TT-530 -- iPhone turns corner in Japan, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, August 24, 2009 Issue No. 530

+++ INDEX

- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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+++ WHAT'S NEW

An interesting thing seems to be happening in the Japanese
cell phone market. Smart phones (think Apple's iPhone) are
enjoying a rapid surge in user numbers, even as cell phone
shipments overall dropped last year (FY2008) a big 31 percent
to 35.85m units. The smart phone segment is estimated by the
Japan Electronics and Information Technology Industries
Association (JEITIA) to have grown a whopping 79 percent to
1.97 million units last year. This number is expected to
increase to 3.29 million units a year by 2012.

So how much of this growth is iPhone related? Neither Apple
nor Softbank offer shipment numbers, but anecdotally, it
looks like the iPhone is unnerving DoCoMo and so clearly
it must be becoming a threat. At that same time, the
iPhone is clocking in at the number one sales position in
retail stores, as measured by companies that track in-store
POS sales data -- real data, not guesstimates.

It wasn't that long ago that industry followers were
panning the iPhone, writing articles with titles like, "Why
the Japanese Hate the iPhone." The rumors were that
after DoCoMo turned down the iPhone because Apple
wanted too much control over the applications business,
Softbank was the only carrier small enough to agree to take
it and then only reluctantly. This reluctance was at one
point seen to be justified after the initial two-month
sales surge of 200,000 units tanked, and by the end of
2008 the iPhone was selling at less than half Apple's
expectations.

This was a low point for the product, and earlier on this
year Softbank decided to take action by offering the
iPhone for no money down, instead amortizing the cost of
the handset over the term of the contract. Softbank also
very significantly set a great fixed-price unlimited data
plan so that the iPhone's applications could provide
maximum user experience. These two actions seem to
have been the main turning point for the iPhone.

[Continued below...]

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[...Article continues]

The experts had lots of reasons why the iPhone wouldn't be
successful, pointing out that the Japanese already had
highly capable smart phones, and were used to using their
devices as simple purpose-built tools, rather than taking a
more intimidating "miniature PC" approach. Among the things
the first iPhones fell down on were the lack of a built-in
one-seg TV, GPS navi, poor camera quality, and no debit
card or rail pass payments capability. Then, by virtue of
the fact that the iPhone is a miniature PC, users couldn't
connect with popular cell phone-centric sites operated by
Mixi, Gree, and DeNa.

So it seemed that Apple's iPhone would languish from lack
of willingness to localize the product to compete with
domestic offerings, with the possible exception of a few
foreigners :-) who liked the cool apps they could download
from overseas App Stores.

Suddenly, however, in June this year, a report by BCN, the
POS data ranking service, surprised everyone by reporting
that Apple's iPhone 3G 8GB model had grabbed the number one
sales position over the previous 3 months, at 2,300 store outlets
monitored by BCN. In second place was the iPhone 16GB model.
In third spot was a domestically produced smart phone, the
Aquos SH-04A, sold by DoCoMo, which apparently did well
because of its better quality one-seg TV reception.

Then in mid-June the new faster, re-tuned iPhone GS showed
up, and early data from GfK indicated that the iPhone was
still top of the heap in June and July. So that gives us 5
months of data putting the iPhone at number one, which in
our books is proof positive that the iPhone is no longer a
temporary phenomenon.

Anecdotally, we are seeing a lot of iPhones on the subways
and buses, almost always in the hands of young females, or
businessmen. From what we can tell speaking to purely
Japanese users, while the camera and some other aspects
detract from the iPhone's appeal, the simple coolness of
the interface and the rapidly improving selection and
quality of the music and games make the iPhone highly
desirable.

Also, although Softbank isn't saying it, it appears that
the iPhone is starting to make a contribution to the
company's bottom line as well. In the April-June period,
Softbank saw a 20 percent increase in its overall corporate
profitability. There is no indication of what the iPhone
contributed to this, but it does appear that the flat
rate communications plans (of which iPhone owners are
major users) of JPY6,000/month, are pumping lots of
yen into the company coffers.

So what does the future hold for iPhone? We have heard
on the grapevine that DoCoMo is quite concerned about the
surge in iPhone sales and is pushing to move its Android
alliance up and in front. Our take is that they may have
left things too late. Word-of-mouth promotion by young
iPhone early adopters seems to be winning over their
friends in droves, and the coolness factor is spreading.
These early users are doing Softbank's marketing work for
them and are helping to prepare their friends for both the
negatives as well as the positives of the device.

As a result, we believe that Apple and Softbank may have
broken through the market acceptance barrier. Now, if
they can move quickly and do something about improving the
camera quality (guys, 10Mpixels is the minimum we should
be seeing on the iPhone), payment systems, and built-in
one-seg TV, then sales should climb through the roof...

