A week in tech; part 1

The latest tech news from Japan and Korea.

A week in Japan tech

Information Technology

- Information technology spending in Japan is expected to drop 1.2% in 2003 to ¥12 trillion ($102.6 million), the third straight year of decline, according to projections released by market survey firm International Data Corp. Japan (IDC Japan). The latest report indicates that the plunge in unit prices is starting to spread from personal computers and other hardware into service segments such as outsourcing and system consulting. Spending on hardware is expected to slip by 4%, while the service sector, which had continued expanding through 2002, will likely not grow either. The continued decline is attributed to sluggish demand caused by the prolonged economic downturn coupled with significant increases in the performance of hardware and software that have enabled data processing previously requiring large computers and proprietary software to be done on small servers and mass-market software. According to IDC Japan, IT investment peaked at around ¥12.5 trillion ($106.9 billion) in 2000 but has declined every year since.

Media, Entertainment and Gaming

- Sega Corp. returned to profitability for the fiscal year despite faltering sales. The company reported a ¥3.1 billion ($26.2 million) profit for the year ended March 31, compared with a ¥17.8 billion ($152.7 million) loss for the prior fiscal year. Sales fell 4% to ¥197.22 billion ($1.7 billion) from ¥206.3 billion ($1.8 billion). Sega's operating profit declined 35% to ¥9.30 billion ($79.7 million) for the latest year from ¥14.2 billion ($121.8 million) for the prior fiscal year.

- Nintendo Co. reported a 37% plunge in profits for the fiscal year as sales of its GameCube console fell short of expectations. The company said net income was ¥67.3 billion ($572 million) for the fiscal year ended March 31st, down from ¥106 billion ($904.1 million) in the prior year. Sales totaled ¥504 billion ($4.3 billion) down 9%. As of March 31, 9.55 million GameCube machines have been sold around the world, short of Nintendo's goal of 10 million and far below the 51.2 million PlayStation2 consoles shipped world-wide so far.

- Square Enix Co. reported mixed earnings for the last fiscal year. The former Square posted a record group net profit of ¥14.1 billion ($120.3 million) for the year to March 31st, a turnaround from a year earlier loss of ¥16.6 billion ($141.6 million). Brisk sales of game software led by its "Final Fantasy" series, as well as restructuring after suffering massive losses in its movie business, helped improve its bottom line. Square's group revenue grew 9.9% to ¥40.3 billion ($343.7 million) from ¥36.7 billion ($312.2 million). The former Enix had a group net profit of ¥2.4 billion ($20.6 million), down 43% from ¥4.3 billion ($36.5 million) a year ago. Enix's group revenue dropped 12% to ¥21.9 billion ($186.8 million) from ¥24.8 billion ($211.5 million). Enix attributes the weak results on sluggish sales of the "Star Ocean Till the End of Time" software for use on Sony's PlayStation2 game console. For the current fiscal year, Square Enix targets a group net profit of ¥10.5 billion ($89.5 million) and revenue of ¥62.6 billion ($534 million).

Mobile / Wireless

- KDDI Corp. has developed a prototype mobile phone handset that shows both terrestrial digital broadcasting and Internet-based information on the screen. The handset will be available for trial service at the end of this year when terrestrial digital broadcasting services begin in selected areas. Developed jointly with NHK Science & Technical Research Laboratories and KDDI, the handset shows TV programs on the upper half of its screen and information via the Internet on the lower half.

- NTT DoCoMo Inc. said it will launch an e-commerce service on May 26th for users of its second and third-generation cell phones, featuring virtual shops and online payment. Japan's mobile phone giant declined to comment on its revenue target for the new service, but said it expects to attract 900,000 users to the service in one year.


- Furukawa Electric, the world's second-largest fiber optic maker, posted a record annual loss and warned of more to come as its business continued to struggle after the telecommunications fallout. Furukawa's United States fiber-optic unit has been hit hard as telecommunications carriers curb investments after overspending during the Internet bubble. Furukawa's consolidated net loss hit ¥114 billion ($977.9 million) in the year, dwarfing the previous year's ¥3.4 billion ($29.2 million) loss. Revenues slid 7.9% to ¥710.6 billion ($6.1 billion).

- The Japanese government might relax the obligations it has put on NTT Corp.'s regional operators to open up their fiber-optic lines to other companies. The General Affairs Committee of the Diet's upper house decided to study the possibility of changing the NTT operators' obligation to lease their fiber-optic lines to other telecommunications companies. Young telecommunications firms oppose the move, saying that it will lead to an NTT monopoly in the fiber-optic line business. The elimination of the requirement would lead to higher rates, and new telecommunications companies, like Softbank Corp., protest that this would throw their business plans into disarray. As a result, the committee toned down its original resolution calling for changes to instead suggest that changes be considered.

- NEC Corp. will launch an IP telephony service for corporations July 1st. The new business will be an all-encompassing service that offers to build the system, secure the communications lines, and operate the IP telephony network. NEC will adopt the IP Centrix method for this service, using a single dedicated server for central management of all IP phone calls, extension lines and call transfers inside the corporation. This is said to be 30-50% less expensive than a conventional corporate phone network based on a PBX (private branch exchange). NEC aims to generate total sales of ¥220 billion ($184.2 million) with this service over the next three years.

- Sumitomo Mitsui Banking Corp. will become the first major Japanese bank to use the Internet Protocol-based phone system for its internal telephone network. The bank plans to introduce the IP phone system for its three main branches in Tokyo and Osaka on a trial basis by July, and shift all of its approximately 50,000 telephones at 500 operational bases nationwide to the IP-format system in four to five years.

A week in Korea tech

Media, Entertainment and Gaming

- Electronic Arts is gearing up to make inroads into the rapidly growing Korean gaming market, with its recent appointment of its first Korean country manager. EA Korea, set up four years ago, announced its selection of 34-year old Korean Hahn Su-jung as chief executive officer. She revealed her ambitious goal of expanding EA Korea's annual sales by over 50% this year.

Mobile / Wireless

- Korea's mobile data-service market is forecast to grow from W2 trillion ($1.7 billion) this year to W7 trillion ($5.8 billion) in 2007 according to IDC Korea. The domestic mobile data-service market now includes diverse business models since new multimedia services were introduced last year following the explosive growth of SMS among mobile phone users. The diversification of mobile data services was also boosted by the upgrade of the cellular network technologies, particularly the launching of cdma2000 1x- and EV-DO-based networks. The handset market is fast shifting toward the EV-DO technology standard, allowing mobile phone users to enjoy faster transmission of data over the network.

- SK Telecom Co. finalized its selection of Samsung Electronics Co. and LG Electronics Inc. as equipment suppliers for its 3G wireless services. SK Telecom aims to launch the new wireless mobile services based on W-CDMA technologies around the end of this year. SK Telecom declined to reveal the value of contracts, saying negotiations are still underway to decide the exact terms. Samsung will provide equipment for the wireless business in the Seoul area, while LG Electronics hasn't decided its target region yet.


- South Korea has failed to persuade the United States to suspend its 57% tariffs on exports by Hynix Semiconductor. The US Commerce Department, in an earlier decision, ruled in favor of Micron Technology alleging that Hynix received loans and guarantees from Korean government-backed lenders, unfairly allowing it to undercut rivals.

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