Category: telecommunications

mobile communications industry

Apple-Samsung Patent War and Impact on Japans Industries (talk at Foreign Correspondents Club Tokyo on Oct 2, 2012)
PROFESSIONAL LUNCHEON
- “Apple-Samsung Patent War and Impact on Japans Industries”
- Speaker: Gerhard Fasol
- Tuesday, October 2, 2012
- 12:00-13:30
- Foreign Correspondents Club Japan (FCCJ), Yurakucho
Outline: In a global war to dominate the smartphone market, Samsung and Apple have been at each other’s throats, playing out the war in courts around the world and accusing each other of patent violations. A California court recently ruled in favour of Apple and ordered Samsung to pay $1 billion, a figure that could rise dramatically when the case is played out. Samsung has won minor battles in the U.K., Japan and Australia, but with new mobile phone models and tablets being introduced by both firms, the war is only going to get bigger and bloodier. In Japan local manufacturers are being marginalized and even fighting for survival.

Japan-based expert Gerhard Fasol will return to the FCCJ (for “FCCJ: Fasol & Matsumoto, The iPhone And Japan’s Mobile Phone Industry”, report of Fasol’s talk with Softbank Mobile CTO Tetsuzo Matsumoto at the first iPhone landing in Japan) to shed light on the Apple-Samsung dispute and how it impacts the Japan market, Japan operators and Japan manufacturers.

Gerhard Fasol runs Japan’s Eurotechnology K.K. consultancy (www.eurotechnology.com), has advised the president of Germany, JETRO and number of Japanese companies involved in high-tech industries and has authored Japanese patent applications. Fasol, who has written a number of books, graduated with a PhD in Physics from Cambridge University and was a tenured professor at Cambridge’s Cavendish Laboratory, a research scientist at the Max Planck Institute for Solid States Sciences in Germany, a manager of one of Hitachi’s R&D labs and was Director of Studies at Trinity College, Cambridge.

Read our report on Japan’s Telecom landscape

Copyright 2013 Eurotechnology Japan KK All Rights Reserved
October 2, 2012
Mobile payments: 10 years to reinvent the wheel?
Mobile payments for train travel was demonstrated in Tokyo in 2003, but has not reached London yet

Mobile payments: Tokyo (mobile SUICA) vs. London (OYSTER)

Mobile payments are big: Reuters estimates that the mobile payment market will be about US$ 1000 Billion by 2016, and in Japan just a single railway line achieves already now several US$ billion in mobile payments per year.

Mobile payments in London:

On July 17, 2012 The Wall Street Journal reports, that as far as Transport for London is concerned, there is no viable mobile payment solution at this time:
- Transport for London sees no way to use mobile payments at ticket barriers at this time, because the technology is not advanced enough
- London’s state-of the art mobile payment transactions take longer than 500 milli-seconds which is too slow for Transport for London requirements
Mobile payments in Tokyo:

While no viable solution has yet been found in London, in Tokyo millions of people use “mobile SUICA” mobile payments every day at Tokyo’s rail, subway, tram lines and buses:
- mobile payments at ticket barriers were first demonstrated in Tokyo in 2003 (photo below shows a demonstration at a trade show in Tokyo in 2004)
- “mobile SUICA” mobile payments were commercially introduced to the public since January 28, 2006
- payment transactions take 100 milli-seconds or less, which would fulfill Transport for London’s speed requirements
- in addition mobile SUICA also has a full e-money function, and can be used at 1000s of stores all over Japan for payments, and for 1000s km of high-speed trains all over the main island of Japan, between Hakata and Aomori.
Mobile payments: Why does it take at least ten years to reinvent the mobile payment wheel in London?

Why is it that a problem the solution of which was demonstrated in Tokyo in 2003 and put to commercial use every day since January 28, 2006 without any problems, has not yet been solved in London even today?

The answer to this question is of course complex, and you will find elements of a discussion of this question on pages 185-188 of our mobile payment report (click here for free download which includes pages 185 – 188, pdf-file).

In our opinion the answer for this huge delay even today in the age of globalization and internet is a combination of:
- human nature and
- the huge communication gap and disconnect between European organizations and companies and Japanese organizations and companies and
- the totally different way in which banking systems, payment systems, and also the commercial structure and way of thinking of transportation companies are organized regulated in EU vs Japan.
Mobile payments in Japan vs Apple Pay

https://www.cnbc.com/video/2014/09/16/why-apple-pay-isnt-as-revolutionary-as-it-seems.html

We have been working on mobile payment and e-money issues here in Tokyo for about 10 years or longer, and you may be interested in some of our reports:
- Mobile payment report
- SUICA and mobile near field payments for transport report
- Mobile payments and e-money for vending machines report
Copyright 2012 -2019 Eurotechnology Japan KK All Rights Reserved
July 26, 2012
How to turn Galapagos into a competitive advantage in both directions
Positive and negative aspects of Japan’s Galapagos issues

European Institute of Japanese Studies Academy Seminars presents
- Speaker: Dr. Gerhard Fasol, President, Eurotechnology Japan K.K.
- Wednesday, June 13, 2012, 18:30 – 21:00
- Embassy of Sweden, Alfred Nobel Auditorium
- Stockholm School of Economics, European Institute of Japanese Studies
About the talk:

In the last 20 years, several global revolutions were created in Japan, including the LED lighting revolution(1), mobile internet(2), electronic money(3). However, in each case Japan failed to capture much of the global value created by these revolutions. Dr. Fasol will talk about what is holding back Japan from capturing more global value from its unique creativity and how Western companies can do better in Japan, and avoid the most well-known traps

About the speaker:

For the last 15 years, Gerhard Fasol has worked with more than 100 investment fund managers in Japan, advising them on technology inflections, initiated and managed business development and assisted M&A projects. Dr. Fasol is currently working with several US and European companies in these areas, helping them onto successful paths in Japan. Dr. Fasol has been an Advisory Board member to the Chairman of JETRO and the only foreigner on Japan’s “Post Galapagos working group”.

