Industry Profiles

American companies involved in the consumer electronics industry will find in Japan the essential elements for business success. Japanese consumers tend to adopt new technologies earlier than those in other countries and serve as a ‘proof-of-concept’ market. As a result, many new products and applications are introduced in Japan first before being launched in markets around the rest of the world. Japan’s strong background in semiconductors, miniaturization and product design serves as a solid foundation for developing and manufacturing high-end consumer electronics.

But American companies expanding operations into Japan do not have to begin alone: global powerhouses like Fujitsu, Toshiba and Sony are partnering with U.S. companies to jointly develop products and technologies. And not only do the U.S. companies benefit from the development and manufacturing expertise of these Japanese firms, they can also utilize the worldwide reach of these multinational firms.

Market size and outlook

Japan’s Ministry of Internal Affairs and Communications (MIC) surveyed the consumer electronics market for 2004 to have been 2.7 trillion yen and estimated it to grow to 11 trillion yen by 2010, more than four times the value of 2004. When including the cellular telephone market (and including network platforms and appliances), the market size is estimated to be 20 trillion yen (See figure 1).

The MIC defines the consumer electronics market to include the following areas:

• Service content market
  • Content, such as entertainment information on movies, drama, etc.
  • Services, such as distance learning (tele-education), security services, etc.
• Appliance market
  • Digital information consumer electronics, such as TV, washing machine, PC, modems, etc.
  • Network platform market*
• Networks, including ADSL, cable Internet, fiber-optic cables, etc.
  • Platforms, such as ones for billing and authentication

* The MIC includes the network platform market in the consumer electronics industry due to the expected convergence of communication and entertainment electronics.

Figure 1: Projected Growth, Consumer Electronics Market, 2004-2010

Source: Ministry of Internal Affairs and Communications

State of the industry

The Japanese consumer electronics industry anticipates the convergence of communication and entertainment electronics. By networking consumer electronics, companies seek to provide advanced services to help consumers achieve more convenience in their daily activities, particularly in the home market.

Consumer electronics are expected to make their way into home security systems helping to monitor fires or break-ins and report them to nearby fire departments or police stations. Telediagnostic systems are being developed in which a person’s diagnostic information monitored by various devices in the home (e.g. thermometer, scale) is sent to their doctor or healthcare center. Consumers could also control appliances in home from their cell phone or personal digital assistant (PDA). Upon departing the home, a person can turn off all consumer electronics while turning on the security system. On the way home from work, one can start a bath or begin warming up the house.

One control system in development that focuses on entertainment consumer electronics is the E PC, which is a computer that looks like a VCR and sits as a part of entertainment consoles to serve as a control center for stereos, TVs and other equipment. Louis Burns, vice president of the desktop platforms group at Intel, told CNET, “The whole industry is turning about. You will start to see the content industry target the E PC.” In Japan, Intel is working with a company to create a library of about 1,000 movies available for pay-per-view at home.

The realization of such a convergence of communication and entertainment electronics is facilitated by the following:

• Significant governmental support
  • e-Japan Strategy: sought to make Japan “the world’s most advanced IT nation” by 2006; achieved what Cisco Systems in a press release called “the most advanced network infrastructure in the world.”
  • u-Japan Program: seeks to realize a “ubiquitous network society by 2010.”
• Advanced network infrastructure
  • KDDI, one of Japan’s leading information and communications companies, provides a robust and widespread network. For 2007, the company plans to construct an Ultra 3G network that converges all fixed and mobile service networks to create a ubiquitous network.
  • NTT DoCoMo, another leading telecom company, provides the Okutto-Keitai service, which achieves seamless and continuous reception of navigation information wherein a driver can take with them on their mobile phone directions to a store from the navigation device inside their vehicle.
• Faster technology adoption speed
  • Approximately 90 percent of cell phones in Japan have cameras, while the figure for other major markets is 20 percent.
  • About 80 percent of desktops have embedded TV tuners, a concept that has only begun to be seen in other parts of the world.
  • T Navi, a product allowing consumers to surf the Web or shop on a TV, is gaining popularity as a revitalized version of the TV-web programs that failed to catch on in the past decade.

A major challenge manufacturers are working on is overcoming obstacles in connecting consumer electronics of different types and fields from different manufacturers. Companies able to facilitate compatibility between products and technologies stand to find significant opportunities.

Successful American companies in Japan

• On2 Technologies Inc. – New York, NY
  • Partnered with Saver Corporation, the market leader for transcoding technology for mobile phones in Japan, to develop the industry’s first online Flash 8 video transcoding service for mobile phone users
  • Saver Corporation will license On2’s Flix Engine technology for integration into its mini-it EM family of Flash 8 video transcoding servers
• GeoVector Corporation – San Francisco, CA
  • Established a subsidiary (kabushiki kaisha) to work closely with Japanese partners KDDI, Mapion and NEC Magnus to exploit a large base of mobile phones with the necessary embedded hardware and location specific information required to provide its 3-D “click on the real world®” search engine applications
• NVIDIA Corporation – Santa Clara, CA
  • Supplies graphics processors, platform processors, and wireless media processors used in a variety of consumer electronics like PCs, servers, mobile phones and used in developing and deploying PC games
  • Works with world leading Japanese OEMs Fujitsu Siemens, Mitsubishi, Sony and Toshiba

For more information about how you can expand your company to the Japanese consumer electronics market, please contact JETRO.