JIN-274 -- Bad Blood -- Japan's Invention Deficit

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Commentary on the Week's Business, Technology and Cultural News
Issue No. 274
Thursday, May 27, 2004

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@@ VIEWPOINT: Bad Blood -- Japan's Invention Deficit

>> NEWS 1: Fukuoka's Future
>> NEWS 2: Russia Upping Oil

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@@ VIEWPOINT: Bad Blood -- Japan's Invention Deficit

It's not often in life that an elderly genius ushers you into his lab
and hands you a bottle of freshly brewed blood. But funny things happen
in the nooks of Japanese universities.

A couple of days ago, leafing through the tedious pages of a crusty
medical magazine, we spotted a report about Eishun Tsuchida, a professor
who has spent the last three decades of his life trying to produce
totally synthetic blood.

The possibilities, he was quoted as saying, are quite extraordinary.
Once it has been fully tested and certified -- and an effective mass-
production technique has been perfected -- man-made blood may result in
a worldwide end to blood donation, screening for diseases, blood group
differentiation in stocks and shortages in the wake of big accidents
and natural disasters.

We quickly learned that the race to create this magical elixir has become
a scientific version of the holy grail: The international quest has
attracted a motley crew of genuine academic researchers, garden-shed
kooks and profit-hungry con-men.

The concept of making blood in a lab is not new, of course, and has even
been perfected by some companies. The difference is that other synthetic
bloods have always relied on at least one element based on actual
hemoglobin. Tsuchida's blood is a world first for having every part of
the compound manufactured synthetically in a lab.

It sounded too good to be true, so it was with a fair measure of
scepticism that we called the professor himself.

He was very eager to see us.

When we turned up at his labs in Waseda university in northwest Tokyo,
Tsuchida wasted no time handing over the fruits of his 31 years of labor --
a bottle he gleefully described as "rich, red and beautiful."

The testing was already underway with lab animals, and the human tests --
a series of transfusions -- are being prepared as we write. The young
researchers are all graduates of Japan's, Britain's and America's finest
universites. They sat in awe of the professor as he clicked through
slide after slide of successful lab results.

Tsuchida concluded that he had nearly finished building a factory
outside Tokyo to "brew" large quantities of Albumin, the critical
ingredient, from yeast, and he believes that emergency services will
be able to carry stocks of his blood -- which can be stored at room
temperature, is not blood-group specific and has a shelf-life of 24
months -- within a few years.

But, per usual in Japan, we left disappointed.

Here was man who would be a celebrity anywhere else in the world.
But he remains an unknown because of the odd relationship between
Japan and its researchers, Japan and creativity, Japan and ... the
individual with talent.

In the US, he would have formed a company, pushed out an IPO and
have prepared a super-slick, TV-ready speech ready to woo
serious investors.

The problem is not that the Japanese are not great inventors --
it's that they don't have the slightest clue about how to sell
their best ideas.

-- The Editors

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NEWS 1: Fukuoka's Future

As part of its continuing strategy to position Fukuoka as western
Japan's key information technology (IT) -related R&D and manufacturing
center, Fukuoka Prefecture will open the System Large Scale Integrated
Circuit (LSI) R&D Center (tentative name) in the Momochi District of
Fukuoka City in October 2004. The Center is designed to bring together
new IT-related commercial and academic R&D facilities within the same
structure. The Center will offer "incubation rooms" and a design
experiment/evaluation laboratory for IT startup and joint venture
companies. Academic research institutes such as the Fukuoka Laboratory
for Emerging & Enabling Technology of Systems on Chip (FLEETS), the
Kyushu University System LSI Research Center and the College of System
LSI Fukuoka will also move into the Center from their current, separate

The seven-story Center, currently under construction, will have a total
of 7,700 square meters (approximately 23,000 sq. ft.) of floor space.
Facilities planned within the Center include the following (with B
through E relocating from current sites):

A) "Incubation Rooms"
This dedicated office space is available for use by companies involved
in System LSI related research and commercial development. New venture
companies are eligible for discounted leasing rates. Offices of varying
sizes are available -- 20 square meters (6 rooms), 40 square meters (20
rooms), 80 square meters (15 rooms), 160 square meters (1 room) and 1
Shared Office (10-15 companies can use 10 square meters each).
Discounted leasing rate per month for eligible companies is 1,260 yen or
$11.40 (one dollar to 110 yen) per one square meter (including
consumption tax).

B) System LSI Design Experiment/Evaluation Laboratory for Venture
This laboratory, designed and equipped by the Center sponsoring entity,
is intended for exclusive use by joint venture companies with less than
100 employees. For eligible firms, electronic design automation (EDA)
tools for System LSI design are available for use free of charge,
including U.S. software tools such as Synopsys, Mentor Graphics and
Cadence. The lab, operating in the adjacent Fukuoka Software Research
Park since June 2003, will relocate to the new Center.

C) College of System LSI Fukuoka
This College, jointly sponsored by government, industry, and academia,
is Japan's first training institution dedicated to System LSI
engineering. It started operations in December 2001 in the Fukuoka
Software Research Park. The purpose of the College is to produce a
steady supply of highly-skilled System LSI engineers in the Fukuoka
region. Annual enrollment is around 400 students.

D) Fukuoka Laboratory for Emerging & Enabling Technology of Systems on
This central R&D laboratory is presently located at the Kasuga Campus of
Kyushu University. The Laboratory is funded by the Ministry of
Education, Culture, Sports, Science & Technology. FLEETS conducts
research related to architecture and design support technology of System

E) Kyushu University System LSI Research Center
This Center leads advanced research projects on design and application
technologies of System LSI. It began operations at the Kasuga Campus of
Kyushu University in 2000. The Center will continue the its main
operations at the University, but will open a branch office in the new
Center in Momochi starting in October.

Kyushu, sometimes referred to as Japan's "Silicon Island," had 366
factories for semiconductors and related components as of CY 2002.
Total 2002 output was valued at approximately 94 billion dollars,
representing 32.2 percent of Japanese semiconductor production. Building on
this commercial environment, IT-related research facilities (including
System LSI) have concentrated in Fukuoka Prefecture, the commercial and
academic hub of Kyushu. Local governments, in conjunction with
industry, are seeking to maximize opportunities created by Fukuoka's
close geographic proximity to the rest of Asia. Kyushu is considered an
important link in the Asian "Silicon Sea-Belt" of semiconductor
production, which stretches from Japan through South Korea, coastal
China, Taiwan, and Singapore.

Fukuoka Prefecture's IT promotion initiatives in recent years include
completion of the Fukuoka Gigabit Highway Project, which provides 2.4
gigabit high-speed telecommunications infrastructure access free of
charge to eligible IT firms. The Prefecture is also a co-sponsor with
industry of the Academy for Advanced Information Technology
Professionals (AIP), which opened in Fukuoka in January 2003. US IT
companies such as Cisco Systems, Oracle, Sun Microsystems and NCR have
furnished trainers and know-how to AIP, which cross-trains IT engineers
and systems managers in cutting-edge IT-related disciplines.

The Momochi district of Fukuoka City, a modern planned sector of office
parks and entertainment and residential areas, is home to a high
concentration of IT-related companies, including branches of most of
Japan's electronics giants. For instance, Sony in recent years has
moved its three System LSI-related group companies into Momochi: Sony
Semiconductor Kyushu (April 2001), Sony LSI Design (October 2001), and
Sony Information System Solutions (January 2003).