Gerhard has an extensive business and academic career, as manager of one of Hitachi’s R&D labs, University Lecturer in Physics at Cambridge University. He also served as Director of Studies at Trinity College Cambridge, Research Scientist at the Max-Planck-Institute for Solid State Science in Stuttgart, and invited Professor at the Ecole Normale Superieure in Paris, was one of the first working on spin-electronics and magnetic memories in Japan, and has won a Sakigake research program from Japan’s Science and Technology Agency while faculty member in Electrical Engineering at the University of Tokyo. Gerhard graduated with a PhD in Solid State physics from Cambridge University and Trinity College, Cambridge, UK.

Gerhard Fasol lecture at Stanford University: “New opportunities vs old mistakes – foreign companies in Japan’s high-tech markets”

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved
June 13, 2012
Disaster communication. Lessons from the Tohoku disaster

Communications save lives during disasters

Disaster communication: keynote at the 7th KCC Korea Communications Conference, Seoul

Communications save lives during disasters, and are essential for survival, for “situational awareness” (= to know what is going on), for decision making, and business continuity. Nobody likes to experience a disaster, but when disaster strikes there is no time, and decisions taken within a split-second can decide about life or death. Preparations need to be taken far in advance.

Victims and responders need “situational awareness” to take the right decisions

Japan’s continuing disasters have put Japan’s very advanced mobile and fixed line communications systems to an extreme test from which other countries can learn. Currently, Japanese operators are learning from the experience and are hardening communications and broadcasting systems. Understanding communications during disasters is essential for business continuity.

While traditional communications broke down due to overload, social networks showed resilience

It has been reported that mobile communications peak demand during the March 11 disaster increased to about 50-60 times normal volume, leading to a break-down or switch-off of mobile voice communications, and to an extended near-break down of mobile email.

Twitter and social networks showed strength and resilience, as did internet based communications. The internet was initially designed in the 1950s to provide communications during nuclear war.

The Korean Communications Commission invited me to talk about “Communications in disasters” at the 7th Korea Communications Conference in Seoul on May 12, 2011.

Copyright (c) 1997-2013 Eurotechnology Japan KK All Rights Reserved

May 12, 2011
Post-Galapagos Japan? – globalizing Japan’s fantastic technologies…

Japan Galapagos effect: “Why do Japanese companies make so beautiful mobile phones with fantastic functions, and have almost no global market share?”

I asked this question back in 2003 to NTT-DoCoMo’s CEO Dr. Tachikawa (see my article “Leadership questions of the week” in Wallstreet Journal of June 12, 2006, page 31), and offered several proposals to Dr. Tachikawa, of which he accepted one.

A related question is: “why can Samsung, LG and Apple beat Japan’s initially far more advanced mobile phone makers, and why have Japan’s phone makers taken no effective action to build global business in order to avoid extinction?”

Now six years after my initial presentation to DoCoMo’s CEO, I have been invited as the only non-Japanese to work on Japan’s “Post-Galapagos Committee”. For most of this year our small group of industry CEOs, academics, government officials and other leaders have been working on understanding the reasons for Japan’s “Galapagos effect” and how to overcome it.

Read about this work here in the New York Times, about my (Japanese language) presentation to the committee on the IT-Media website here (in Japanese)

The “Galapagos effect” has not been created by a single factor. Instead a collection of choices by the management teams of Japan’s electrical conglomerates have prevented leverage of their domestic success stories into global success stories. These choices can be overcome. In our “Post-Galapagos committee” we have worked all-year on how to overcome these choices.

Unfortunately the “Galapagos effect” is only one symptom of the crisis of Japan’s electrical giants: most have shown little or no growth in sales over the last 10 years, while at the same time margins tend to be small or negative. Over the same period, General Electric has increased sales by a factor of about three, while at the same time earning healthy margins.

Overcoming this crisis will create many opportunities. If at least some of the conclusions of our “Post Galapagos Committee” can be realized, then our committee’s hard and totally voluntary work during most of this year and many late nights will not be wasted.

For an analysis of Japan’s electrical industry sector see our

Japan electronics industries: mono zukuri

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

December 17, 2009
Will cash become obsolete?
Gave presentation to the Telecommunications Committee of the American Chamber of Commerce in Japan (ACCJ) on October 7, 2009, entitled “Will cash become obsolete? E-money, mobile payments and mobile commerce”.

Talk was attended by about 30-40 executives from major global telecom operators, global banks, new-age payment companies, and from major internet companies.

