Japanese PC market grows by 70% in 1995
DOS/V systems outsell NEC PC98s for first time
The news is in: 1995 was a banner year for the Japanese PC market, with 5.7 million PCs shipped, and Fujitsu was the big winner. While NEC remained king of the hill in 1995, shipping some 2.3 million of its PC98 systems, up from 1.5 million units in 1994, its market share continued to fall, down to just 40%. Fujitsu, meanwhile, marked the largest growth of any maker and moved from 4th to 2nd in the vendor share rankings. Fujitsu shipped over 1 million DOS/V PCs in 1995 -- more than triple its 1994 PC unit shipment mark, and thereby doubling its market share to 18%.A Dataquest Japan market survey describes 1995 as the year of the "Fujitsu Shock," reminiscent of the "Compaq Shock" earlier in the decade, when that company challenged Japan's proprietary-PC manufacturers with low-priced DOS/V PCs. The drastic growth of Fujitsu sales owes much to a similar strategy -- that of gaining market share by cutting profit margin to the bone. Fujitsu's low-price FMV DeskPower series, an all-in-one PC introduced to the consumer market at the end of 1994, enjoyed brisk sales throughout 1995. Indeed, Fujitsu's FMV DeskPower S ranked first among all PCs in unit sales for three months running in mid-1995.
Due in large measure to Fujitsu's success, DOS/V computers tallied nearly 2.6 million units shipped, out pacing NEC's PC98 systems (2.3 million shipped) for the first time. In 1993, DOS/V systems held only a 30% market share.
Apple Computer, meanwhile, held onto a nearly 15% market share in 1995, down just 1% from the previous year. This was mainly due to the strength of the Mac's brand name recognition in Japan, Apple's intense sales efforts, such as through cash-back campaigns, and the reality that Japanese Windows 95 did not hit the market until late November. There is speculation that Apple's 14.5% market share was gained at the expense of dipping into the red.
The 1995 numbers reported by market researchers Dataquest and IDC are similar. Dataquest puts 1995 Japanese PC shipments at 5.71 million units, while IDC gives it as 5.76 million. IDC notes, however, that this is number of units shipped, and it estimates that about 400,000 of these (over 6%) remained in retail store inventories at year-end. This would put the number of PCs actually sold in Japan at 5.36 million, which matches the estimate of 5.3 million units made by one electronics industry association.
In any event, it is clear that the Japanese PC market has shaken off the doldrums of the early 1990s. IDC's 5.76 million units shipped for 1995 is a 69.8% increase over the 3.39 million units shipped in 1994. IDC estimates that shipments will continue to rise in 1996 to 8.39 million units, a 45.7% year-on-year increase. Dataquest, though, gives a much lower 7.6 million forecast for 1996, only a 33% growth.
In monetary terms, 1995's PC shipments represented some ¥1.35 trillion in sales, up 55% over 1994. The increase was fueled in large measure by the business market, which usually opts for higher end (and higher priced) systems. Corporate purchases accounted for 63% of 1995's PC sales. Contributing to the increase were a growing awareness of the value of networking, increased use of e-mail and groupware, the popularity of the Internet, and expansion of the SOHO (small office/home office) market. There is now 0.14 computer per employee in Japan's corporations, compared with 0.46 computer per employee in the US, according to IDC. And while an estimated 85% of business computers are networked in the US, only 35% are networked in Japan.
Japan's home market, meanwhile, accounted for 32% of 1995 PC sales, or 1.86 million units. This is nearly double the number of home-use PCs bought in 1994. IDC estimates that 11.1% of Japanese households now have a PC, up from 8.6% in 1994 but still a far cry for the nearly 40% of US households that own a PC. If current trends continue, however, it is expected that by 2000, about 44% of Japanese homes will have computers.
Other than Apple and IBM Japan, no foreign computer companies made it into the top five. Dataquest suggests this is because their lower-priced products, which attracted much attention two years ago, are no longer attractive since Japanese makers like NEC and Fujitsu have managed to introduce products in the same price-range through such efforts as the use of OEM, overseas production, and reduction of distribution costs. The yen's depreciation in 1995 also adversely affected foreign manufacturers in Japan.
