energy import data, including detailed analysis why Japan’s LNG import costs are so much higher than elsewhere, in our report on Japan’s Energy Landscape.
Japan gas imports: 77.5% cost increase since January 2011
Reason for this increase are increased import quantities, the very high prices Japan is forced to pay for gas imports, and the decrease of the value of the YEN due to ‘Abenomics’. These very high costs drive all-out efforts to secure new sources of natural gas to reduce costs, and also drive the sofar neglected development of renewable energy sources in Japan.
Japan’s gas import costs increased by 77.5% from Jan ’11 to Jan ’13. Source: https://www.eurotechnology.com/store/j_energy/
Primary energy imports are a very substantial part (about 7% currently) of Japan’s GNP, and have increased by 34% in January 2013 compared to January 2011
However, the figure above shows that current monthly costs of primary energy imports are below the peak just before the Lehman shock. Thus Japan’s primary energy costs are currently very substantial but not without precedent. Detailed energy import data, including detailed analysis why Japan’s LNG import costs are so much higher than elsewhere, in our report on Japan’s Energy Landscape
Japan’s primary energy import costs increased by 34% from Jan ’11 to Jan ’13. Source: https://www.eurotechnology.com/store/j_energy/
Descent into crisis of Japan’s electricity operators started in 2007:
Figure above clearly shows that the decent of Japan’s electricity operators started years before the Fukushima nuclear disaster. Therefore we conclude that restarting the nuclear reactors alone will not cure the crisis of Japan’s electricity operators, which for many years have enjoyed a monopoly position, and are now increasingly under attack by competitors including Japan’s very successful gas companies. We added approx. 50 pages analysis of Japan’s gas sector to our Japan-Energy-Report.
Wednesday, 20th February 2013, Embassy of Austria, Tokyo
14:00 Welcome by Dr. Bernhard Zimburg, Ambassador of Austria to Japan
14:10 Gerhard Fasol, “today’s agenda”
14:20 – 14:40 Robert Geller Professor of Geophysics University of Tokyo, seismologist. First ever tenured non-Japanese faculty member at the University of Tokyo “A seismologist looks at nuclear power plant safety issues”
14:40 – 15:20 Gerhard Fasol Physicist. CEO of Eurotechnology Japan KK, served as Assoc Professor at Tokyo University and Lecturer at Cambridge University and Manager of Hitachi Cambridge R&D lab “Ludwig Boltzmann – the disrespectful revolutionary”
15:40 – 16:20 Kiyoshi Kurokawa Academic Fellow of GRIPS and former Chairman of Fukushima Nuclear Accident Independent Investigation Commission by National Diet of Japan “Creativity, Crazy Ones and Power of Pull”
16:40 – 17:20 Shuji Nakamura Professor, University of California, Santa Barbara. Inventor of GaN LEDs and lasers, which are the basis for the global LED lighting revolution. “The global lighting revolution and the changes I want for Japan”
17:20 – 17:30 Gerhard Fasol “Summary”
Followed by reception (private, invitation only)
Registration: latest 10 February 2013 (by invitation only)
Further information:
Peter Storer, Minister for Cultural Affairs, Embassy of Austria
Robert Geller: “A seismologist looks at nuclear power plant safety issues”
Robert Geller gave an overview of large scale earthquakes and tsunamis in different regions of earth, and in history, and explained that large “Tohoku-2011” scale earth quakes and tsunamis do have a finite probability of striking Japan, and need to be taken in to account in the construction of structures such as nuclear power plants. Robert Geller in particular explained and emphasized the risks on the northern coast of Japan, facing the Sea of Japan.
Gerhard Fasol: “Ludwig Boltzmann – the disrespectful revolutionary”
Gerhard Fasol reviewed Ludwig Boltzmann’s life and work, and particular Boltzmann’s efforts to promote open discussion and to destroy dogmatic views, most importantly the rejection of atoms by Oswald’s school of “energetics” and Mach. Ludwig Boltzmann’s work is fundamental in many areas of today’s physics, technology, IT, energy and in many other fields. As a demonstration of Ludwig Boltzmann’s work linking the macrosopic face of Entropy with the statistical properties of atoms and molecules, Gerhard Fasol explained today’s state of development of electrical power production from the entry of mixing of water with different concentrations of salts, from salinity gradients. “Osmotic powerplants”, which are directly based on Boltzmann’s work on the Entropy of mixing, have the potential to be developed into a very important contribution to our future renewable energy mix, although much research still remains to be done, especially in the area of semipermeable membranes.