Outline:

What is money?
1. Medium of exchange
2. Unit of account
3. Store of value
4. (Standard of deferred payment, unit for debt)
e-Cash value to society:
- reduced cash handling costs
- Higher transaction speed
- Convenience
- Greater security (especially mobile) vs. reduced privacy
Why should be care? (Summary)
- Electronic money is here to stay
- One e-money card/Japanese person
- 2% of banknotes and coins today
- YEN 100 billion outstanding
- YEN 100 billion transactions/month
- Japan is far in advance, rest-of-world is likely to follow. But can Japan capture the value? maybe not.
- However: “Galapagos syndrome“
More information in our reports:
Mobile payments, e-money and mobile credit in Japan
SUICA and NFC payment for transport
QR codes are also used for payment
October 7, 2009
Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10-11, 2009)

Two keynotes on “Evolution of TV” and “Social TV” and chaired session at BCWW2009 Global Media Forum, Seoul, Korea, September 10-11, 2009

https://www.kocca.kr/cop/bbs/view/B0000135/1245334.do#

organized by the Korea Creative Content Agency KOCCA

https://www.kocca.kr/en/main.do

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

Evolution of TV and social TV (Keynotes at BCWW2009 Global Media Forum, Seoul, Korea Sept. 10, 2009)

September 10, 2009
When did qr-codes start on mobile phones? (in August 2002)

qr-codes were developed by Toyota subsidiary denso-wave

When did qr-codes start on mobile phones: First mobile phone with qr-code reader was the J-SH09 by SHARP for Japanese mobile operator J-Phone

When did qr-codes for mobile phones start in Japan?

Here is the answer: the first mobile phone with qr-code reader was the J-SH09 produced by SHARP for Japan’s J-Phone mobile operator (today’s Softbank) and came on sale in August 2002 – seven years ago.

More details and more than 100 case studies of qr-code applications in our QR-Code report

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

July 29, 2009
M-payments and e-money grow exponentially

1 Billion e-money transactions/month around 2014

Exponential growth: The number of e-cash payments per month increases by a factor of 10 about every 4 years

E-money transactions (including mobile e-cash) grow exponentially in Japan, and we expect to see 1 Billion e-money transactions/month around 2014 (this figure would be much bigger if contactless train travel tickets were included). e-Money now represents about 2% of all cash (banknotes + coins) in circulation in Japan, a recent examination of e-money by the Bank of Japan shows. More below, and a detailed analysis in our mobile payment and e-money report, where we combine the newest data from the Bank of Japan with our own research data.

Exponential growth: The number of e-cash payments per month increases by a factor of 10 about every 4 years

We expect 1 billion e-money transactions per month around 2014. Green curve shows payments with Suica, Pasmo and Edy (not including train travel). The blue curve shows data for all e-money transactions researched by the Bank of Japan.

Total number of e-money transactions in Japan per month

Research by the Bank of Japan shows that e-money has reached the level of 2% of all cash in circulation (bank notes and coins).

-Money as a percentage of total money in Japan

To know more – and to find detailed statistical data: read our mobile payment reports

Mobile payments in Japan vs Apple Pay

https://www.cnbc.com/video/2014/09/16/why-apple-pay-isnt-as-revolutionary-as-it-seems.html

Mobile payment Japan, e-money and mobile credit report:

Mobile payment Japan, e-money and mobile credit (26th edition)

Copyright 2013 -2019 Eurotechnology Japan KK All Rights Reserved

July 13, 2009
10 years e-cash and mobile payments

Mobile phone payments with RFID start in Japan in 2003

i-Mode mobile payments started in Japan in 1999

10 years ago – 1999 – the global mobile payment revolution started in Japan: with i-mode introducing an essentially Japan-only highly successful micropayment system for online content and brick-and-mortar based m-commerce, and SONY’s Edy starting e-cash experiments in Tokyo’s Osaki district. In 2003 SONY’s Felica IC semiconductor chips were combined with mobile phones to introduce the first “wallet phones” (“saifu keitai”). Today the majority of mobile phones in Japan are wallet phones.

For the last 10 years, Japan has been a laboratory for mobile payments and e-cash, conducting a test on 125 million population on which mobile payment and e-cash models work and which don’t. -> We can all learn from Japan’s 10 years of experimentation which mobile payment business models are likely to work, and which might fail!

Edy stands for Euro, Dollar, Yen… expressing the hope for global success – Intel Capital believes in this success and has invested in the company that runs Edy: BitWallet (initially backed by SONY and now acquired by Rakuten).

Which are the most effective e-cash systems?

While SONY has distributed the largest number of cards, in our view the world’s largest (by payment volume) and most effective e-cash and mobile payment system is operated by the world’s largest railway company: SUICA and mobile SUICA.

Edy, SUICA and other e-cash usage in Japan

the world’s most effective railway company in our view also operates the world’s most effective mobile commerce system: The Express Card / EX-IC system.

Although we only have official figures for FY2008, we estimate that in 2009 about US$ 3 billion worth of train tickets are sold via JR-Tokai’s Express card system for a single train line – and much of this by m-commerce via mobile phone. JR-Tokai’s Express card system is an entirely different system than the i-Phone – but an equally friendly and efficient design solution. (For a case study of JR-Tokai’s Express card system download our report).

Mobile payment for Shinkansen high-speed trains in Japan

Mobile payment Japan, e-money and mobile credit report:

Mobile payment Japan, e-money and mobile credit (26th edition)

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

July 13, 2009
Mobile 2.0 at the Korean Communications Conference, Seoul, June 18, 2009
Chairing and keynoting Track 3-3 “Mobile 2.0” at the Korean Communications Conference in Seoul on Thursday June 18, 2009 at the COEX Conference Center.

