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NEWSLETTER- the JAPANALYZER

January, 2004

Market Snapshot - Japan
The Magnificent Maglev

Each month the Japanalyzer takes you inside one of Japan’s IT industries- showing you who’s who and where the market is heading. This month we focus on a specific development in Japan’s transportation industry, because of the major impact it might someday have on Japan’s economy and economies worldwide. It’s called the Maglev train and it differs from traditional trains in that magnets lift it slightly off the track, thereby eliminating friction and reducing noise. The magnets allow the Maglev to travel 66% faster (310 mph in commercial operation) than Japan’s famous bullet train (which runs at 186 mph commercially). The effect on business of such a train between Tokyo and Osaka would be dramatic: a 2.5-hour train ride would be reduced to just one hour, putting the Maglev in direct competition with the Airlines. However, the Maglev is still undergoing testing in Japan and detractors say it may never make it into commercial service. If the Maglev does finally become reality, it will not only alter the Japanese transportation landscape but affect the US as well where several similar projects are under consideration by the Federal government for funding.

The recent buzz around the Japanese Maglev train comes from the speed records the train continues to set. On December 3rd, 2003 Central Japan Railway, which runs the Maglev pilot test on an 11.4-mile test track in Yamanashi prefecture, demonstrated it could travel 361 mph with passengers on-board. The record broke a previous record of 353 mph set just 3 weeks earlier. The pilot test, which began in 1997, has already logged a total of 207,000 miles and carried over 63,000 people. Many in Japan feel these results warrant funding of a Tokyo-Osaka commercial service based on the train. Yet for now, the Maglev remains a pilot because of the effect of the recession on funding. According to Yutaka Osada, Deputy Chief of Central Japan Railway Co.’s Maglev Research Division “We want to build the line a soon as possible, but the government has to decide because it will pay to start construction. With the current economy, it probably won’t be running for some time.”

In addition to funding woes, the Maglev has its detractors which point to energy and cost issues. The Maglev consumes three times more energy than traditional bullet trains yet does not offer a comparable gain in speed. Japan’s “shinkasen” trains have already been built and can attain speeds of up to 275 mph in tests. Yet the Maglev would require enormous amounts of new funding for the trains and associated infrastructure. Maglev critics portend that the project is more about portraying the image of technology advancement than an actual implementation.

Maglev enthusiasts, on the other hand, like to think of the train as an alternative to airline passenger shuttles. The Maglev emits one fourth of the harmful greenhouse gasses produced by a passenger jet. In the US, where the environmental lobby is a strong political force, such arguments for the Maglev are being heard in several States and in Congress. California and Nevada are working hard to fund a Maglev between Anaheim and Las Vegas. Meanwhile, Baltimore and Washington D.C. are pushing hard for their version of a commuter Maglev as well. But neither project has yet to be fully funded, mainly over doubts of practicality. A successful Tokyo-Osaka Maglev may be just the showcase needed to remove and doubt for the US and any other country contemplating such a train.

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This Month's Bridge Builder
Featuring the real voice of IT across the Pacific

January, 2004

Broadband in the Living Room Part II
Mr. Austin Noronha, Senior Director Strategic Investment, Sony

At last month’s Japan Society meeting, representatives from several Consumer Electronics companies explained their vision for the wired home. In the previous edition of this newsletter, we focused on Panasonic’s view of using the TV as an information gateway but this month we shift gears to look at Sony, who was represented at the meeting by Mr. Austin Noronha, Senior Director of Sony’s Strategic Investment- a subject matter expert when it comes to TV and broadband. Mr. Noronha outlined Sony’s product strategy and presented a summary of his company’s CoCoon product line. This month’s Bridge Builder features key highlights from Mr. Noronha’s presentation.

Mr. Noronha initiated his talk by reviewing some of the characteristics of the Broadband universe and emphasizing how quickly broadband penetration is occurring worldwide. Japan in specific, he noted, has the highest penetration rate with government estimates that by 2007, 50% of Japanese households will have broadband. Yet the downside to such rapid growth is commoditization- a trend that implies that success in the market will need to be derived from compelling content, above all. In addition, the rapid proliferation of multiple digital devices in the home, such as digital cameras, DVDs, Home Networks, and PVRs means that a need for networking such content will become urgent amongst consumers. Sony, according to Mr. Noronha, is a company that can provide all these elements: the compelling content (through Sony Pictures), the digital devices, as well as the capability to network everything- yielding a true broadband enabled living room.

Yet the reality of today’s home as Mr. Noronha describes it is still “digital islands”. For example, The PC is connected to the Internet, the mobile phone or PDA may have access to a wireless network, and the consumer electronics devices have no connection at all. Something needs to connect all this equipment so that digital content originating anywhere can be distributed everywhere. Enter Sony’s CoCoon system, announced in 2002, which Mr. Noronha says achieves this goal while offering personalization, upgrade, and ubiquity functions. "CoCoon", according to Sony, is a term for “a series of home AV gateway devices equipped with a large capacity hard disk that enables consecutive recording and playback at the user's leisure of music and movie as well as always-on network functions that realize access to a variety of network services.” Cocoon stands for COnnected COmmunity On Network. The CoCoon system is currently offered mainly in Japan and includes a channel server (a device that records, organizes, and distributes TV content), a home theatre system (complete with TV and speakers), and a digital recorder (a PVR that records to disk or DVD).

Mr. Noronha’s presentation made some in the Japan Society audience wonder whether a common theme was emerging with regards to the timing of “broadband in the living room”, at least for US consumers. Both Sony and Panasonic solutions remain limited to the Japanese market with plans for the US slated as “pending”: the natural conclusion being that Japan is a more mature market, while the US lags. One audience member, who happened to represent a telecommunication carrier asked “what will it take for carriers to make this a reality in the US?”. Mr. Noronha responded poignantly in reference to the massive discrepancy in pricing and speed between US and Japan broadband services, “5 Mbps@ $20”.

For more information on the Japan Society, please visit them on the web at www.usajapan.org and for more detail on Sony’s CoCoon see please visit the product site:http://www.sony.jp/products/Consumer/cocoon/ (Japanese only).

Previous Interviews

Net & Com 2004
February 4-6, 2004, Makuhari Messe (Nippon Convention Center)
Features computers, network-related hardware and software, peripherals, service solutions.

IC Card World 2004
March 2-5, 2004, Tokyo Big Sight (Tokyo International Exhibition Center)
A leading exhibition for the Japanese smart card and smart tag industry. Exhibits feature smart cards, card systems, smart tags, applications, and peripheral equipment. This sixth IC CARD WORLD will be a radically expanded event, with an expanded exhibition, the latest information via seminars and workshops, and other programs.

The 3rd International Keitai Forum
March 17-18, 2004,Kyoto Trade Fair Center Pulse Plaza
An exhibition of Asia and the Mobile Phone with the theme Practical Changes Towards A Ubiquitous Society- aimed towards development of the mobile phone industry through collaboration in Japan, China, and other Asian markets.

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