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BANGKOK – Suspicions that Huawei Technologies’ telecommunications equipment could serve as a back door for Chinese espionage have helped breathe new life into a Japanese tech ecosystem long believed to be dying.
Several companies that prospered under the wing of Japan’s former national telecommunications monopoly, Nippon Telegraph and Telephone Public Corp., which was later privatized and divided to form the NTT group, are trying to gain a foothold in world markets.
In Europe, the UK government’s move to exclude Huawei from its 5G wireless network is a hopeful sign for a group of closely related Japanese manufacturers that once supplied the NTT forerunner. In November, London unveiled a plan to remove high-risk providers – read Huawei – from its 5G network and offered financial support to Japanese electronics maker NEC to help build 5G networks in Britain.
NEC has taken a number of steps to increase its share of the global telecommunications equipment market. In June, it forged a business and capital alliance with NTT to develop products for telecommunications networks around the world.
Meanwhile, the US government is working to limit Huawei’s reach, arguing that the Chinese telecommunications company poses a threat to national security. Washington argues that the Chinese government could use Huawei’s network technology to gain access to sensitive data around the world. Australia, the UK and France are also wary of the Chinese, which may give NEC a chance.
But seizing that opportunity will be a tough challenge for NEC, whose less than 1% share of the global telecoms market is dwarfed by rivals like Sweden’s Ericsson and Finland’s Nokia, which are especially competitive in Western countries.
Therefore, the main struggle for 5G supremacy is likely to unfold in emerging economies that lack their own telecom equipment manufacturers.
NTT, Japan’s former telecommunications monopoly, was known for working hand-in-hand with suppliers, including the NEC, to develop equipment. This arrangement became obsolete when contracting in Japan was opened to foreign manufacturers. But the old alliance with Japanese manufacturers has taken on a new incarnation.
The question is whether the revived association will be able to gain a foothold in the international market. Few Japanese remember the glory days of the industry, but their mark is clearly visible in Thailand.
King Mongkut’s Ladkrabang Institute of Technology (KMITL) in Bangkok, a leading science and technology institute in Thailand, was the embodiment of Japan’s traditional strategy to advance its telecommunications ambitions.
On campus there is a monument marking the institution’s founding as a telecommunications training center in 1960. The monument says, in Thai, Japanese and English, that the training center was founded based on an agreement between Japan and Thailand. .
In late August, the university held a ceremony in a Bangkok suburb to mark its 60th anniversary. Kazuya Nashida, Japanese Ambassador to Thailand, was invited.
A marker on the campus of the King Mongkut Ladkrabang Institute of Technology in Bangkok commemorates the institution’s founding as a telecommunications training center in 1960.
Had it not been for the novel coronavirus pandemic, a minister from former Prime Minister Shinzo Abe’s cabinet would also have been there. Akira Yoshino, an honorary member of the Japanese chemical company Asahi Kasei who received the Nobel Prize in Chemistry in 2019, was scheduled to give a speech.
KMITL’s strong ties to Japan date back to its founding. In its beginnings, it was an “NTT university”.
Japan’s state telecommunications company was established in 1952 as a spin-off of the former Ministry of Communications, which oversaw Japan’s telecommunications and postal services. The company opened its first overseas office in Bangkok in 1958.
Takeshi Kajii, the first president of the state corporation, chose Bangkok because it housed a UN agency. It was also part of Japan’s plan to open a telecommunications training center in Thailand.
Kajii, who was an engineer in the former Ministry of Communications, also served as president of the NEC prior to WWII. He knew that Japan lagged behind Western nations in telecommunications technology, but understood that Japan had to sell more products abroad to support the economy.
The challenge was to promote Japanese telecommunications exports in the face of fierce competition from large Western companies with better technology. Kajii’s strategy focused on cooperating with Asian nations, helping them develop human resources for their telecommunications industries. The idea was to send Japanese technology and experts to these countries to pave the way for subsequent exports of Japanese products.
This patient strategy paid off in the 1980s and 1990s, when NEC built plants to manufacture telephone switchboards in Asia. After NTT’s privatization in 1985, it bought stakes in Asian telecommunications companies, which helped promote Japanese technology in the region.