*****************

Lastly, after having successfully bid for and won the right
to publish the ACCJ Journal, Japan Inc. Communications is
reorganizing, and is looking for a new Editor in Chief for
its online business, as well as some new paper
publications. This is a great opportunity for someone with
strong English writing skills and business knowledge to
join the team of Japan's only English-language business
periodicals publisher. See the job ad in the VACANCIES
section below.

**************

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+++ NEWS

- Google buys On2 for video tech
- Kameda Hospital wins international accreditation
- New non-dairy cream invented
- Sapporo to buy 20% Of Pokka
- Man survives by floating with PET bottle

-> Google buys On2 for video tech

The first and so far only purchase of a listed company by
Google occurred on August 7th, when Google bought out On2
Technologies Inc. for US$106.5m. On2 makes video
compression software which will significantly improve
accessibility of Google's video assets to cell phones and
other lower bandwidth devices. ***Ed: Actually, we're
running this news item because On2 has a Tokyo connection.
Anyone visiting the On2 website will notice that the only
non-U.S. resident director of the board is none other
than Mike Alfant. Congratulations, Mike, on another savvy
investment earn-out!**

http://tinyurl.com/n8pl42

-> Kameda Hospital wins international accreditation

Kameda Hospital, the bilingual medical facility based down
in the Boso Peninsular, Kamogawa City, has announced that
it has won accreditation from international health care
certification authority Joint Commission International
(JCI), and in so doing has become the first hospital in
Japan to become accredited. ***Ed: The JCI approval is
something like an ISO rating for health care institutions
and focuses on the areas that directly impact patient care,
such as access to care, assessment of patients, infection
control, patient and family rights, education, facility
management and safety, staff qualifications, quality
improvement, organizational leadership, and management of
information. Kameda was evaluated and scored on more than
340 standards and more than 1000 measurable elements over
a 5-day period. ***Ed: Another good reason to use this
hospital if you get sick in Japan -- the doctors and nurses
mostly speak English, as well.** (Source: Press Release
received from Kameda Hospital representative, Aug 16, 2009)

*** No URL reference -- press release only.
http://www.kameda.com/us/index.html

-> New non-dairy cream invented

Not sure that we'll be eating it, but food producer Kaneka
corporation has announced that it has developed a
full-taste, full-texture non-dairy cream made from palm oil
and other vegetable fats. The new product is extremely
flexible and can be frozen and heated without losing its
physical integrity. It is also 10%-20% cheaper than dairy
product. ***Ed: Palm oil? Ummm, sounds like they are
hydrogenating the product -- transfats anyone? Then of
course there is the eco impact of palm oil plantings on
forest land throughout Asia and the Amazon... This product
probably won't fly outside of Japan.** (Source: TT
commentary from nikkei.co.jp, Aug 12, 2009)

http://www.nni.nikkei.co.jp/e/fr/tnks/Nni20090811D11JSN01.htm

-> Sapporo to buy 20% Of Pokka

Beer brewer Sapporo Holdings has announced that it will buy
20% of canned drinks maker Pokka, in a 3-way holding with
milk/food company Meiji Holdings, and the Pokka management
team and their backing fund. Meiji Holdings owns 22% of
Pokka. Sapporo has agree to pay JPY10bn for its stake,
apparently eyeing Pokka's extensive vending machine and
overseas distribution network. ***Ed: Of course the real
winner of this deal is Advantage Partners, the fund which
bought out most of Pokka in 2005 alongside the management.
We estimate that Advantage paid around JPY16.5bn for their
90% of Pokka, and this latest deal gives them an almost 5x
return in just 4 years.** (Source: TT commentary from
nikkei.co.jp Aug 12, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20090812D11JFF03.htm

-> Man survives by floating with PET bottle

A 24-year old man who fell off an Okinawan-bound tanker
near Kagoshima's Yoron Island apparently survived for
several hours by swimming then clinging to an empty 2-liter
PET bottle bobbing in the water. He was picked up by a
Liberian-registered freighter later the same day. ***Ed:
PET bottles may the pollution scourge of the oceans, but
this is one lucky time to find out that 2 liters is enough to
keep a grown man afloat in an emergency.** (Source: TT
commentary from japantimes.co.jp, Aug 15, 2009)

http://search.japantimes.co.jp/mail/nn20090815a1.html

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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***------------------------****-------------------------***

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION(S)

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- Country Manager, telecoms provider, JPY15m + incentives
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The applicant should have experience in business reporting and
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Business management experience and a passion to undertake
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The successful applicant will also need to work closely with
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-Education: Undergraduate degree or equivalent journalistic
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-Experience: at least 3-5 years' journalistic experience,
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-Language: Native English, strong Japanese preferable but not
necessary.
-Skills: Basic computer skills and a good knowledge of web
publication processes and print publishing.

