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When Japan invented the world’s first camera-equipped mobile phone two decades ago, it marked an early but crucial step in transforming the phone into a sophisticated high-speed wireless information terminal.
Two decades later, as the world develops 5G networks that are tens of thousands of times faster, the nation that pioneered many of these technologies has been largely absent. Having lost the lead in consumer-facing phones after losing the switch to smartphones, Japanese brands have also lagged behind Nokia Oyj, Ericsson AB, and most importantly Huawei Technologies Co. in developing 5G infrastructure. .
Those three manufacturers control nearly 80 percent of the 5G base station market share, according to research firm TrendForce. But Japanese companies have received an unexpected lifeline from the US-led crackdown on Huawei, the Chinese company that was at the forefront of the technology rollout. As US partners seek providers from friendlier countries, providers from close US ally Japan suddenly seem much more attractive to carriers around the world competing to upgrade their networks.
“He has given us a chance,” said Jun Sawada, chief executive of the Japanese telecommunications giant Nippon Telegraph & Telephone Corp., also known as NTT, of the United States’ steps to eliminate Huawei.
The 5G opportunity could help companies like NEC Corp., Fujitsu Ltd., and other network equipment manufacturers make new strides in a global supply chain that will only grow. Recognizing this, the government has also supported the effort, offering hundreds of millions of dollars in support earlier this year to the nation’s few remaining vendors to build 5G and post-5G technologies.
Since coming to power in September, the administration of Prime Minister Yoshihide Suga has pushed this accusation, and has launched the sector as one of its pillars of growth.
“To take global leadership in next-generation technology, including post-5G and 6G, the government will lead the charge of research and development,” Suga said at a press conference on Friday, announcing more than 1 trillion yen ($ 9.6 billion) in spending an upcoming additional budget for technologies, including wireless.
Having banned the installation of Huawei 5G equipment from next September, the UK is already turning to NEC and Fujitsu, as well as South Korea’s Samsung Electronics Co., to help with its 5G rollout. In June, NTT agreed to acquire a 5 percent stake in NEC, partnering to jointly develop 5G technologies.
In a report on UK supply chains last month, UK Digital Secretary Oliver Dowden noted that the decision to phase out Huawei would leave the country totally dependent on just two suppliers, Nokia and Ericsson, to supply the critical 5G infrastructure.
“This represents an intolerable resilience risk,” Dowden wrote. The strategy sets out a plan to attract new suppliers and support incumbents so that the nation “does not depend on a single supplier.”
NEC shares are up about 21 percent this year, while Fujitsu has added nearly 35 percent, though the gains are largely supported by expectations about its role in Suga’s plans for a digital transformation of the sector. Japan public.
Open model
Japan’s early attempts to dominate the mobile Internet space failed miserably, and the tightly controlled mode I Internet access service of NTT’s unit, NTT Docomo Inc., was unable to catch up in an era of open standards from Internet. From Betamax to Blu-Ray, Japanese companies have rarely associated themselves with promoting open platforms, but are now embracing the concept as they seek to cover lost ground amid Huawei’s challenges.
NTT Docomo is one of the founding members of the O-RAN Alliance, a group that powers open radio access networks (RANs), a crucial part of the telecommunications infrastructure that connects user devices to the wider network.
Traditionally, vendors supplied the RAN and the core network together, and as networks became more complex, only the largest vendors could provide the complete package. That advantage accrued for companies like Nokia, Ericsson, and Huawei.
“From an operators perspective, hiring Huawei is easy,” explains Sawada, who spoke to Bloomberg News in an interview earlier this year. “They will do everything for you.”
He compared this vertically integrated approach to that adopted by Apple Inc. compared to Microsoft on PC or Google on smartphones. The open model aims to break this down and provides opportunities for smaller manufacturers.
“The O-RAN concept is fine, but Nokia and Ericsson just won’t stay quiet and stand by,” said Shinji Moriyuki, analyst at SBI Securities Co. . “
‘Great opportunity’
The administration of US President Donald Trump has campaigned against Huawei’s involvement in 5G networks since 2018, urging its allies to boycott the company’s 5G equipment. Japan has a more difficult needle to thread than others as it depends on the United States for its national security, but it also seeks to improve relations with its main trading partner. It’s a tension Sawada acknowledges.
“China and the United States are strong countries,” he said. “The worst thing that could happen to Japan is that they work together.”
Rakuten Inc., the Japanese e-commerce giant that is building its mobile phone network in Japan to challenge incumbents in the long term, has adopted O-RAN for its 4G and 5G networks. Founder and CEO Hiroshi Mikitani told a conference in November that his goal is to export his network technology overseas and sees its value as “easily exceeding one trillion yen.”
The open model is also seen as strengthening the bargaining position of operators in contracts for the development of 5G networks, and telcos can choose from a wide range of providers. It also provides opportunities for systems integration providers, in which Japanese companies excel.
“Pursuing this open model that increases competition and seeing how much we can win is a huge challenge for us,” said Takahito Tokita, Fujitsu CEO. Earlier this year, Fujitsu sealed a deal to sell 5G technology to Dish Network Corp., which is building its own network after acquiring the Boost wireless business of T-Mobile US Inc.
“This is a multi-billion dollar market,” he told Bloomberg News. “Even a small percentage of that is a great opportunity for us,” he said, adding that Fujitsu is still nothing more than a “newborn girl” compared to Nokia.
Japanese companies were once talked about in Western circles in a similar way as those in China are now doing, working too closely with the central government and benefiting from unfair competitive advantages. But a lot has changed in Japanese business since the first camera phone was launched, with its maker Sharp Corp. now owned by a Taiwanese company, something almost unthinkable just a decade ago. The 5G era and beyond could show your companies how to fight bigger competitors with a more open approach. Bloomberg News
