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NEWSLETTER- the JAPANALYZER

December 2002

Market Snapshot - Japan
Season for Security

Each month the Japanalyzer takes you inside one of Japan’s IT industries or topics- showing you who’s who and where the market is heading. This month we focus on Security once more, by taking a step back to understand the background of the market and its distinct characteristics. Sometimes the Japanese government plays a major role in the development of a nascent industry- the Security industry in Japan is one such beneficiary. But the boom in Security products and services is also a function of demand. With the rapid proliferation of Broadband and Public Networks in Japan, the threat of virtual intruders has become substantial enough to drive purchasing trends. For regular readers of the Japanalyzer, you’ll notice that this Market Snapshot is the continuation of a a theme from last month’s Japanalyzer which featured comments from NetScreen’s , Vice President Marketing, David Flynn and an introduction to Antivirus products in Japan.

Japan’s government made world headlines when it announced its now famous e-Japan initiative in 2001. The basic goal: to make Japan one of the world’s most advanced IT nations by 2005. Of the five pillars of the program several are worth noting: establishing IT networks that rank among the best in the world, using IT for education and human resources training, promoting e-commerce, utilizing IT for public administration and public services, and maintaining the safety of IT networks. While the first pillar (to have a leading broadband infrastructure) has led indirectly to massive proliferation of networking and the resulting interest in Security, the fifth pillar (maintain Security) has made the Security need clear.

A government task force on information technology (IT) announced in June of 2002, an updated version of the e-Japan priority program featuring new goals such as the preparation of domestic laws by the end of fiscal 2005 for concluding an international treaty to fight cyber-terrorism. Other specific measures announced were:

- Each ministry is to ensure the effectiveness of IT security policy by reviewing and implementing it in 2002.

- The National Incident Response Team (NIRT) is to be trained for higher response capability at emergency and higher information collection/analysis capability at peacetime by 2003.

- The required criminal legal system for dealing with high-tech crimes and investigation procedures by is to be made ready by 2005.

- Special investigators of high-tech crimes are to be trained and funded by 2004. - Technical specialists in the evaluation and design of IT security are to be trained by 2004. This additional government support has made it clear that both the money and human resources will be made available- an obvious sign to Security Vendors that government is interested in their wares.

However, Security vendors also have to be grateful for the Broadband boom. Just 3 years, the only major residential broadband service was ISDN: DSL, was just a concept. Today, there are over 5 million DSL connections, largely thanks to competition and the government stimulus mentioned above. Even though Japan has traditionally lagged behind the U.S. and Europe in implementing security measures in its corporate networks, the Japan Personal Computer Software Association says that domestic security software sales for fiscal 2000 were valued at 36.6 billion yen (US$ 292.8 million). Industry experts expect this market to grow by 20.5% annually until 2005 and that Japan will become the world’s second-largest security software market after the U.S. in the next few years.

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

December, 2002

Being driven towards success
Mr. Kenzo Sudo, President and CEO Advan Int’l Corp.

The recognition of changes in the marketplace, and the ensuing adjustment of a company’s core business is often the key to survival. In technology, this is particularly important for longevity : IBM started in typewriters, HP started in calculators, and the list goes on. Fremont-based Advan Int'l Corp seems to be a company cut from the same cloth. Advan was established in 1982 as a distributor of integrated circuits for VME (VERSAmodule Eurocards) boards and communication equipment. In 1997, ADVAN Int'l Corp expanded it's product line providing LCD displays into the vertical channel, concentrating in the medical imaging and health care industries. Advan’s President and CE, Mr. Kenzo Sudo was interview recently and told us his thoughts on Silicon Valley and his experience as a Japanese entrepreneur.

Q. Mr. Sudo, tell us about yourself and your career before Advan? How is that you came to create Advan?

A. I initially came to the U.S. as a part of an around-the-world trip. While I was working at a restaurant to save some money here for a next country to visit, the restaurant owner and I decided to start up a trading company; and this literally became the foundation of my company, Advan Int’l Corp. We started our business by selling special kinds of bleach products to Japanese restaurants, but they were not good selling items. We finally reached the conclusion after assessing semiconductors that these would make “real good sellers”. Despite the fact that Japanese semiconductors were about to gain worldwide recognition, the products that we were dealing with had not been visible yet. This gave us a pretty hard time. In 1982, we changed our company’s name to ADVAN, and it was 1997 when we began selling LCD Displays that are our core products now. The initial target market was retail, but since 1999 it has become the medical market and that generally has high profitability and technological value.

Q. What is the main focus at Advan now?

A. We focus on Medical Imaging in the Healthcare market. Films are still used for X-ray, but we offer display products for a system that allows multiple medical doctors to simultaneously exam digitized X-ray data in a hospital. Tablet displays are currently under development and expected to support both internal and external medical examinations.

Q. Do you expect Advan to use its expertise in displays outside the Medical Industry in the future?

A. We are now developing new customers in CAD and gaming related areas. Although LCD technology has been much improved, some unsolved issues are still remaining. We are trying to develop the solutions with our unique technology, which is the result of experience in the medical industry.

Q. You recently moved production to Korea. Is this a common trend in Silicon Valley to design products here and manufacture them in Asia?

A. Nowadays a lot of Silicon Valley based semiconductor firms outsource their fabrication to Asian companies. This trend is also happening in the software industry. We appreciate the Korean perspective towards quality and there are excellent analog engineers from Korea - so we decided to switch our fabrication from Taiwan to Korea. Much commodity product production has been shifted to Asia, but I’m assuming that high value added products will be manufactured in U.S. from now on due to collapse of bubble economy.

Q. Many companies in Silicon Valley are started by foreign nationals, primarily Indian and Chinese people, although not many by Japanese. Why do you think that is so?

A. After World War II, Japan grew dramatically based on Japanese people’s efforts and cooperation by U.S. Under such circumstances, I doubt that many people will want to leave Japan and start up one’s own business abroad. That’s because anything is available in Japan now , particularly in comparison to pre-WWII Japan. It is too bad that nowadays there are not many spiritually hungry people in Japan, and that the Japanese educational system is not encouraging people to be “hungry” either.

Q. What do you think are the unique challenges Japanese entrepreneurs face in starting a business here? What advice would you give to Japanese entrepreneurs who are contemplating opening up a venture here?

A. By all means, respect for relationships with people is a virtue; this principle definitely applies to anyone regardless of nationality and type of business. This is also one of the rare assets that people are never able to purchase with money. Another advice for entrepreneurs is to “make yourself driven towards success”. If you try to start up a business with “mental preparation for failure”, it’s not even worth beginning it.

Thank you Mr. Sudo. Mr. Sudo can be reached via e-mail at kenzosudo@mail.advancorp.com . For more information regarding Advan Int’l Corp. and its technology and products, please take a look at their website at http://www.advancorp.com .

Previous Interviews

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3G Mobile Forum
January 14-17, 2003 Hilton Tokyo Bay
Following last year’s successful forum Marcus Evans is again putting on its 3GMobile World Forum.

Fiber Optics Expo
January 22-24, 2003 Tokyo Big Sight
Exhibit of all kinds of optical communication devices & equipment : optical fiber cable, optical devices, optical transmitters, optical measuring/inspection equipment, optical communication equipment/systems..

Net & Com 2003
February 5-7, 2003 Makuhari Messe (Nippon Convention Center), Tokyo
Exhibit of computers, network-related hardware and software, peripherals, service solutions.

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