Kiyoshi Kurokawa: “Creativity, Crazy Ones and Power of Pull – Uncertain Times: Changing Principles”
Kiyoshi Kurokawa laid out the rapid and dramatic changes we are currently facing in our world: the development of the global information revolution, revolutions towards democracy in the arab world, the Sept-11 terror attacks, and the triple disaster in Tohoku in March 2011. As short summary of the information revolution, linked with other major developments of global impact:
web 1.0: 1991-2000 – end of cold war, world wide web, globalization and financial crises: 1990, 1992, 1997
web 2.0: 2001-2010 – 9.11, digital age, wireless, touch panel, growth of emerging economies, BRICs, global financial crisis 2007, and President Barak Obama
web 3.0: 2011- – Arab Spring, and March-11 Tohoku disaster
Paradigm shift of The Principles (Joi Ito, MIT Media Lab, and Kiyoshi Kurokawa, GRIPS):
The principles 1: RESILIENCE instead of strength RISK instead of safety SYSTEMS instead of objects
The principles 2: COMPASSES instead of maps PULL instead of push PRACTICE instead of theory
The principles 3: DISOBEDIENCE instead of compliance CROWDS instead of experts LEARNING instead of education
For his work as former Chairman of Fukushima Nuclear Accident Independent Investigation Commission by National Diet of Japan, Kiyoshi Kurokawa was recently awarded the “Scientific Freedom and Responsibility Award” by the American Association for the Advancement of Science (AAAS). Kiyoshi Kurokawa paid particular attention for the deliberations and fact finding by the Independent Investigation Commission was open and transparent, and published globally in Japanese and in English in many different forms. The report itself can be downloaded here: http://warp.da.ndl.go.jp/info:ndljp/pid/3856371/naiic.go.jp/index.html
Kiyoshi Kurokawa emphasised the contribution of “Regulatory Capture” to the Fukushima nuclear disaster. Important work on “Regulatory Capture” was done by US economist George Stigler, who was awarded the Nobel Prize in 1982. Kiyoshi Kurokawa emphasized that Regulatory Capture is not specific to Japan, there are many examples throughout the world.
Shuji Nakamura: “The global lighting revolution and the changes I want for Japan”
Shuji Nakamura briefly outlined his inventions of a long series of GaN based devices, GaN LEDs and lasers, which are the basis for the global lighting revolution, and for bluray storage technology. Shuji Nakamura gave us a passionate personal view of his work as a researcher, how he created and experienced the breakthroughs, and some consequences on his personal life. Shuji Nakamura explained how he was accused in a US court by his former employer, and how as a consequence in order to defend himself and his family, he saw himself forced to countersue his former employer in Japanese courts. Shuji Nakamura compared his situation as a researcher in Japan, and now in Santa Barbara, and made some suggestions for change for the position of researchers.
SONY profits: Currently 56% of SONY’s profits come from selling life insurance and financial products
Games are 11% of SONY‘s sales – and currently 56% of SONY profits come from selling life insurance, consumer loans and financial products in Japan. Games are important, but are not going to make or break SONY at this time.
Technical specs of the next Playstation need to be fantastic. Specs alone however have not been the main focus for quite some time now. Smart phones, social games, smooth linking of all “screens” are disrupting the games sector. In Japan, the social games market is already twice the value of the traditional game console market (excluding software): in anticipation of their global success, GREE and DeNA combined have climbed to half the market cap of all of SONY.
SONY’s game business model also faces disruption by free and $.99 “snack-type” games, downloaded to mobile phones and tablets – to win in this sector SONY would have to beat Rovio’s Angry Birds brand and their galactic and Starwars games among others. Its hard for SONY to please both hardcore gamers, and the much larger audience of casual gamers looking for quick in-between low cost or free game “snacks”.
If I was CEO of SONY, another fact I would worry about is that there are currently about 800 games on Playstation, while here are about 130,000 games on iOS, and more than 100 new games submitted to Apple everyday. Now if Apple would take this enormous developer support to a next generation Apple-TV ecosystem, I would have sleepless nights about my whole game business division if I was SONY-CEO.
I like SONY’s acquisition of the cloud game platform Gaikai
Personally, I like SONY’s acquisition of the cloud game platform Gaikai. It will be key for SONY to keep a great team at Gaikai. Ultimately Gaikai might become SONY’s most important game platform. Improving the specs of SONY’s Playstations is necessary for SONY to remain a console player – however for business success SONY needs to drive disruption instead of reacting to others like Apple or Rovio. Gaikai could give SONY that chance. SONY’s own studios could also be a more important weapon in the game.
SONY is often taken as a poster child for Japan’s stagnation
over the last 15 years, SONY showed essentially no revenue growth and close to zero average profits and margin. However, CANON proves that even a Japanese electronics company can deliver consistent growth and good margins, but copying CANON of course is not the way to go. SONY will need to create its own way.
Read our report on Japan’s electronics industry sector:
