November 2001
CONTENTS

MARKET NEWS
NTT Docomo’s FOMA 3G Serivice
Wireless Communication Technology

NEW TECHNOLOGY
Digital Movies Revive Industry
Germ Combating Fridge
Radio-Controlled Clocks
Touch Screen Computers

MULTIMEDIA ALERT
Digital TV Sales on the Rise
Nintendo Considers Others
OpenTV wins Interactive Deal

BIO-SCIENCE DEVELOPMENT
Japanese BioTech Developments
Eye Cell Replacement
Artificial Blood Vessels

ENVIRONMENT
Sensor Detects Nano-threat
Negative Ions Get Attention
New Way to Synthesize Chemicals

SEMICONDUCTOR
Japan at Odds with Asian Rivals.
Fujitsu and US Flash Chip Production

SPECIAL SECTION
Going In Depth on Japan Tobacco

STRATEGIC ALLIANCES
Japan in the United States
United States in Japan

Attempt to Cleanup Megabanks Balance Sheets Underway

Japan’s major banks have begun to take steps that will regenerate their balance sheets. Pressure from the Financial Services Agency has initiated a response from the megabanks to tighten their internal assessments of bad loans, beef up their loan-loss reserves and make some management changes. Regardless, many analysts still do not feel that the implementation of these measures will lead to a thriving comeback.

At a Nov. 26th press conference the President of Mitsubishi Tokyo Financial Group Inc., Shigemitsu Miki, stated that “the business climate will likely continue to be severe, making me hesitate to confidently say we will be able to achieve a V-shaped recovery”. Mr. Miki did not deny that there is an ever increasing need to quickly dispose of the bad loans presently lingering before fiscal 2003.

The new issue plaguing the vast majority of banks is how to devise a strategy that will help tackle the recent bad loans and the additional loans that prove to be a disappointment in the first half of next fiscal year and is the first half of this year.

Mitsubishi Tokyo financial Group, comprising Bank of Tokyo-Mitsubishi and Mitsubishi Trust & Banking Corp., are suffering from losses resulting from bad –loan write– offs and shareholdings. The increase of bad-loan disposals has resulted in a group net loss of ¥96.83 billion ($780 million) on operating revenue of ¥1.689 trillion for the first half of fiscal 2001.

Mizuho Holding Inc., the integrated body of Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan, also reported weak result for the first half that ended on Sept. 30th. Mizuho Holdings, the holding company of Mizuho Financial group is the world’s largest banking group in terms of assets, and has posted a loss as great as ¥2.64 billion for the fiscal first half.

Nonperforming loan disposals, including write-offs and loan-loss, a combined worth of ¥861.63 billion, reserves weighed down the reported earnings for Mizuho. The failure of the supermarket chain Mycal Corp., has contributed largely to the losses the bank is taking. For the full fiscal year, the bank group expects to post a consolidated net loss of ¥720 billion, and has plans to write off ¥1.689 trillion in bad loans.

Management changes are underway in the financial group. Next spring Fuji Banks’ Deputy President Terunobu maeda will be officially inaugurated as president. However, the three current chief executive officers and six managing directors will be removed. The implementation of new executive members, to be implemented as quickly as possible, will give the bank a fresh start and initiate greater strength within the financial management team.

These measures are in a great attempt to regain the market’s trust as soon as possible. As of the end of March, of next year, Mizuho holdings will have an additional ¥800 billion in loan-loss reserves against problematic borrowers.

A detailed breakdown has yet to be released by Mizuho Holdings, however, Yamaoto has stated that it will be able to handle the failure of one or two companies in each industry.

In Mid-November, the Financial Services Agency launched a series of special examinations, initiating the tightening of internal assessments. The main focus of the FSA regulators is to check the status of loans to large corporate borrowers with an outstanding loan balance of at least ¥10 billion.

The removal of loans to borrowers at risk of failure and those that have gone bankrupt from the balance sheet must take place within two to three years, under government guidelines.

Hidden problems are also being targeted by banks. This includes loans that have been granted to companies that might have stock prices or credit ratings that are signs of business conditions failing. Sumitomot Mitsui Banking Corp. has prepared to raise loss set– asides on loans to weak borrowers. The bank has already announced that it would book a ¥1 trillion loss incurred from the cleanup of bad loans in this fiscal year.

Shokickhi Takagi, FAS Head of the supervisory bureau, has expressed that he is confident in the Japanese banks attempts to get rid of those loans failing to show positive performance. This will help alleviate investors’ concerns about the status of the financial industry.

Latent reserves are being used by some banks to conduct the cleanup, causing many to wonder if they will be able to meet necessary costs for disposal out of their profits in every term.

MARKET NEWS

NTT DoCoMo’s FOMA 3G Service; Possible Disappointment

FOMA- The 3G WCDMA (wideband CDMA service by NTT DoCoMo, was supposed to offer a dramatic leap in technology. The Japanese operator promised that the service was state of the art mobile phone service that would provide much faster transmission speeds and effortless downloading of video and music for those on the go.

DoCoMo, however, has encountered much criticism with reports of bugs, low connection rate, screen freezing, over heated and short battery life, difficulty accessing I-mode (DoCoMo’s internet service), and lack of sufficient content. The problems have been reported on a consistent basis from the approximately 4,500 users of FOMA since the end of May when the trial service first began. The question that is being pondered by many is whether these problems are the result of a green service or a highly fundamental flaw that is in the DoCoMo FOMA system itself because of the WCDMA standard. In the opinion of Yasomasa goda, telecoms analyst at Merrill Lynch in Tokyo, FOMA’s biggest problems are much more basic than software bugs”. In addition, Goda feels that DoCoMo’s failure to alleviate even some of the most basic problems prior to launching the FOMA service is rooted in the fact that they are inherent to the WCDMA standard, in turn making it difficult to fix the problems within the next few month’s.

General manager of NEC’s mobile wireless business unit, Yoshitak Matsuo, has stated that some of the difficulties with FOMA stem from using GSM for the core network. The slow connection rate of the service, as compared with 2G phone connection, arises from the fact that the specifications for the core network is based on GSM.

The GSM network can also be blamed for the short battery life, causing the need to recharge the batteries on a daily basis. This is a major inconvenience for Japanese users accustomed to PDC mobile phones. In direct contrast to FOMA, PDC phones are energy efficient, reducing the need to recharge the battery. GSM phones consume energy even when they are not in use, making the FOMA battery life anything but efficient.

DoCoMo is attempting to control the entire 3G system industry, causing industry officials to question how this is effecting the company’s ability to deliver effective and dependable service. The PDC system was based on a propriety system, enabling the development of end-to-end Internet experience for customers. WCDMA or GSM based, has eliminated the propriety right.

DoCoMo denies that any of the difficulties that have arisen are the result of their attempt to monopolize the 3G industry. In response, the company cites that the FOMA problems have come about because of the need to fine-tune the software, reminding critics that WCDMA is expected to have bugs bin it because it is such a new system. As many as 328 problems have been identified by DoCoMo, 235 of which have been resolved. According to the general manager of Fujitsu’s mobile connection and wireless division, Eisuke Iwacuchi, the number of problems identified is not proportionally large. Because of the possibility of such high number of potential problem combinations, the only way to properly identify difficulties is when the system is in actual use.

Initial connection rates have increased from 50% to 90% and are presently close to 98%. The company has since resolved the problems of screen freezing and poor connection. In addition, Keiji Tachikawa, DoCoMo’s president, expressed that he was confident that the service and the company will benefit from the trials and tribulations because of what has been learned from resolving problems.

Wireless Technology

Japan’s biggest liquid crystal display maker Sharp Corp. said on Wednesday, December 5th, that both Sharp Inc. and Cisco Systems Inc. had jointly developed high-speed wireless communications technology to connect home-use audio equipment and computers.

The technology is capable of transmitting large volumes of video data, even high-definition images, in addition to linking televisions and personal computers. The companies expect the technology to create a big market, a spokesperson from Sharp has stated.. By March 2003 Sharp will introduce commercial products using this technology.

The new technology is based on wireless Local Area Network know-how gained by combining Sharp’s video-transmission technology and Cisco’s wireless-communications technology. The transmissions range inside a house is up to 30-40 metres, compared with 10 metres of Bluetooth technology.

NEW TECHNOLOGY

Digital Movies Could Help Revive Industry

The movie industry is hoping that the introduction of digital movie-making, distribution and projection, will allow for increased efficiency and decreased costs. Lower ticket prices would attract a larger audience and help revive the hurting industry.

Digital projectors are presently being used by seven film distributors, such as Toho Co, Towei Co, and Tokyu Recreation Co. Worldwide there are only approximately 35 theaters that are digitally equipped. The DLP projectors in cinemas provide twice the contrast as conventional systems and higher resolution than low-end DLP projectors that are marketed for business conference purposes. In addition, the vibration produced on the screen from a spinning film reel is eliminated.

The projectors are much easier to operate since they do not require splicing or reel switchovers. AT the cineplex in Niigata the system was recently implemented and expects an estimated 80% savings on labor costs. In addition, the projector can store multiple movies on one hard disk, compared to twenty minutes on a single reel of film. In order to show a 90-minute movie made of five to seven reels of firm, two projectors are needed. Making it necessary for a technician to monitor the projector.

With the push of a button an operator can show movies ranging in topics and length, even pre-set showings. However, the cost of installing the system is three to four time the cost of conventional projectors. Once installed the overall cost is lowered.

The new projectors save space because there is no need for multiple projector and a splicing machine. This would allow the theater to use the added space for additional profits, such as a concession stand.

Germ Combating Fridge

A new line of refrigerator has been introduced to the market by Mitsubishi Electric Corp. that uses a purple light-emitting diode as a photocatalyst to fight food odor, while the interior features a germ fighting agent.

An increase in the amount of air flow through the deodorizing device makes the fridge twelve times more effective at odor elimination the previous products the company has produced.

The product adjust energy modes as a result of outside temperatures and the frequency the doors are opened. Other features include a vegetable container that shields the contents from cool air in order to prevent them from dehydrating.

There are two models available, one with a separate ice compartment and five doors and the other with double doors for the main fridge.

Radio-controlled clocks

The makers `of clocks are releasing new models that are ratio-controlled, using radio signals to set their time automatically. In October,, a second time-signaled radio station opened in Saga Prefecture, leading the clock makers to believe that there will be an increase in demand for the product following shortly.

The clocks offer more accurate time than conventional products on the market and do not need to be reset manually. Seiko Clock Inc. released eleven models in its new Tin Pa series of Wall clocks in mid-September, the prices ranged from ¥10,000 to ¥38,000. The clocks automatically choose from two frequencies– 40 KHz sent from the first time-signal station in Fukushima Prefecture and 60 KHz from Saga Prefecture.

Rhythm Watch Co. released a radio-controlled clock as part of its Nemurina series which sells for ¥10,000. Like Seiko’s product, this clock also chooses from two frequencies automatically and, in addition, has a second hand that “sleep” during the night hours.

Casio Computer Co. released 13– radio controlled models, which includes alarm clocks.

Department stores and consumer –electronics chains are preparing, even expanding, for the newly debuted timepieces.

Touch Screen

Sonyo Electric Co. has introduced an easy-to-use portable computer, Screo WTP-500. The device combines the functions of a computer and personal assistant to providing an easy-to-use means of navigation. Sales began the end of October with the unit priced at around $1,000.00. The company has plans to market 200,000 units in the first two and a half years. Sanyo is hoping to sell the device to companies that want to keep in close contact with their customers. It envisages businesses will give or rent out the unit to consumers and then offer a variety of services via the Internet then the user can gain access via the Screo.

MULTIMEDIA ALERT

Digital Television on the Rise

By the end of 2002 the number of households viewing satellite digital televisions will likely reach about 2.5 million. The contributing factors included in the rebound of satellite digital TV sales is the release of lower-priced products. In October, Matsushita Electric Industrial Co. released as many as three inexpensive tuner-equipped TV sets. With almost a 20% discount ,comparatively, the 28– inch model with price as low as $1,610 (¥200,000).

As of September, as cited by the Japan Electronics and Information Technology Industries Association, there was a 35% increase in the sales of stand-alone tuners and TV sets with built-in tuners for the month of October. The sales marked the first time in seven months that figures reached 50,000 units.

In addition, Sony Corp. has released new products that are close to ¥100,000 less then previous products released. The new line ranges in prices from ¥250,000 to ¥350,000. With the help of increased marketing strategies the companies have seen satisfying results.

At Best Deniki Co. shops for the month of October, sales were up almost 100% from September in the satellite digital TV set sector. Another electronics retailer, Yamada Denki Co., there has been an obvious increase in the demand for thin, large-screen plasma display panel TV sets. The TVs are equipped with tuners for satellite digital services. Joshin Denki Co., have the impressive sales increase of almost 200% since September.

It was not always good news for the industry sector. In December, of last year, when companies initially launched the product there was an outlook of 160,000 units of the receivers shipped. In the time period of April-June there was a comparatively sharp decline . In May shipments fell to a record low of 17,000 units. It was at this point that broadcasters placed greater pressure on the consumer-electronics makers to lower prices

The lower prices have been implemented at an opportune time, prior to the Winter Olympics and World Cup Soccer.

Video Games

In an effort to support software designers for Nintendo’s consoles and handheld players, the company’s president, Hiroshi Yamauchi, will sell some of his stake to set up a ¥20 billion ( $161 million) fund. The President will sell all of his 10.84% stake (1.18 million shares) in Nintendo and then repurchase an unspecified portion as a means of reducing Yamauchi’s capital gains tax bill. This fund, which is used to finance the design of games for Nintendo, may also have the salutary benefit of better identifying promising developers and strengthening ties with existing designers.

Some fund managers predict that the sale of Yamauchi’s 1.18 million shares isn’t small enough to prevent Nintendo’s share price from lowering. Nintendo is also exploring the option of having these software designers receive loans on the condition they complete designated projects for Nintendo’s game players.

In order to boost sales for Nintendo’s Game Boy Advance software, the company lowered the fees it charges to software companies that create games for this specific player. Currently, sales of the Game Boy Advance software have not surpassed those of software designed for the older Game Boy version, with each having sold 19.1 million software copies for the six month period ending September 30th.

Nintendo expects an increase in Game Boy Advance’s sales due to the upcoming Christmas season and has currently sold 21.8 million software units for the product.

Interactive TV Deal Won By Open TV

An agreement has been made between OpenTV Corp., a provider of interactive TV software and services, and Jupiter Telecommunications Co., Ltd. OpenTV will work with Jupiter’s J-COM Broadband unit, which presently has over 1 million digital subscribers, to develop on-demand news, weather, shopping and other services.

OpenTV, has topped rivals and has gained an opportune entry into the Japanese TV market, will develop interactive television services with Jupiter, Japan’s major cable TV operator.

Marty Leamy, President of OpenTV, has told Reuter that his company was able to win the contract because of their interactive TV content and in-country support services it will provide in addition to software. The main competitors were Liberate Technologies Inc., Microsoft Corp. and Canal Plus Technologies.

Jupiter is the largest multiple system operator with over 21 cable systems. nationwide.

BIO-SCIENCE DEVELOPMENT

Biotech Development in Japan Troubled

The biotechnology market in Japan different from the one that has been created in the United States or even Europe. The U.S. and Europe has seen significant growth within the industry, particularly the pharmaceutical sector, which have altered the field of medicine. However, in Japan the guarantee of growth in the biotech market is a distant fantasy.

The biotech venture market in Japan is the most fragile aspect of the biotechnology industry. The market lacks “the infrastructure that would serve as the foundation for the long-term growth”. To rebuild and make the market stronger will require serious investments of both time and money.

Because the Japanese market, in general, is so different from Western markets in terms of both size, it is much smaller, and structure it is extremely challenging to rebuild the infrastructure.

The general structure of a biotechnology company in Japan consists of a specialized department of a large corporation being spun off into its own company. Thirteen consortia that research highly unusual diseases have been funded by the government. Without the support of the government these companies would not have gained market support on its own.

The problem has arisen that despite the increasing desire to research genes that play a role in the onset of diseases, or genes that affect the course of a disease, companies are finding it difficult to receive funding. One of the reasons for the lack of biotech VCs is that the science is so complicated and investors are hesitant to take part in an investment that holds such uncertainty.

The government has voiced support on behalf of the biotech companies and is trying to build up the industry.

Diseased Eye Cell Replacement Studied

In Japan, scientists have possibly discovered a way to replace damaged cells in the eyes retina. Through results gained from animal testing, the possibility of the technique lending to the prevention of blindness from degenerative diseases of the retina, such as macu lar degeneration and retinitis pigmentosa, looks positive.

Dr. Masatoshi Haruta of Kyoto University, and colleagues, has found through his experimentations with rat eye cells, that some genetic altering could cause cells from the iris to take on new, light-sensitive features comparable to the retina.

The degeneration of retina cells are the leading causes of blindness. Retinal cells are incapable of regeneration once damaged. The retina is located at the back of the eye and is a thin membrane that captures images that are then transmitted to the brain through the optic nerve.

Under the guidance of Haruta, the team conducted investigations to determine the possibility of getting cells from the iris to take on the retina’s duties. It is noted that the surgical removal of a portion of the iris is an already established practice in patients suffering from such ailments as eye tumors.

The iris cells from rats were introducted to Crx, a gene normally expressed in the photoreceptor part of the retina. The iris cells exhibited retina-like traits with the assistance of Crx. The technique would allow doctors to use the manipulated iris cells in retinal transplantation.

Real vs. Artificial Blood Vessel

An artificial blood vessel said to closely resemble a real artery in terms of size, elasticity, and flexibility, has been developed. Researchers from the Kyushu University Graduate School of medical Sciences and the National Cardiovascular Center have noted the development of the artificial artery and cite that it has such characteristics as flexibility and elasticity in common with biologically fit arteries. The tiny holes punched in the small-diameter, double-walled tubes help elasticity. The tubes serve as a shunt for blood flow in patients suffering from arteriosclerosis obliterans.

To increase biocompatibility, a thin film of collagen and a polymer compound coat the inner and outer tubes. The inner tube is made from segmented polyurethane and is inserted into the 5.5 mm. The device is biocompatible, highly elastic, and durable. When tested in dogs, the device has lasted up to a year without complications

ENVIRONMENT

Sensor Detects Nano-Threat

Horiba Ltd., measuring– instrument maker, in collaboration with an associate professor at Toyohashi University of Technology, has developed a highly sensitive biosensor that has the capability of gauging concentrations of harmful substances in the environment at the nanogram level.

The device operates as such: A protein antibody applied to the surface of a charge-coupled device on the sensor comes in contact with a harmful substance, it generates ions and produced on the CCD parts where electrons are stored. The concentrations of harmful substance are gauged by electrically amplifying the rate of storage of electrons.

A prototype senso that measure some 2cm square is made by integrating a CCD and peripheral circuits on a chip. During experimentation, the team was ablel to gauge the concentration of bisphenol A, which is a chemical suspected of disrupting hormones, in units of several nanograms.

The new sensor is able to gauge the concentrations of substances in a time span anywhere from several seconds to about 30 minutes.

As a result of the DDC use it is now possible to produce a smaller, simple biosensor. In due time and with the changing of certain antibodies, the device may even be used in the detection of prions and other toxic substances polluting the air. Prions are the proteins thought to be responsible for mad cow disease.

In addition, if DENA is applied on the CCD instead of antibodies, the device could also be sued as a DNA chip. Specially trained individuals are needed to complete related tasks.

Negative Ions Get Attention

An increasing number of products that emit negatively charged ions are being released by home-appliance makers. The negative ions are believed to create a fresher environment, also eliminating bacteria and odor-causing molecules.

The products are in response to obvious consumer interest because of the greater airtightness of houses and the spread of hay fever.

Sharp Corp, Toshiba Carrier Corp., Hitachi Ltd. and Matsushita Electric Works are companies that are all marketing a wide array of negatively charged ion appliances. Air conditioners, brushes, hair dryers, and humidifiers are among the new product lines being introduced. More products are expected to follow the trend.

Chemical Synthesis without Byproducts Could Transform Chemistry

Three scientists, William Knowles, a former researcher at U.S. food-and-drug concern Monsanto Co., and K. Barry Sharpless of the Scripps Research Institute in La Jolle, California, along with Ryoji Noyori of Nagoya University, have received the Nobel Peace Prize for developing catalytic asymmetric synthesis, yielding only the desired form of the molecules that normally exist in two mirror– image byproducts.

This molecular catalysts discovery has brought scientists closer to the completion of chemical reactions that yeild the target compound but do not generate any harmful byproducts. Molecular catalysts are those with a molecular weight of less than 1,000 and a size of several nanometers.

Presently, the catalysts used for asymmetric synthesis promote the chemical reaction by skillfully arranging organic molecules around certain metals. However, different metal can only place their catalytic push on selected types of organic compounds, and in the process of completion trigger reactions that lead to the synthesis of a variety of unwanted byproducts.

Ryoji Noyori sought a solution to this problem as leader of the Noyori Molecular Catalysis project, sponsored by Research Development Corp. of Japan. Manager at the Material Science Laboratory of Nitui Chemicals Inc., Tadahito Nobori, was at one time a member of the project. Nobori has used ideas from his work at the project that have led Mitsui Chemicals to the development of a molecular catalyst for the synthesis of urethane.

The recently developed catalyst is 450 times more efficient and is able to yield urethane with as many as two-thirds fewer byproducts. In time, if this new urethane can be manipulated and used for car seats there will no longer be a need for springs. Presently, urethane is used for bumpers and insulation. A way to mass-produce urethane using the new molecular catalyst has been developed by Mitsui Takeda Chemicals Inc., a joint venture between Mitsui Chemicals and Takeda Chemical Industries Ltd. As a result, potential applications for the high-performance urethane material is under investigation.

This discovery has made the possibility of “tailor-made” chemicals a more realistic goal. Already promising to promote asymmetric synthesis experts will now be forces to rewrite the rules on what can and cannot be synthesized in the laboratory.

The investigation of molecular catalysts designs are underway to examine the possibility of controlling the construction of materials at the molecular level which is a highly necessary technology in creating a path for nano technology.

The ability to synthesize efficiently without the release of byproducts is appealing from both an economical and environmental standpoint. Perhaps making molecular catalysts the major point of change within the chemical industry.

The license to use technology for developing molecules that catalyze asymmetric synthesis reactions has been granted to Kanto Kagaku and a British subsidiary of Dow Chemical Co. of the U.S.

The licensed technology to domestic chemical and pharmaceutical producers will be provided by Kanto Kagaku. Dow Chemical unit is using their license to develop a catalyst that has that capability of synthesizing new practical and functional materials.

SEMICONDUCTOR

Japanese Chipmakers At Odd With Asian Rivals

Japanese chipmakers are at great odds with their Asian rivals over a critical segment of the semiconductor market. However, it is very apparent that Japans rivals in the Republic of Korea (South Korea) have the “upper hand”.

Japanese manufacturers have suffered incredible losses as a result of the massive price decrease for dynamic random access memory (DRAM) chips-microchips.

NEC Corp., Toshiba Corp., Hitachi Ltd and Misubishi Electric Corp. collaborated ,in late October, to discuss a possible filing of suit against their South Korean counterparts, whom they accuse of dumping chips into the Japanese market.

Despite the threat, South Korean companies, such as Samsung Electronics co. and Hynix Semiconductor Inc. have done little to alter the environment they are blamed for creating.

A senior executive at the world’s largest maker of DRAM chips, Samsung Electronics, has been quoted as saying “We will continue production, even though we may be losing money… The south Korean government and the industry are trying to force the Japanese to withdraw from the DRAM market altogether”.

There does not appear to be any faltering or signs of weakness for the South Korean rivals. Samsung Electronics made an announcement on October 29 stating that they plan to manufacture a massive amount of DRAM chips. Two days later, on October 31, the world’s third-largest maker of DRAM chips, Hynix Semiconductor, secured an agreement from its banks to obtain fresh loans to aide the struggling company.

There has no been in increase in the market price of DRAM chips, which is about one-third of the cost of production. The Japanese chip manufacturers are going to wait the silent war out, as opposed to filing suit and getting into an obvious price war.

A senior NEC executive is quoted as saying “ The Korean manufacturers are planning to raise prices once Japanese firms withdraw completely from the market to cover the losses they have accumulated…. If clients understood this, the price war wouldn’t last for long”.

The possibility of a turnaround for the Japanese manufacturers is highly unlikely because of the poor health of the market in general. In addition, Politicians, bureaucrats and financial institutions in South Korea are behind their country's manufacturers, adding to the pressure the Japanese industry is facing.

NEC and Hitachi have merged their DRAM businesses by setting up a joint venture in an attempt to revive profits. However, many analysts believe this is a hopeless effort.

Japan has enjoyed huge gains, but has also suffered massive losses being in the industry. South Koreans are not denying that this may be a short-lived occurrence. “Our advantageous position can only last for three years… China will emerge as the leading DRAM manufacturer sooner or later” said a senior exec. from Samsung Electronics.

Fujitsu Will No Longer Produce Flash Chips in the U.S.

Fujitsu Ltd. announced that it will no longer produce flash memory semiconductors in the United States as of the beginning of the 2002 year. The flash memory plant in Gresham, Oregon will no longer be in use as of the end of January, Fujitsu is currently seeking a buyer. The plant is operated by Fujitsu Microelectronics Ins., a California subsidiary and functioned as Fujitsu’s first overseas base manufacturer of semiconductors when it began operation in October 1988. The company has seen a dramatic cut back in the worldwide demand for the product amid falling prices.

The company’s semiconductor production overseas has experienced a major decline in semiconductor overseas. Prior to announcing a cutback in the semiconductor sector on U.S. soil, Fujitsu terminated chip production in Europe.

As a result of the cut back and closing of the Oregon plant, Fujitsu Microelements will liquidate inventory and let 670 employees go.

The company has a weak outlook for the possible recovery of product sales and has delayed further consideration of forming a joint venture with a U.S. partner to alleviate the losses caused by U.S. semiconductor productions. A factory in Aizu, Fukushima Prefecture will continue to make the chips after the closure of the U.S. plant.

Rights to Cancer Vaccine Granted To Japan Tobacco Company

Japan Tobacco, one of the world’s largest tobacco companies and maker of such brands as Camel, Winston, Mild Seven and Salem is being criticized for the potential to sell cigarettes to consumers under false pretenses.

The tobacco company announced that if a successful cancer vaccine was produced and went on the market, the company would continue to sell cigarettes. Japan Tobacco is in the process of making deals with biotech companies for the exclusive rights to market future lung cancer vaccines.

The vaccine would not eliminate the chances a smoker has of getting other tobacco-related diseases, such as heart disease and emphysema, but would potentially encourage smoking by lending to the belief that the disease could be treated.

Japan Tobacco has already paid Corixa, Seattle based, several million dollars for an exclusive license to develop and sell vaccine and antibody-based products aimed at the prevention and/or treatment of cancer, primarily in north America and Japan.

