Looking to 2020: Japan’s Tech Upheavals and Opportunities

Japan made full use of the 1964 Olympic Games to showcase its rising economic power and technological prowess to the world. Japan’s government and corporations cooperated to implement a variety of technological “firsts” for the games: the first with live satellite TV broadcast, the first with color TV coverage, the first with quartz timekeeping, the first with photo-finish and touchpad systems for determining finish times in sprint and swimming events, and the first with networked and computerized scoring system. The opening of the first “Shinkansen” bullet train, then the fastest in the world, was also coordinated to occur just a few days before the opening ceremony.

Japan is preparing to showcase its technological prowess during the 2020 Olympics as well. Docomo is working to provide a 5G network in time for the 2020 games. NHK, Japan’s national television broadcasting station, supported by Sony-developed production equipment, is preparing to make the 2020 games the first to be broadcast in 8K ultra HD, with NHK already starting limited test runs of sporting events with MLB, NFL and FIFA. Gaming and eCommerce leader DeNA and robotics company ZMP Inc. recently set up a joint venture, Robot Taxi, for implementing driverless taxi service, and plans to have a fleet in operation for the 2020 games.

I had a chance to speak about current technology trends in Japan with Marc Einstein, Head of Japan Research, ICT Practice at Frost & Sullivan, who will be in Israel next week as an invited speaker for the mHealth Israel Investors Summit taking place in Jerusalem on June 29, 2015. Marc notes that the technology industry in Japan has been experiencing many disruptions and challenges. Unlike 1964, when Japan was already well on its way on a dramatic postwar economic expansion, the mood leading up to the 2020 games is more muted. “Everyone knows how the once dominant consumer brands like Sony and Sharp are far below their peak and may never recover their leadership position again. And even given that, it’s still striking to what degree Japanese consumers have opened up to using non-Japanese electronics. No one would have guessed, even imagined, 10 years ago that a Korean company like Samsung and an American company like Apple would be the leading providers of mobile phones in Japan.”

Marc notes that the telecom industry has also been experiencing substantial disruption. With the advent of OTT communication applications in Japan, in particular the overwhelmingly popular chat and phone app LINE, voice ARPU (average revenue per user) among Japanese carriers has declined precipitously, with 2014 ARPU being almost a third of 2009 levels and data ARPU remaining flat.

This has caused Japan’s major telecom companies to scramble to find ways to capture growing revenue streams, often in very different ways. Marc point out that there is a potential silver lining in that the scrambling may help put Japan in a leadership position in some key emerging fields.

The first field is the internet of thing (IoT). Docomo is counting on their new 5G network being used not only by people with mobile phones and tablet, but also by a growing army of IoT equipment, such as connected billboards, streetlamps, and vending machines, as well as mobile-enabled cars. Marc notes that the rise of IoT could be a major driver of growth in another area where Japan has maintained market dominance: sensors. “Many IoT devices are, in essence, an electronic sensor connectable to a mobile network, so the emergence of IoT devices should result in a big increase in the demand for sensors that make those devices possible. And as things stand, most of those sensors will be made by Japanese companies.”

The second field enjoying a boost from the telecom troubles is consumer robotics, led by another telecom giant, Softbank. “Softbank doesn’t even see themselves as a telecom company,” says Marc. “They see themselves as a holding company that happens to have telecom as a large, but shrinking, part of their portfolio, and they have actively been searching for new technology areas in which to expand.” One area that has gained particular traction is robotics, exemplified by the Pepper robot, which recently became available to the public.

Softbank sold out its first batch of 1000 units within the first minute of sales, and plans to produce around 1000 units per month. Marc, who lives in Tokyo, noted that he has already seen some sales representatives being replaced by Pepper robots, and expects the trend to continue. “Japan has long held, and has managed to maintain, a leadership position in robotics. What’s new now is how cheap these sophisticated robots have become. Earlier robots that have wowed attendees at trade shows and demos cost millions of dollars. In comparison, Pepper is shockingly cheap: JPY 198,000 upfront + JPY 24,600 per month. That’s really reasonable. At that price point, buying a Pepper unit and paying the monthly fee is substantially cheaper that hiring a human sales representative.” Marc also notes that Japan’s aging and declining population is driving current developments in robotics. “A recent poll asked what would be the best way to increase Japan’s workforce in light of a declining population: increasing immigration, increasing women in the workforce, or making robots? Robots were the clear winner out the three.” Robots to help with the care of the elderly, even for providing companionship, have also seen rapid recent progress in Japan.

Finally, Marc noted that these developments can provide a “sneak peek” on what may be around the corner in other parts of the world. “Declining ARPU for telecom became a crisis relatively early in Japan, but it’s going to happen in other countries too. The Verizons and Vodaphones of the world are also going to have to scramble to deal with tumbling telecom revenue soon enough. In addition, the new Japanese developments in IoT and consumer robotics will be deployed not just in Japan but in the rest of the world as well.”