What will Mobile 2.0 be and how do we get there?

Korea and Japan can be like a time-machine: if we look at Korea and Japan today, we can get a good idea of how Mobile 2.0 could evolve in Europe and US and other advanced markets 5-8 years down the road. Is this a perfect time-machine? No. i-Mode and Japan’s mobile phones never made it onto the world stage, but Korean mobile phones did.
This keynote will set the stage for the Mobile 2.0 panel discussion. I will introduce some of the most outstanding new services which have cultural and society impact: mobile social networks, and literature created on mobile phones for mobile phones, as well as mobile payments, which have the potential to replace money as we know it.
Will Korea, Japan, China and the rest of the world arrive at the same Mobile 2.0 and what will the timing be?
Which are the critical issues? We identify four critical issues for the rapid development of Mobile 2.0, and will discuss these issues with the following panel:
1. Platforms
2. Business models
3. Globalization
4. Standardization vs risk taking and entrepreneurial initiative
front row: Ms Kyung-Ja Lee, PhD (Commissioner of the Korean Communications Commission), Back row (left to right): Kyung Hee Song (Director Radio Planning Division of Central Radio Management Office), Emilian Calemzuk (President FOX TV Studios), Jonathan Levy (Dpty Chief Economist, FCC), Gerhard Fasol (Eurotechnology Japan KK), Kate Bulkley (Journalist), Carlson Chu (Sr VP PCCW Ltd, Hong Kong)

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved
June 15, 2009
New opportunities versus old mistakes – foreign companies in Japan’s high-tech markets (presentation at Stanford University)

About 10 years ago, on October 28th, 1999, I was invited to give a talk about this topic at Stanford University’s US-Japan Technology Management Center for Stanford Faculty, alumni and Silicon Valley entrepreneurs. 10 years is a good period to check out how much of that is still valid today, and how much Japan has changed during the last 10 years.-

Gerhard Fasol’s lecture at Stanford University “New opportunities vs old mistakes – foreign companies in Japan’s high-tech markets”

Stanford University Japan Technology Center lecture on change and new opportunities in Japan

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

June 2, 2009
beeTV – DoCoMo’s new mobile TV

Japan leads mobile phone experimentation

Japan introduces and tests a large range of experimental and innovative mobile services

On May 1, 2009, DoCoMo in cooperation with media firm Avex started the mobile TV beeTV which brings 8 channels including a MOOLOG Channel (MOOLOG = MOOvie-bLOG)

beeTV is an indicator how Mobile TV may impact Japan’s Media Sector.

beeTV is NTT-docomo’s test balloon for next generation mobile TV

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

May 25, 2009
Potential Flu Pandemic Positive for Telcos
- Potential Flu Pandemic Positive for Telcos (Airtime: Tuesday, April 28, 2009)
  
  Read more about Japan’s telecom sector: http://www.eurotechnology.com/store/jcomm/
  Read more about DoCoMo: http://www.eurotechnology.com/store/imode/
  Read more about KDDI: http://www.eurotechnology.com/store/kddi/
  Read more about Softbank: http://www.eurotechnology.com/store/softbank/
Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·
April 28, 2009
Does the "not-invented-here" syndrome slow down the development of mobile internet and mobile content outside Japan?

It is well known that mobile internet, mobile payments and mobile content business and many other areas of mobile broadband are much more developed in Japan and South Korea than in other countries.

NOKIA and Vodafone and some other western mobile phone companies had the opportunity to take part in Japan’s mobile payment systems, mobile TV solutions and many other mobile businesses – instead they preferred not to do so and to withdraw from Japan’s mobile market.

Similarly it seems that mobile payments, mobile TV developments outside Japan are being developed from scratch without much regard to what has been learnt in Japan in debugging such mobile businesses both from the technology viewpoint as well as the usability, security, convenience etc viewpoints.

Lets discuss if the “not invented here syndrome” could be a factor.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

April 17, 2009
"Mobile Internet Device will replace Cell Phone! Do you agree?" [from a LinkedIn discussion]

[My answer to a recent LinkedIn discussion group question: “Mobile Internet Device will replace Cell Phone!”]

This is too narrow a view.

I would say: today’s state of the art cell phones already include the role of internet device + many other functions, mobile internet devices cannot do.

1. For several years practically all Japanese cell phones have been “mobile internet devices” + camera + barcode reader + digital & analog TV + GPS navigator + movie camera + wallet + cash + train ticket + appartement key + comic book + e-book reader + alarm clock + etc. read the details in our reports:

http://www.eurotechnology.com/store/

2. have you read Karl Popper? – he is a philosopher. He says it makes no sense to discuss terminology. He would object to this discussion topic – because he would say that this is just mincing definitions and has no substance.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

April 17, 2009
iida – a new brand for KDDI’s design series by Yayoi Kusama

KDDI created a new brand: “iida” for the long running best selling AU design series mobile phones. KDDI introduced some of the most recent iida design series models at the KDDI Designing Center. In addition to the earlier Yamaha musical instruments phones, KDDI introduced a spectacular phone created by Yayoi Kusama.

Fun is the green leaved charger….

