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Is Japan losing its tech edge to East
Asian rivals?
By Peter
Morris
Once on the global cutting edge of
virtually all things technological, Japan's high-tech
industry appears to be losing its edge, showing signs of
wear and tear and flagging innovation.
After a
failed satellite launch and a slew of cyber-security
problems ranging from faulty automated teller machines
(ATMs) to personal information leaks on its popular
Yahoo! DSL (digital subscriber line) service, Japan is
doing some soul-searching on the state of its high-tech
industry and trying to galvanize the sector into once
again being the world's leader. That may not be
possible, at least not in the near future.
The
Nihon Keizai Shimbun recently reported that Prime
Minister Junichiro Koizumi is considering establishing a
new ministry that would reformulate - and reinvigorate -
Japan's information-technology (IT) policies. Koizumi
also aims to enter the new space race. After China's
successful manned space flight and US President George W
Bush's announced plans to send Americans to Mars,
Koizumi has decided to revamp his country's flagging
space program and send Japanese astronauts into orbit.
And last Thursday, the government kicked off an
important Internet public service for its citizens, who
now can file tax returns and apply for passports online.
The government also will accept payments for certain
administrative fees, such as patent filings and labor
insurance, via ATMs or Internet banking.
Japanese society often appears to be
synchronized, and so it's no surprise that the
government, by promoting a national reinvigoration of
the tech industry, has also encouraged colleges and
corporations to renovate their approaches to technology
- and keep Japan in the forefront of technological
creativity and development. These moves are expected to
help Japan maintain its dominant role in the global
automotive and consumer-electronics industries, among
others.
Because of its restrictive immigration
policies and a dearth of qualified tech professionals,
Japanese IT firms and universities alike are tripping
one another in pursuit of young, tech-savvy students.
For the first time, top-ranking Keio University is
offering full-tuition, merit-based scholarships in order
to attract the best incoming freshmen. Last Wednesday,
Matsushita Electric Industrial Co Ltd launched its
"entrepreneur" recruitment program, mainly targeting new
college graduates. The aim is to create new businesses
and promote entrepreneurship in Japan.
Too
little, too late?
In some respects, Koizumi's
move to renovate and energize Japanese technology may be
too little, too late.
Back in 2000, Japan took
the first major step toward becoming an e-commerce
nation by passing the IT Basic Bill. The law calls for
an "electronic government" through the creation of a
broadband-network infrastructure, the promotion of
e-commerce and the protection of secure networks and
private information. The law was intended to help
companies bypass the 733 regulations and 124 laws that
were inhibiting expansion of Japan's e-commerce, and it
has facilitated the development of intriguing ventures
in cyberspace. One example: on March 20, Yamaha Corp
will begin selling electronic organs that can be
connected to the Internet. Still, despite some advances
and removal of some of the regulatory underbrush,
galvanizing the IT sector still faces quite a few
obstacles.
For example, despite strides in the
lucrative mobile commerce market, Japan's "m-commerce"
industry still lags behind that of South Korea.
Furthermore, the expansion of Japan's broadband
infrastructure, critical to nurturing an Internet-savvy
population, has been hampered by government regulations.
Another barrier to e-commerce in Japan is the lack of
widespread credit-card ownership.
Japan is still
very much a cash society, and even credit-card holders
are often reluctant to give away their card numbers
online because of the widespread perception that it is
not safe. This perception was reinforced after a
security lapse at Yahoo! Japan, one of the country's
most popular DSL providers, compromised some users'
personal information.
Finally, advocates of
better high tech in Japan have called for more foreign
professionals to give a boost to the industry. Their
urgings, however, have mostly fallen on deaf ears, as
the country's homogeneous society is reluctant to
encourage immigration and open what some fear might be
the floodgates of demographic and cultural change.
The government's campaign to introduce
technology into virtually all aspects of daily life is
regarded by some not as a way to improve efficiency, but
as an attempt to maintain the country's technological
edge over Japan's East Asian rivals, China and South
Korea.
Korea has better Internet penetration,
broadband
Over the past decade, Japan's East
Asian neighbors have been making strides in the IT arena
and have surpassed Japan on a number of IT fronts.
Internet penetration in South Korea is much higher than
in Japan, and Seoul boasts one of the most sophisticated
broadband networks on the planet. Japan's
personal-computer (PC) and broadband penetration is
still very low, and many people are still using slow
dial-up services.
South Korea also has surpassed
Japan in other tech industries, including liquid crystal
displays (LCDs), semiconductors and mobile technology.
Samsung and LG are now leaders in the ultra-competitive
global consumer-electronics market, and even Korean
video-game makers are making inroads into the market at
the expense of their Japanese rivals, particularly in
China, where Korean video games are hot.