Genesys, California based, also signed a contract with the third-biggest tobacco firm in the world in 1998 granting Japan Tobacco marketing rights to products developed.

Many of the issues arising amongst critics involving the morality behind the situation. “Giving a tobacco company exclusive rights to lung cancer vaccines is like putting Dracula in charge of a blood bank”-Helen Wallace of GeneWatch UK. The tobacco companies are using this break through development to increase profits, not prevent further diagnoses.

The biotech firms defend their contracts with Japan Tobacco holding, stating the firms are dealing with the pharmaceutical division of the company.

Japan Tobacco derives more than 97 percent of its revenues from tobacco sales and 67 percent of the company is owned by the Japanese government. Since 1998, Corixa has filed 6 world patents relating to lung cancer diagnosis and therapy. In June of 1999, Corixa Corporation granted Japan Tobacco a 3-year exclusive license to develop and sell vaccine products aimed at preventing or treating lung cancer in North America, Japan, and in China with a co-exclusive license with Zambon Group.

The license excludes Europe, the former Soviet Union, Argentina, Brazil and Columbia, which are covered by an exclusive license granted to the Italian pharmaceutical company, Zambon Group.

In 1998, the deal with Cell Genesys gave Japan Tobacco sole marketing rights to its genetically engineered cancer vaccine in Japan, Taiwan and Korea with the exclusion of the U.S., Cell Genesys retained marketing rights.

This deals gives many the impression that the Tobacco Company’s are using a sick and twisted means to manipulate the consumer into feeling comfortable with smoking. “ We tackle lung cancer by breaking the addictive grip of the tobacco industry and taking action to help people quit smoking or never start. The last company that should control the rights to a lung cancer vaccine is one that makes huge products that cause the disease in the first place” states Derek Uach, Director of Non-communicable diseases at the World Health Organization (WHO).

This issue makes it difficult to determine what is in the best interest of the general public. If the rights to the gene patents are granted, it could lead to exclusive control over new treatments and medicines by one of the main causes, tobacco. Japan Tobacco is merely using the rights to the vaccine to diversify business. President of Japan Tobacco, Masaru Mizuno has stated that “ It is inevitable that domestic (demand for) cigarettes, the main source of our cash flow, will be decreasing in the future. We need other sources”. The need for additional cash flow sources has taken them into the sectors of the food and drug industries. However, neither sector has proved to be lucrative.

Japan Tobacco purchased 53% of the mid-size pharmaceutical company Torii Pharmaceutical Co, in 1998. Japan Tobacco has expanded its’ U.S. subsidiary in an effort to strengthen clinical development. The Company has steadily increased investments in the pharmaceutical industry, building out what is now a $638 million division for the conglomerate. Plans are also underway to expand overseas in places such as Japan and Europe, perhaps someday China.

Despite efforts to diversify into three markets, the large share of the company that the government owns hinders the ability to operate like a private company.

Japan in the United States

Japan Auto Sector Gains U.S. Market Share

For the past ten months in a row Toyota Motor Corp. , Honda Motor Co., and Hyundai Motor Co., in the U.S. have taken market share from U.S.-based rivals.

Asian-based makers gained 1.4 percentage points to 30.4 percent in November while U.S. –based rivals lost 1 point to 64.1 percent., and European market share fell 0.4 points to 5.5 percent. General Motors and Ford have both cited that sales decreased following the Thanksgiving holiday, despite free financing offers.

With Honda at the forefront, Asian-based makers have regained some of their market share that was lost in October when General Motors Corp. and Ford Motor Co. increased incentives in an attempt to bring back buyers following the tragedy of September, 11th. DaimlerChrysler AG’s Chrysler unit, U.S. based, issued zero-interest loans to help jump start the auto demand.

Subaru of America, the U.S. arm of Japan’s Fuji Heavy Industries Ltd., have noted that there has been an increase in demand for all-wheel drive Subaru wagons and cars rising 13 percent to 16, 122 units. Sales for Fuji Heavy, 21 percent owned by General Motors, have risen 8 percent this year. Nissan Motor Corp, Japan, has stated a sales increase of 6.9 % to 56,223 units.

Manufacturer Price-Fix

Ibiden Co. Ltd., a Japanese manufacturer of ceramics and electronics parts, agreed in July to plead guilty to its involvement in an international price-fixing cartel, on the condition that the company will not be forced to face criminal charges. Ibiden agreed to pay a fine of $3.6 million for fixing the price of isostatic graphite, a carbon substance used in machines that produce electrodes, dies, molds and other products used in the semiconductor industry. The Japanese firm chose to cooperate with the US Justice Department as part of a plea agreement, which is subject to approval by the US District Court in Philadelphia. Ibiden wants to reduce the time commitment and cost from such a lawsuit and has already posted the $3.6 million fine as an extraordinary loss in the year ended March 31.