KDDI iida charger

KDDI iida design series – by Yayoi Kusama

KDDI iida design series – by Yayoi Kusama

KDDI iida design series – by Yayoi Kusama

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

April 8, 2009
72.5% of all digital mobile TV on this planet earth is in Japan

About 50 million mobile phones equipped with digital terrestrial mobile TV (“oneseg”) have been delivered up until today – not counting “oneseg” tuners for PCs, car navigation units and stand-alone units. Comparing this number with reports of mobile TV roll-out in other countries around the world, we conclude that 72.5% of todays mobile phones with mobile TV are in Japan.

How much mobile TV do Japanese people watch on their mobile phones?
In the latest version of our mobile-TV report, we explain in detail our methods to determine that averaged over all of Japan’s population of 125 million (including those who don’t have a mobile-TV yet), the average viewing time is between 0.4 – 2.3 hours of mobile TV / month. WOW!

Mobile TV 2.0 (OneSeg-2)
Not surprisingly, Japan’s media giants are now starting to move, and develop programming specially designed for mobile TV: for example “lunchbox” mobile TV broadcast to mobile phones from 12:00noon – 12:40pm weekdays with news, weather, diet information, summaries of TV shows… it’s only a question of weeks or months now in Japan for mobile TV to develop into a totally new advertising and m-commerce medium, and some has started already.

Starting the global mobile internet revolution with i-Mode in February 1999, we can see Japan’s leadership emerging in the mobile TV arena. Japan’s challenge is to leverage this know-how globally, Japan missed this chance with i-Mode and left the field to iPhone and friends!

In December 2008 97.5% of global mobile TV was in Japan and S-Korea

72.5% of all mobile phones with digital TV globally are in Japan:
In the same way as with mobile internet (i-mode), Japan is again the global forerunner in mobile TV, together with South Korea.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

February 25, 2009
Top 10 mobile trends for 2009
Answering the question “Top 10 mobile trends for 2009: what would you choose?” We answer from our perspective here in Tokyo:
1. Mobile payments and wallet phones
  see our mobile payment report
2. GPS and location based services (LBS) such as navigation and mapping
  see our location based services (LBS) report
3. Mobile search including location related search
4. QR codes and other 2D bar codes for information input into mobile phones
  see our location based services (LBS) report
5. Ultra low cost mobile phones for low end not only in emerging markets but also in advanced countries in economic crisis times
6. Subsidized $1 mini-laptops with flat rate HSDPA (7.2Mbps) data plans
7. WiMax networks come into commercial service
8. Embedded B2B applications
9. Beautiful OLED ultra-high resolution screens (bigger than iPhone displays)
10. Mobile agent services
Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved
February 18, 2009
Wild differences in operating margins for mobile, TV media groups and electricals

We analyze the effect of the crisis on operating margins in three different sectors in Japan:

(1) electronics,
(2) mobile communications
(3) TV media groups.

In sector (1), Nintendo‘s margins are above 30% and increasing despite the crisis, while traditional electronics companies’ margins are evaporating.

(2) for mobile operators DoCoMo, KDDI and SoftBank margins are 10%-20% and increasing despite the crisis! Could mobile phone usage be crisis resistant?

(3) TV media groups had healthy margins in the 10%-20% range back around 2001- however these margins have been slowly melting away, and TV group margins are heading to cross the zero line into the red zone by 2010-2011. Watch out for a TV media crisis. Read more below.

Consumer electronics sector operating margins:

Nintendo bucks the trend: while Japan’s electronics firms’ margins are dropping into the red, and have never been much higher than 5% during the last 10 years, Nintendo‘s operating margins are above 30% and rising despite the crisis.

Margins of top Japan’s electronics multinationals and Nintendo

(Find full data, fully labeled graphics and analysis in our report on Japan’s electrical companies)

Mobile phone sector margins are 10% – 20% and rising despite the crisis.

Mobile phones seem to be resistant to the current crisis. DoCoMo‘s, KDDI‘s and Softbank‘s margins are healthy and improving despite the crisis.

Operating margins of Japan’s top 3 mobile operators

(Find full data, fully labeled graphics and analysis in our JCOMM Report)

Margins of TV media groups have been melting away since their peak in 2001.

Back in 2001 Japan’s TV media groups used to enjoy healthy margins of up to 20%. Over the last 8 years these healthy margins have molten away, and Japan’s large TV media groups are likely to all simultaneously go into the red from 2010 onwards, unless dramatic action is taken. Media groups will need to grow profitable new business, e.g. mobile-TV, and other cross-media growth areas.

Could it be that recent anti-takeover measures have made the large TV media groups complacent?

Operating margins of Japan’s TV media groups

(Find full data, fully labeled graphics and analysis in our J-MEDIA Report)

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

February 9, 2009
8 years since commercial start of location based services (LBS) in Japan in July 2001

It will soon be 8 years since DoCoMo started commercial location based services (LBS) for mobile phones in Japan in July 2001. During these 8 years, Japan’s mobile LBS industry has grown and a range of differentiated mobile LBS services has emerged – indicative of how the LBS industry might develop in other countries in the next few years (Read our LBS-FAQ here, and our mobile LBS report here).

NOKIA’s recent acquisition of Navteq for US$ 8.1 Billion has drawn much attention to LBS for mobile phones.

The world’s first commercial location based service (LBS) for mobile phones – “i-Area” – was rolled out by DoCoMo in Japan in July 2001 – eight years ago! – is still going strong, and for some time also includes location dependent mobile search: you type “ramen” into the search box and back comes a list of ramen noodle restaurants for the neighborhood near you. “i-Area” is a pre-GPS service – no GPS is necessary. Like so much about Japan’s mobile internet eco-system, i-Area has a non-obvious complex business model fine-tuned over 8 years now.