Japanese semiconductor makers set up joint venture
Ten major Japanese semiconductor manufacturers in early February established
a joint venture company to share the R&D costs for 12-inch wafer manufacturing
equipment and materials. The new company, Advanced Semiconductor Technologies,
Inc., is a cooperative venture of Fujitsu, Hitachi, Matsushita Electric,
Mitsubishi Electric, NEC, Oki, Sanyo, Sharp, Sony, and Toshiba. Through
joint evaluation of equipment and technologies, this new venture is expected
to ease the financial burden of the individual member companies for R&D,
which is said to amount to over ¥3 trillion industrywide. Advanced Semiconductor Technologies, envisioned as a 10-year effort, will spend about ¥35 billion for the R&D within the next five years, and will gather at least 100 researchers from member companies. The company will use a part of Hitachi's Production Engineering Research Laboratory in Yokohama, and will construct a clean room there for its R&D work. "It is beneficial for semiconductor manufacturers to conduct joint R&D since we are now at the turning point in developing next-generation semiconductor technology, including 12-inch wafers and lithography by use of optical technology," says Hajime Sasaki, an executive vice president of NEC who was appointed as president of the new company.
For the establishment of the new company, semiconductor manufacturers will not get financial support from the Ministry of International Trade and Industry, which has been providing support to the semiconductor industry. MITI supported the establishment of a think tank, the Semiconductor Industry Research Institute Japan (SIRIJ), in 1994. The new company explains, though, that it did not request MITI support in order to "keep some freedom [from government 'guidance']." While all members of the new company belong to the SIRIJ, they describe the activities of the institute as "worth doing, but for the next-next generation technology" of the distant future. R&D efforts at Advanced Semiconductor Technologies, says a company spokesman, will be targeted at the more immediate "next generation technology." All in all, Japan seems to have learned from its mistakes and stands poised to become the dominant player in tomorrow's semiconductor industry.
Japan's ERP software market set to expand
The market for Enterprise Resource Planning (ERP) software has yet to mature in Japan, but predictions are that the Japanese ERP market will average a more than 40% annual growth through 2000. According to a report issued by Gartner Group Japan, the Japanese ERP market was just ¥5.8 billion in 1994. But rapid, ongoing changes, in the Japanese business environment, particularly restructuring, are expected to boost that market to over ¥55 billion by the turn of the century.
The Gartner Group report is based on a survey conducted for seven domestic and foreign ERP vendors in Japan: NEC, Fujitsu, SAP Japan, Baan Japan, SSA Japan, JD Edwards Japan, and QAD Japan. The report suggests that, since most ERP package products available in Japan have been imported from overseas, the required localization and customization to meet Japanese business needs took time and hindered their penetration into the market. However, since ERP products are proving a popular tool in Japan for business process reengineering as well as for corporate information system configuration applications such as EDI (electronic data interchange) and CALS (continuous acquisition lifecycle support), following the trend in North America and Europe, the Japanese ERP market is expected to enjoy steady growth.ç
How closed are Japan's markets?
Top 100 foreign firms post ¥15.5 trillion in sales
A study by Gemini Consulting's Tokyo office of the top 100 foreign companies in Japan contradicts some stereotypes. Contrary to Japan's image of being a "closed market," 36 foreign companies had annual sales of over ¥100 billion each in 1994. The business success of foreign firms has been growing rapidly as well. In 1992, the company in 100th place on the list of foreign firms had sales of ¥25 billion; in 1994, it took sales of ¥35 billion to make the list.Among the fastest growing foreign companies are those dealing in computers and electronics; 20 of the top 100 foreign companies (accounting for ¥3.4 billion in sales) were information technology (IT) firms. IBM (in first place by a significant margin) was the only IT firm in the top 10, but three others (Philips, Texas Instruments, and Motorola) placed in the top 20, and a total of 12 are in the top 40.