A federal grand jury in Philadelphia also indicted three executives of the company in connection with the case. The indictments charge Masaru Endo, Ibiden’s chairman; Shigeo Yasuda, general manager of the company’s ceramic department; and Akira Hashimoto, general manager of international sales for the department. The three Japanese citizens are accused with conspiracy to fix prices of isostatic graphite in the period between July 1993 to February 1998. They were also indicted for attempting to suppress and eliminate competition by agreeing not to sell to each other’s customers as well as setting market shares.

Ibiden is the third company to be charged for its involvement in the isostatic graphite price-fixing conspiracy. Both Carbine of America Industries Corp. and Toyo Tans USA Inc. have also been charged. One executive from each company has pleaded guilty.

Short News

An extensive partnership in production and sales in planned between Daikin Industrial Ltd., the leading Japanese air-conditioner company, and Trane Co, the second largest air-conditioner maker in the U.S. The combined annual sales of the two companies reaches close to ¥trillion , which is higher then the sales of Carrier Corp., the global market leader. As of now, the combined world market share for the two companies is just under 20%. The companies plan to enhance cost competitiveness and business for each other because they specialize in two different types of air conditioners. Daikin will use the U.S. company’s marketing channels to sell small and midsize air conditioners in Northern and Latin America.

Mitsubishi Corp. will invest $130 million in the expansion of operation in the U.S. The company will work with the U.S. independent power producer, Tenaska Inc., building upon the existing relationship. Mitsubishi believes the U.S. has a large latent demand for electricity generated by independent power producers, perhaps making the market the most important for power generation operations. Mitsubishi will take stakes in companies that will operate two power plants already under construction by Tenaska in Oklahoma and Alabama, this will be through holly owned subsidiary Diamon Generating Corp. By 2003 both facilities should be generating electricity.

As early as December Argo Graphics Inc., a vendor of computer-aided design systems, plans to make a full-scale entry into the U.S. The company will take a capital stake in the California firm, Global Vision technology Inc., with the intentions of engaging in CAD training, consulting and system sales, primarily for Japanese companies in the US. A private placement of shares by Global Vision will give Argo Graphics a 3% stake for ¥30 million. There is also a possibility that Argo Graphics will utilize the long-standing relationship with parts supplier Honda Motor

United States in Japan

Guidant Corp., U.S. Release Product Lineup In Japan

Guidant Japan KK is strengthening its lineup of products to treat cardiac dysrhythmia.

The local arm of U.S. medical instrument manufacturer Guidant Corp. has released two new pacemakers, both designed for patients with irregular heartbeats. One of these, the Pulsar Max II, has a function that simultaneously senses breathing as well as body movements and adjusts the heart rate accordingly. This offers more effective treatment then conventional devices that detect these changes with separate timing, the company said.

The new pacemaker are priced at ¥1.6-1.79 million, and Guidant Japan expects annual sales of 10,000 units.

The introduction of the PULSAR MAX II and DISCOVERY II is part of Guidant’s ongoing effort to provide the most advanced treatment options to patients in Japan and worldwide. In total, an estimated 38,000 pacemakers will be implanted in Japan in 2001.

The PULSAR MAX II and DISCOVERY II systems both introduce new feature designed to help physicians manage patients with atrial arrhythmias. These features are intended to stabilize the primary pumping action of the heart during periods of atrial fibrillation by providing pacing at regular intervals in the ventricle during atrial arrythmias.

The PULASR MAX II also has a sophisticated algorithm designed to provide an appropriate heart rate for a patient’s given level of activity.

End To The Joint Venture

Johnson & Johnson and Kyowa Hakko Kogyo Co. have agreed to make their prescription-drug joint venture in Japan a wholly owned subsidiary of the U.S. multinational, the two companies have stated.

Johnson & Johnson will acquire Kyowa Hakko’s 40% stake in Janssen-Kyowa Co. by the end of this year for an estimated ¥15 billion. The name of Janssen-Kyowa, which will retain its directors and employees, will be changed to Janssen-Pharma as of January 1, 2002.

Johnson & Johnson will market solely some of the products it previously sold with Kyowa Hakko from April next year, after the termination of the venture.

By pursuing an accelerated decision-making process, the U.S. firm aims to expand sales in Japan, by 2006, to ¥100 billion. In the year 2000, sales were ¥32.1 billion.

The Company has additional plans to increase the number of drug sales personnel to 1,000 from the current number of 420 employed. Plans to increase the number of clinical development staff by 10 additional employees each year, from the current 150, are also being considered.