To apply, please send your resume, cover letter and any
relevant clippings to: michael@japaninc.com

-----------------------------------------------------------

+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------- Japanese Tax Seminar by CCH -----------------

Theme: 'Multinational corporations face tax Issues
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This economic crisis has influenced the interpretation of
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For more details, please contact us at: support@cch.co.jp,
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-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

=> In TT529 we discussed introduced the notion of a new
Wind Turbine induced illness, dubbed Wind Turbine Syndrome
(WTS). We made a mistake on the definition of infrasound
frequencies, which a number of readers pointed out. The
correct range of infrasound is generally accepted to be
<1Hz-20Hz, not 20Hz to 50Hz. We regret the error.

We also received several letters from readers debating the
worth of Nina Pierpoint's WTS findings. Enjoy...!

*** Reader Comment: You wrote about a new illness, dubbed
Wind Turbine Syndrome (WTS), which was identified by New
York-based pediatrician, Nina Pierpoint.

Now, I'd never heard of this before, and I knew very little
about the health effects of wind turbines until I started
looking in to it a few hours ago. However, this is starting
to look to me like an example of fairly irresponsible
science reporting, something you've been guilty of in the
past.

Looking into the literature. The first thing I note is that
neither Pierpont nor Amanda Harry, a British physician who
actually appears to be the one who kicked off this idea,
have published any peer-reviewed literature on this issue.
In fact, there appears to be no peer-reviewed literature
supporting this at all. Why their papers didn't pass a peer
review (or wouldn't, if they were submitted for one) is
fairly clear. Harry sent informal surveys to a
self-selected group of people who believed that they'd
experienced adverse health effects from wind turbines. That
people who believe such claim on a survey that they've had
adverse health effects is hardly news!

Pierpont doesn't seem to have done any better, from what I
can see in the book excerpts she makes available: she has
only a small number of interviewees, with no indication of
how they were selected, but strong hints of selection for
claims of problems.

Further weakening her argument, she provides no reasonable
mechanism, under current scientific thinking, for why these
health problems would be occurring. Note that this doesn't
say that they're not occurring, nor that there isn't a
mechanism there to be discovered, but that does greatly
increase her burden of proof that the problem exists at all
outside the minds of a few people. Have a look at
"Infrasound from Wind Turbines – Fact, Fiction or
Deception?" by Geoff Leventhall in Canadian Acoustics, Vol.
34, No.2 (2006)[1] for some details on this.

[1] http://www.wind.appstate.edu/reports/06-06Leventhall-Infras-WT-CanAcoust...

If we start to look in to the peer reviewed literature, we
find no mention of health problems for wind power, and a
whole lot of mention of issues relating to most other power
sources.[2] Not that this says we ought not worry about
potential health effects of wind power, but how much do we
really want to get excited about something that may or may
not have health effects, and so far as we can tell to this
point, has few or none, when we can make accurate yearly
estimates of the (not small) number of people who will be
killed by hydrocarbon emissions?

[2] http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(07)61253-7/abstract

*** Our response: Thanks for your response. You bring up a
number of good points:

1. Nina Pierpoint has in fact been peer reviewed. You may
not like who the peers are or how it was done, but they
were bold enough to go on record on her website.

2. We are not saying that Wind Turbines are not a worthy
way of making power. Just that they come with some caveats.
Not only is there the possible infrasound issue but they
are also really ugly. The Japanese are in the forefront of
planning to move wind turbines off-shore -- so this WTS
issue may just push them to start building. About 20kms
over the oceanic horizon would do the trick.

3. Your Nina Pierpoint claims miss the main issue of this
article, which is that the Japanese at least are taking
the infrasound problem seriously. It's doesn't matter to us
in Japan whether some acoustic expert in Canada thinks
the problem exists or not, the Japanese government itself
is taking action to research the issue more thoroughly.
This is a good thing. Although we see very little about
infrasound and WTS in the English press for news about
Japan, the issue has come to the surface a number of times
over the last 3 years, and is well documented in Japanese
reports.

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-----------------------------------------------------------

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+++ ABOUT US

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Comments

There is no surprise for me that smartphone shipments are raising every year. Such phones like iPhone are more powerful than simple cell phones. You can choose from the huge variety of applications from the Apple app store and use them everywhere you want. What about cell phones, their functionality is not so big nowadays, so people will choose smartphones for sure. Thanks for the great article. I will be waiting for other interesting articles from you in the future.

Sincerely,

Mark Johnson from iphone development.

I just wonder about one thing. Japan is a very develoed country, with huuge techological potencial. But it doesn't work out their own mobile systems. Why???
Catherine from blackberry application development

The standard answer, and one that may be boring, is that Japanese just aren't that good at commercial software (games are a different story). The companies making cell phones typically prefer to make something function physically, like with buttons, than visual interfaces such as would be found on iOS, Android, WinMobile, etc.

TL

business