GPS came later – KDDI introduced the first GPS phone in December 2001 – a little more than seven years ago – and today about 1/2 of all mobile phones have GPS in Japan. Japan’s Government requires all cellphones to have GPS built in. Therefore, within a few years, as users replace their older phones, 100% of Japan’s cellphones will have GPS, giving a boost to the mobile LBS industry.

Interesting companies? An undisputed leader is Navitime – offering “total navigation” to about 2 million subscribers – almost 2% of the population of Japan. Many people in Japan, including the author of this newsletter, cannot live without total navigation….

Bombarding subscribers with mobile discount coupons by SMS for shops in the neighborhood is often mentioned in western blogs about mobile LBS. I have not yet received a single one during the last 8 years of mobile LBS in Japan – although these do exist if you want them.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

January 29, 2009
+ 49% y-o-y net profit increase for KDDI

Japan’s telecom operators are a very bright spots in a dismal economic crisis. I think that’s not a coincidence.

Why? The deeper purpose of Japan’s location based services, QR-codes, mobile music, e-moji, wallet phones and keitai credit etc. has always been to make mobile phones inseparable from people’s daily lives, so that people would use their mobile phones a lot, even if there is an economic crisis. This strategy seems to work.

Japan’s second largest operator KDDI was the first to announce financial results this round:
– quarterly net income increased +49% year-on-year, and
– operating income increased +18.5% compared to same quarter last financial year.

KDDI is particularly interesting because KDDI is a model for the 3G roll-out by China Telecom in China, which was awarded a license to build a 3G network using the same CDMA2000 technology as KDDI.

KDDI was initially far more successful than both DoCoMo and Vodafone (now Softbank) to roll out 3G in Japan – as documented in detail in our 3G report. Analyzing carefully what KDDI did right, and the difficulties DoCoMo and Vodafone encountered, as well as proper exploitation in differences between technologies will be a must.

KDDI introduced many advanced services such as GPS (global positioning and related location base services LBS), full song mobile music, etc several years earlier than DoCoMo and Vodafone -> Softbank, helping the image of the brand and raising revenues (ARPU). This advance allowed KDDI to overcome the handicap of lower market share compared to DoCoMo. Read more below, and in our reports.

KDDI’s 3rd quarter net profits rose by 49% yoy.

Comparing 3rd quarter FY2009 (Oct. – Dec. 2008) with 3rd quarter FY2008 (Oct. – Dec. 2007) operating income increased +18.5% and net income increased +49%. These are spectacular results considering the terrible economic crisis going on now.

Notice also KDDI‘s very aggressive income growth targets forward to year FY2011 (shown for operating income, thin orange line).

Steadily increasing net annual incomes on the order of US$ 2 billion/year is not bad in times such we have now. Find a detailed analysis in our KDDI report.

Quarterly operating income of KDDI

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January 29, 2009
3G mobile diversity in China
China’s Ministry MIIT granted three different 3G cellphone licenses on January 7, 2009:
- a TD-SCDMA license to China Mobile (457 million GSM subscribers)
- a wCDMA license to China Unicom (133 million GSM subscribers)
- a CDMA2000 license to China Telecom (43 million CDMA subscribers acquired in 2008 from China Unicom, 216 million fixnet phone subscribers, 38 million broadband subscribers)
MIIT estimates that the operators will invest about US$ 41 Billion for 3G over the next two years, ie about US$ 20.5 Billion/year – about the same annual rate as Japan’s 3G investments every year over the last 8 years since 3G introduction.

Network technology diversity (instead of the Government deciding on a single radio technology standard) means that China’s mobile market a few years down the road may have some similarities to Japan’s today. Several Japanese companies, including “time machine company” SoftBank are working to bring 3G mobile services and technologies from Japan to China.

In our opinion, competition between different 3G radio network technologies is one of the factors driving Japan’s 3G success story.

MIIT decided not to abandon CDMA2000, in order to enhance competition between technologies. Another factor may have been that Japan’s CDMA2000 operator KDDI was initially much more successful in bringing 3G to market than competitors DoCoMo and Vodafone (which sold Japan operations to SoftBank).

In Japan it was not market leader DoCoMo or Vodafone, but KDDI with CDMA2000 winning the 3G introduction battle. Better be prepared for surprises in China too, and don’t underestimate China Telecom.

US$ 41 billion for 3G in China over 2 years is similar to the figures for Japan.

Japan’s mobile operators have invested a around US$ 15 – 20 Billion every year for more than 10 years (for details see our JCOMM report), very similar in size to expected annual 3G investments for all of China.

Japan’s 3G introduction took about 8-9 years (from October 2001 until 2009/2010 – Japan’s last 2G phone was shipped in December 2007). Therefore we expect 3G introduction to take about 10 years for China – could be faster because China can learn from 3G introduction in other countries.

China’s planned 3G investments compared to Japanese mobile phone network investments

China opts for network diversity – like US and Japan

The figure below – from our JCOMM report about Japan’s telecom sector – shows the 2G -> 3G transition in Japan, where several networks with different technologies compete in the market place. We believe this competition between different technologies is a key factor for the rapid success of 3G in Japan.