The payoff was particularly great in Thailand, where NEC built a plant in 1989 and established a foothold in the Thai market, rivaling those of Germany’s Ericsson and Siemens, whose telecommunications businesses later merged with Nokia’s. In 1992, NTT bought an 18% stake in the Thai fixed line operator TT&T, which was established that year to finance, build and operate telephone networks in regions outside of Bangkok.
Soon after, however, Japan’s big telecom operators went through more difficult times. In the first half of the 1990s, the Thai government asked NEC to supply switchboards and base stations for its nascent mobile communications network. But NEC rejected the offer. Its Thai unit was busy with its fixed line equipment business, while NEC’s plants in Japan were concerned about supplying NTT Docomo, the mobile arm of the NTT group, according to an NEC executive.
Ericsson and Siemens intervened in the breach, supplying wireless equipment to Thailand. This led the country to adopt European technology and standards for its wireless infrastructure. In the early 2000s, Huawei joined the Europeans, who divided the Thai market with Ericsson and Nokia.
NEC’s strategic blunder in Thailand highlights how Japanese mobile phones failed to capture significant shares in foreign markets, despite Japan’s early technology leadership, due to “Galapagos syndrome,” a myopic approach to the domestic market.
The fortunes of Japan’s telecommunications industry declined further as it failed to keep up with important technology trends, such as the shift from fixed line to mobile communications, from voice to data and from switchboards to Internet protocol switching. That failure eventually even undermined the dominance of Japanese companies at home as foreign players moved in with better technology.
But after three decades in limbo, Japanese companies are hoping for a return to the global telecommunications market. Once again, they are using Southeast Asia as a springboard to expand elsewhere.
The NICT Asia Center in Bangkok, an outpost of Japan’s National Institute of Information and Communication Technology, will soon begin an outdoor demonstration project for a millimeter wave radio system using NEC equipment. The system is designed to serve as a wireless link between cellular base stations.
The global bandwidth shortage facing wireless operators is driving experiments with the underutilized millimeter wave (mm wave) frequency spectrum for future mobile communications networks.
As wireless communication technology moves towards 6G, which is expected to launch in the 2030s and beyond, higher frequency bands will be used. The radio waves used will have shorter wavelengths, which creates problems because the range of radio communication systems decreases as the wavelengths get shorter.
Therefore, future mobile networks will require more base stations, eventually more than one per person. Today, base stations are connected by fiber optic cable. However, this is costly and future wireless networks could become too large for fiber optic cables to be a viable option. One potential alternative is millimeter wave wireless technology.
NEC has already finished testing the system in Japan. Thailand will be the first county abroad to conduct a trial of millimeter wave technology. It was chosen because of the long-standing relationship between Japan and Thailand, which began with the founding of the telecommunications training center in Bangkok.
NEC hopes that the experiment in a hot and humid climate in Southeast Asia that could affect equipment performance will pave the way for the adoption of millimeter wave wireless technology as a standard for the Asia-Pacific region, which will determine what soon as possible. like next year. That would give NEC an advantage in Thailand and neighboring countries.
Huawei has already established itself as a leading provider of 5G equipment for Asian telecommunications networks by taking advantage of its technological and price competitiveness.
It will be difficult for NEC to secure contracts to equip full base stations, but the company could be a strong competitor if it continues to undermine Huawei’s control in niche markets, such as communication between base stations, said Tetsuya Kawanishi, a professor at Waseda. University and expert in radio and optical technologies supervising the NEC test.
In typical infrastructure deals, one company supplies all the equipment. But NTT and NEC are advocating an open model for telecommunications networks, hoping to keep costs low by attracting multiple providers. The millimeter wave wireless project aims to demonstrate the benefits of this approach.
The conflict between the United States and China is fragmenting the global telecommunications equipment market, which had been relatively fluid due to deregulation and innovation.
In this changing context, Japan’s telecommunications industry is attempting a renaissance on the world stage. It is an opportunity that Japanese companies will not want to miss.
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