Greater
China - including mainland China, Taiwan and Hong Kong -
is gearing up to supplant both South Korea and Japan as
the center of Asia's consumer-electronics industry, both
on the production and development sides. After acquiring
a majority stake in TCL-Thomson Electronics, a joint
venture between TCL and Thomson SA of France, China's
TCL International Holdings Ltd is now the world's
largest television maker. China is also developing its
own standards for the next generation of cellular phones
and digital video disc (DVD) players, and it is
fine-tuning its software industry to cater not only to
the promising Chinese market but also to the lucrative
international software market.
Moreover,
Japanese companies have set up numerous research and
development centers in China to take advantage of the
large number of Chinese engineers who cost a fraction of
their high-priced Japanese counterparts, and these
facilities are developing products both for the domestic
market and for export. The integrated-circuit foundry
industry is also red-hot in China, where local companies
are designing and fabricating tailor-made semiconductors
to be used in mobile devices under international brand
names such as Intel, Nokia and Fujitsu. However,
companies face pitfalls in doing business in China -
notably the loss of intellectual property.
In a
New York Times article on January 13, Steven Lohr
described efforts by the Chinese government to use its
own standards for the next generation of technology
products, such as cell phones and DVD players. China is
developing software standards for wireless computers and
tax policies favoring computer chips destined for the
Chinese consumer market. The global semiconductor
industry is protesting a Chinese tax that is nearly 14
percent higher on imported computer chips than on those
designed or manufactured in China. The higher tax rate
applies to chips used in products sold to the Chinese
market but does not apply to exports.
China's
encryption demands, regulations daunting
Even
more disconcerting to Japanese tech companies is a new
regulation, announced in December, that will require
foreign companies to use Chinese encryption software and
to co-produce their goods with a designated list of
Chinese companies when selling wireless devices to
Chinese consumers. The Times article notes: "Foreign
computer makers, led by American companies, have
protested the decision. In addition to their concern
about the separate standard, foreign companies are
worried about the possible loss of intellectual property
if they are forced to work with Chinese companies that
have the potential to become competitors."
These
new regulations will have the biggest impact on "wi-fi"
(wireless fidelity) devices that permit short-range
wireless connections to the Internet. Beijing insists
that wi-fi regulations are necessary to safeguard
national security, as encryption codes for
communications are critical to a country's security.
Experts in China and abroad have routinely emphasized
the need for improved security for data communications.
But critics outside of China say that wi-fi
communications do not pose a security risk because they
only extend a few hundred feet, and that China's
national standards are in essence regulations designed
to inhibit foreign companies from taking a big slice of
the Chinese wi-fi market.
Aside from developing
its own wi-fi standard, China is actively promoting
open-source computing to reduce its dependence on
Microsoft Windows, and is even developing its own
standard for DVD players. The Chinese standard for the
next generation of DVD players and discs, called EVD
(enhanced versatile disc), is expected to have four or
five times the storage capacity of current DVDs, but
will not be widely available until at least 2005.
China hopes to avoid steep royalty payments to
patent-holding corporations in Japan, the United States
and Europe by creating its own technology, but it will
face intense competition. Two separate consortiums of
Japanese companies, one led by NEC and another headed by
Sony, are already in the final stages of developing
their own next-generation DVD standards.
To be
sure, "Japan Inc" has realized that in order to stay
competitive in the global economy, it is crucial to tie
up with other companies, whether they are Japanese or
foreign. Sony Ericsson is one of the more notable
examples; the Swedish-Japanese mobile-phone maker, after
struggling from losses due to increased competition in
the mobile-phone industry, surprised analysts by
swinging into profit in the final quarter of 2003 on
strong sales of phones equipped with cameras and games.
In fact, there have been a string of tie-ups
between European and Japanese high-tech companies in
recent weeks, including an agreement to develop a
unified standard and equipment for security products,
such as face and fingerprint recognition based on
biometric technology. Finally, on January 23, Hitachi
said it had concluded an agreement with Fraunhofer
Institute for Secure Telecooperation in Germany to
develop technologies to help users validate digital
signatures without being hampered by different
infrastructure environments used in various countries.
In addition to cooperating with foreign
companies, Japan will need to start importing foreign
labor if it really wants to stay competitive in the
global IT industry. Whether the Japanese like it or not,
opening the door to foreign workers is not a question of
if, but when. Otherwise, in the near future, Japanese
employees might need to start looking for high-tech jobs
in China and South Korea.
(Copyright 2004 Asia
Times Online Co, Ltd. All rights reserved. Please
contact content@atimes.com for
information on our sales and syndication policies.)
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