China having chosen multiple competing technologies, we may see a similar 3G success story as in Japan, however with much larger subscription numbers.

Japan’s mobile network diversity – overview of competing networks

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January 22, 2009
Mobile marketing with QR-code

If your business requires interacting with lots of people in Japan, if you are offering services to consumers, or just as a convenience offered on your business cards – think about QR codes:

Eurotechnology Japan blog: Mobile marketing with QR-code

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

January 2, 2009
5 top tips for mobile marketing?
Answering the question: “What are the 5 top tips for mobile marketing”

Our company worked for several of the world’s largest consumer companies on mobile marketing here in Tokyo/Japan.- Many of Japan’s mobile trends usually move to Europe and US within about 3-5 years. So here are some tips from our work on mobile marketing in Tokyo/Japan:
1. Leverage spontaneity: use the “here & now” effect of mobile
  - Mobile phones are among the very few privileged items almost all people carry on their body at all times and allow people to react on the spot. Mobile phones allow people to buy “here and now”, on the street, on the toilet, from bed, changing trains, waiting for a bus etc. Successful mobile marketing campaigns use this “here and now” effect. As an example, see the iPod campaign in Tokyo-Shibuya, or the North-West Airlines campaign in Tokyo/Shinjuku (discussed in detail in our QR-code report).
2. Provide real value
  - Things work best when people perceive and actually receive real value. For example, an airline seat, or a share purchasing/selling transaction at the moment they want it. Don’t disappoint people by promising value, which you don’t deliver.
3. Make it fast: close a transaction in seconds not minutes
  - Mobile phones are mostly used in short bursts. Attention span is short. Apple’s iPod campaign allowed people to buy an iPod from the Apple store via mobile phone here and now, in a very short time (find a detailed description in our QR-code report)
4. Do innovate if its really new – but don’t re-invent the wheel
  - Japan is a huge mobile laboratory – many mobile business models discussed in Europe or US now have already been tested out years ago in Japan. Read our reports,
5. search on the internet, or do thorough market research in Japan
  - Treasure security – your mobile sites need to be more secure than websites, not less secure
Customer data lost via mobile phones, or a hacked mobile banking site is just as disastrous as if the same occurs for a fixed line traditional website. Mobile sites can potentially be broken from remote locations in your own country or from a country you wish you never had to deal with.

We worked on security of mobile financial industry sites.
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Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved
January 2, 2009
Japan trends 2008/2009
One of our clients in the financial industry asked me several trend questions:
1. Q1: Biggest surprises in Japan in 2008?
  - Collapse of Japan’s mobile phone handset market (read our blog). In this context the Japanese telecom equipment makers association invited me to give a presentation, which was booked out 2-3 weeks ahead – about 100 Japanese telecom equipment maker managers attended! The General Affairs Vice-Minister / Secretary of State attended….
  - The dramatic increase of acquisitions by Japanese companies:
    Panasonic’s acquisition of SANYO (read analysis in our blog)
    Nomura’s acquisition of a big chunk of Lehman Brothers assets (read about a presentation by Nomura’s CEO Kenichi Watanabe)
    SONY‘s acquisition of the outstanding part of SONY-Bertelsmann music
    TDK‘s acquisition of Germany’s EPCOS
    NTT-Data’s acquisition of Germany’s Cirquent (BMW’s IT company)
    Fujitsu‘s acquisition of the outstanding 1/2 of Fujitsu-Siemens
2. Q2: Biggest changes for 2009?
  - Hopefully LED/Solid state lighting going mainstream to save energy
  - Batteries and solar cells in combination starting to replace petrol for cars
  - Solar cell battle (between Q-cells, SHARP and others)
3. Q3: Key topics in Japanese media for 2009?
  - Financial crisis and reviving the economy
  - Crisis of the car industry – and car industry’s paradigm shift
Copyright 2013 Eurotechnology Japan KK All Rights Reserved
December 23, 2008
ICT trends for Japan for 2009

Smartphones, European exits from Japan, and M&A

ICT trends for Japan: Ericsson and Nokia Siemens Networks (NSN) remain engaged in Japan’s ICT sector

by Gerhard Fasol

One of the Embassies here in Tokyo asked me to write a report about ICT trends for Japan…

ICT trends for Japan: Mobile phone sector

Pushed by the Government the mobile operators changed the business model for mobile phone sales from a straight subsidy model to an installment payment system. As a consequence the mobile phone sales collapsed, creating huge difficulties for Japan’s mobile phone makers, but greatly improving the financial results of mobile operators.

Smart phones grow market share in Japan

An interesting trend is the growth of the “smart-phone” market (Blackberry, HTC-Windows-Mobile phones, iPhone etc.) and mini-PCs, which can be acquired for YEN 1 with subsidy from eMobile.

In this context the Japanese telecom equipment makers association invited me to give a presentation, which was booked out 2-3 weeks ahead – about 100 Japanese telecom equipment maker managers attended! The General Affairs Vice-Minister / Secretary of State attended…

Nokia terminates mobile phone business in Japan

On November 27th, 2008, global press announcements announced that NOKIA will stop making mobile phones for Japan’s mobile operators with immediate effect. DoCoMo and SoftBank had NOKIA phones in preparation and had already started marketing efforts – these were cancelled a few days after NOKIA’s press announcement.