The new System LSI R&D Center is representative of the substantial
investment and close collaboration of local government, industry, and
academia to make Fukuoka Prefecture an important IT hub in Asia. The
concentration of IT-related firms, and of R&D facilities particularly in
the Momochi area, may present networking, joint venture, and research
opportunities to interested U.S. firms. They may also offer market
entry opportunities into this region for American IT-related products
such as computer and peripheral hardware/software, IC testing equipment,
telecommunications equipment, security equipment and optical fiber

Contact Points for Follow-up:

A) Facilities in the new R&D Center (including office leasing) are
managed by:
Fukuoka Industry, Science & Technology Foundation
c/o ACROS Fukuoka Nishi Office 9F
1-1-1 Tenjin, Chuo-ku, Fukuoka City
810-0001 Japan
Tel: 81-92-725-2783
Fax: 81-92-725-2796

B) For further information on the R&D Center and other IT-related
initiatives in Fukuoka Prefecture:
Mr. Tomonori Haraguchi, Chief
Shin Sangyo (New Industry) Project Office
Commerce-Industry Department, Fukuoka Prefecture Government
7-7 Higashi Koen, Hakata-ku, Fukuoka City
812-8577 Japan
Tel: 81-92-632-4202
Fax: 81-92-641-4622
E-mail: haraguchi@asias-kyushu.com

-- Gordon Feller

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NEWS 2: Russia Seeks to Up Oil Delivery

Russia may boost Pacific oil sales earlier than expected by combining
rail and pipeline supplies to a new port instead of rushing to build a
$12 billion pipeline from scratch, state pipeline monopoly Transneft
said last Friday.

Transneft chief Semyon Vainshtok told reporters the new idea would help
begin deliveries to Asian countries and the United States as early as
2007, if the government gave its approval soon.

"We recently met with railway executives and [the head of Russian
Railways Gennady] Fadeyev took it seriously and asked his specialists to
study whether the project was economically viable," Vainshtok said.

Transneft irked world oil markets earlier this month when it said its
system of pipelines had hit an export capacity ceiling at 4 million
barrels per day. That means Russia may be forced to curb its booming
production if new pipelines are not urgently built.

Output in the world's second-largest crude-exporting nation has risen 50
percent since 1999 to 9 million bpd in April.

But analysts say further growth will largely depend on whether Russia
manages to build its first pipeline to Asia or the Arctic coast.

Vainshtok has repeatedly said he prefers a pipeline to the Pacific,
rather than to the Arctic port of Murmansk or to China, as that will
allow Russia to sell oil to Japan, China and the United States and
diversify sales away from Europe.

"It will also allow us to gradually develop and connect untapped Eastern
Siberian resources to world markets," he said.

Initial plans for a Pacific pipeline consisted of a huge 4,000-kilometer
link from Taishet, near Lake Baikal in Eastern Siberia, to the Pacific
port of Nakhodka to ship between 1 million bpd and 2 million bpd of West
and East Siberian crude.

The new idea proposes building the first 1,000-kilometer stretch from
Taishet and pumping 200,000 bpd of oil to a rail hub for onward shipment
to the new port in rail tanks along the Baikal-Amur Mainline railway.

The Soviet Union spent billions of dollars on the BAM over several
decades, but it is almost unused as military freight traffic dried up
after the collapse of communism in 1991.

Vainshtok said the pipeline plan would be a massive boost to the BAM,
but added the government needed to encourage the project by cutting rail
transport tariffs for oil on the route.

Transneft would gradually build three extra stretches of pipeline as
crude shipments and East Siberian production grew, until the line fully
linked Taishet and the Pacific port.

Vainshtok also said the government needs to introduce stricter controls
on output to protect the nation's resources from depletion.

"The government needs to be tougher" in controlling oil companies'
production licenses, he said. Output may "automatically drop" in the
future, as producers invest less in the fields, he said, citing some
industry surveys.

Vainshtok's comments echoed those posted on the Federal Energy Agency's
Web site.

"Authorities should be ready to undertake very serious operating
measures," agency chief Sergei Oganesyan said in the statement. "The
largest companies exceed approved production rates by two to three times
at some fields."

-- Gordon Feller

SUBSCRIBERS: 16,023 as of May 27, 2004

Written and edited by Roland Kelts and
Leo Lewis (editors@japaninc.com)


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