Of the top 100 foreign firms, 52 were based in the US, 11 in Germany, 8 in the UK, 8 in South Korea, and 6 in Switzerland. The rankings do not include banks and financial services companies, nor those that do primarily direct export sales that do not pass through a foreign-owned corporation in Japan (such as Boeing or British Petroleum).
If you're curious about what foreign firms are most successful in Japan, here is Gemini Consulting's list of the 40 largest (by equity-adjusted sales), plus a few other IT firms you might wonder about
More information about the Top 100 Largest Foreign Companies in Japan is available from Gemini Consulting Japan, Inc., phone 03-3265-8285, fax 03-3265-8540, e-mail pkirby@st.rim.or.jp.
JustSystem ties up with Oracle Japan
The lucrative Internet business is targeted
Justsystem has tied up with Oracle Japan, announcing that it will integrate Oracle's Relational Database Management System (RDBMS) technologies into new JustSystem Internet software. JustSystem is set to release its JustOffice Server software in which the Oracle7 Workgroup Server RDBMS is installed, this spring. A Solaris 2.4 version was to be released in March, and a Windows NT version will be launched in May.JustOffice Server is JustSystem's first server software combining the Internet WWW and groupware. Following on the heels of this product, JustSystem plans to release a document server with a "foldering" function in this summer, and those with workflow and group scheduling functions within the year. The company is also scheduled to release its JustCommerce Server for electronic commerce during the summer.
The tie-up should help JustSystem sales, since in the Japanese RDBMS market in 1995, Oracle held top position in the UNIX (53%), Windows NT (57%), and NetWare (63%) markets.
Data encryption, Japanese style
A high-speed, large-key encryption system from Trans Cosmos
While US government policy limits the export of data key-encryption algorithms more complex than 40 bits (see "Breaking through the encryption barrier, " December 1995, page 12), Japanese developers have been working on large-key algorithms for the Japanese electronic commerce market. One of these companies, Tokyo-based Trans Cosmos Inc., has successfully developed a high-speed encryption system that employs the Open Key method, with a different key for encryption and decryption. The method developed by Trans Cosmos is key-compatible with the global RSA data security standard, making it applicable for international electronic commerce, such as online shopping via the Internet or CALS (continuous acquisition lifecycle support).The key can be set at any desired length, but 512-bit or 1,024-bit encryption is envisioned as the standard. Trans Cosmos has also developed an online sign-up system for Internet service providers, one that is based on CompuServe's Remote Account Maintenance Protocol (RAMP) but modified for the Japanese market. By early spring, Trans Cosmos plans to incorporate its two systems into Internet-related software products for client/server systems as well as Japanese versions of Internet in a Box and Mosaic in a Box. Predictions are that the products will achieve ¥9 billion in sales in the initial three years.
In contrast to the US concerns about encryption technology exports, Japan has no cryptogaphic export regulation. Japan thus stands in good position to develop encryption algorithms that could be globally marketable and thus well become the world standard, leaving US firms out in the cold, if US encryption technology export prohibition laws are not scrapped.ç
NEC looks to Sun Microsystems for RISC chipsWhat's behind nec's decision
to tie-up with Sun Microsystems for RISC (reduced instruction-set computing) chip production? The speculation is that NEC considers the technology of its traditional partner, MIPS Technologies, too weak for enhancement of its ASIC and large-size corporate server business -- even though NEC is a major shareholder of MIPS. MIPS' attention recently has been focused on image processing.
To enhance its workstation RISC business, NEC has turned to Sun Microsystems, whose SPARC workstations hold a nearly 50% market share. NEC insists that this joint production with Sun is for a limited range of products only, and that it has no intention of using SPARC technologies for its own workstations, but many industry watchers wonder about the sincerity of such sentiments.
Through the tie-up with Sun, NEC will start production of the Ultra SPARC LC, a lower price version of the 64-bit RISC MPU developed by Sun, within the year at its Kumamoto works in Kyushu. It is obtaining technical support from California-based SPARC Technology Business, a semiconductor business section of Sun.