NOKIA had founded the Japan subsidiary on March 3rd, 1989, almost exactly 20 years ago, thus NOKIA has given up entering Japan’s mobile phone market after 20 years of efforts. NOKIA will not totally shut down in Japan, NOKIA announced that R&D and procurement will continue, and VERTU announced to enter Japan’s market with a mobile vertual network operator (MVNO) model renting network capacity from DoCoMo, and opening own shops.- However the opening of these direct VERTU stores keep being postponed.

NOKIA joins the row of European telecom companies which have given up operations in Japan: Vodafone, Cable & Wireless.

Nokia Siemens Networks (SNS) is continuing business in Japan as well, so NOKIA will not be entirely gone from Japan.

M&A

European company’s acquisitions in Japan are currently at low levels, including the ICT sector. By far the largest acquisition in Japan by a company from the European/Mediterranian area was not by an EU company, but by the Israeli company Iscar which acquired the Japanese company Tungaloy for around US$ 1 Billion. However, this acquisition was driven by US capital. Read details in our blog here.

In the opposite direction, Japanese acquisitions in EU and elsewhere, there is a boom of acquisitions by Japanese companies abroad. For example, TDK acquired the German company EPCOS, Fujitsu acquired the outstanding 1/2 of Fujitsu-Siemens, NTT-Data acquired 72.9% of Cirquent which was a 98% subsidiary of BMW before. SONY acquired the outstanding 1/2 of the SONY-Bertelsmann Music Group from Bertelsmann.

The current trend is definitely a strengthening of Japanese acquisitions in Europe.

The most important issue however are not the acquisition transactions themselves, but the crucial issue will be whether these acquisitions create or destroy value. In many cases the difficulties to overcome “cross-cultural” issues are enormous. Many huge wrecks line the road: Vodafone-Japan, Cable-Wireless-Japan, NOKIA’s mobile phone business in Japan, or DoCoMo’s overseas acquisitions. There are also many success stories – the most impressive and famous one Nissan-Renault, however there are many more. An interesting case in progress is Nippon-Sheet-Glass (now NSG Group)’s acquisition of Pilkington Glass (read about a presentation by NSG’s CEO here in our blog).

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

December 23, 2008
NOKIA quits Japan – for now… NOKIA’s market share in Japan’s mobile phone handset market was 0.39% – after 20 years of market entry efforts

NOKIA’s Japan subsidiary was founded on April 3, 1989 – almost 20 years ago. On November 27, 2008 NOKIA announced to terminate selling mobile phones to Japan’s mobile operators, effectively withdrawing from Japan (except for purchasing, R&D and VERTU).

NOKIA’s sales figures in Japan were a well kept secret until last week when several Japanese newspapers wrote that NOKIA sold 200,000 phones during FY 2007: thus NOKIA’s market share was 0.39% – after 20 years of market entry efforts.

Considering the disastrous collapse of mobile phone handset sales in Japan, NOKIA’s move to quit sales in Japan actually makes a lot of sense. Nothing prevents NOKIA from re-entering Japan again in the future.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

December 10, 2008
Japan’s mobile phone disaster
Japan’s mobile phone sector is admired the world over, and Japanese mobile phones are years ahead the rest of the world regarding functionality. However, Japan’s mobile phone industry may be heading for a disaster, similar to the European 3G spectrum license fee disaster which almost bankrupted Europe’s mobile phone operators – unless changes are made quickly. Statistics released today show that mobile phone deliveries in October dropped down to 1/4 of steady sales maintained over the last 8 years as the figure below shows.

Switch from subsidy business model to installment contract model causes Japan’s mobile phone handset market to collapse (temporarily)

What is the reason for the disastrous drop in mobile phone deliveries?

Until recently Japan’s mobile phone operators subsidized mobile phone handsets. Consumers would typically pay YEN 10,000 (about US$ 100) for handsets with built-in digital TV, GPS, movie camera with auto-focus, electronic money and tickets, QR-code reader, and much more, which cost the operators up to YEN 100,000 (US$ 1000) per handset.

Encouraged by Japan’s Government, mobile operators recently switched from the subsidy model to an installment plan, while discounting the monthly usage fees.

While previously consumers put YEN 10,000 (US$ 100) or in some cases YEN 1 (1 cent) on the counter to receive one of the world’s most advanced handsets, since a few weeks ago consumers are faced with a 2 year installment purchase contract where they pay the full YEN 60,000 (US$ 600) or YEN 80,000 (US$ 800) for a handset in installments of around YEN 3000 (US$ 30) each month for two years. Not surprisingly handset sales dropped into the cellar as shown above (the figure above actually shows the deliveries from manufacturers to mobile operators, not the actual retail sales).

What are the likely consequences?
1. continuing consolidation of Japan’s mobile phone handset makers
2. surviving handset makers will push into international markets
3. operators will push harder for cheaper handsets
4. operators might return to a modified subsidy model
5. NOKIA might get another chance in Japan
Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved
December 10, 2008
Paradigm change of the global mobile phone business and opportunities for Japanese mobile phone makers

presentation by Gerhard Fasol, at the Industry Association of Japanese telecom and networking equipment makers, Friday November 27, 2008, 15:00-16:30

Presentation was fully booked several weeks before the talk, attended by about 100 managers and executives of Japan’s telecom equipment makers, and included also the Vice-Minister/Secretary of State of Japan’s General Affairs Ministry, which is responsible for telecom regulation in Japan.

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November 27, 2008