Chapter 5

ICT and the Future of Industry

Part 2

Section 1　ICT and Future Issues for Japan’s Economy

In this section, we sort through prevailing views on play.
future issues for Japan’s economy and the role ICT can

1. Future issues for Japan’s economy

(1) ‌Continuation of the low birth rate and aging population and (2) Course of action toward mid-to-long-term economic growth
the arrival of a society with a declining population As the birth rate remains low and the population con-
Due to the ongoing low birth rate and aging popula- tinues to age and decline, we must move ahead with
tion, Japan’s working-age population has been in decline supply-side measures and demand-side measures, as
since its peak in 1995, and the total population started two halves of the same whole, in order to realize mid-to-
declining since its highest point in 2008. According to long-term economic growth. On the demand side, the
the national census, the country’s total population in first priority is to focus on the shrinking labor input and
2010 was 127.08 million and the working-age population to boost the productivity of enterprises. Additionally, we
was 81.03 million. And according to population projec- must expand the labor participation rate through the
tions (medium fertility assumption) by the National In- promotion of employment for women and seniors as well
stitute of Population and Social Security Research, the as improve labor quality through enhancements to edu-
total population will fall to 116.62 million in 2030 and to cation and HR development. On the supply side, it is im-
86.74 million in 2060 (a 31.74 percent decline from the portant to advance efforts to capture expanding over-
2010 population). The working-age population is fore- seas demand through proactive global expansion by
cast to shrink to 67.73 million in 2030 and to 44.18 mil- enterprises and to strive to generate sustained demand
lion in 2060 (a 45.47 percent decline from 2010) (Figure through the creation of new products and services
5-1-1-1). (product innovation).

Figure 5-1-1-1 Transitions in and future projections of Japan’s population

[tens of thousands] Actual figures Projected figures (%)
14,000 45
12,670 12,708 12,660
12,328 12,729 12,706 12,410 39.9
12,544
12,101 12,066 40
12,000 11,699 3,317 11,662 39.4
1,247 1,826 36.1 38.8
11,189 2,567 3,395 11,212 37.7
1,065 1,489 2,201 2,925 3,612 10,728
10,466 3,657 35
887 10,221
9,921 3,685 33.4
10,000 9,430 739 9,708
9,007 624 31.6 9,193
540 30.3 30
8,411 479 29.1 3,741 8,674
26.1
416 26.8 3,868
8,000 3,856 25
3,768
8,251 8,716 8,409 23.0 3,626
7,883 8,590 8,622 3,464
6,744 7,581 20.2 20
6,000 5,517
5,017 6,047 7,212 8,103
14.6 17.4 7,768 7,341
7,682 7,085
12.1 6,773 15
6,343
4,000 10.3 5,787
5,353
9.1 5,001
7.1 7.9 4,706 10
4,418
5.7 6.3
2,000 4.9 5.3 2,751
2,515 2,249 5
3,012 2,553 2,722 2,603 2,001 1,752 1,621 1,457
2,843 1,847 1,680 1,583 1,204 1,073
2,979 1,324 1,129 1,012 939 861 791
0 0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Population 65 and older Population between 15 and 64 Population 14 and younger Percentage of seniors

(Source) Figures to 2010 taken from the “National Census,” MIC; figures for 2014 taken from “Population Statistics,
” MIC (figures established on December 1); and figures for 2015 and beyond taken from “Population Projections for
Japan (January 2012),” (medium fertility and medium mortality assumption)
National Institute of Population and Social Security Research

29
 2. The role of ICT in economic growth
(1) ‌Boosting the productivity of enterprises with ICT (supply side (1)) three essential status symbols (B&W televisions, wash-
ICT can be used to make enterprises’ production ac- ing machines, and refrigerators) and later by three new
tivities and distribution activities more efficient, thereby essential status symbols (color televisions, air-condition-

Part 2 boosting productivity. In the past, enterprises in all in-

dustries have largely focused their efforts to boost pro-
er units, and cars). But since the 1990s, Japan’s econom-
ic growth has been sustained on the demand side by
ductivity with ICT on making business operations more ICT-related products and services.
efficient. For example, beginning with the construction Like other products and services, ICT products and
of business operation systems with mainframes, then services, viewed individually, start with an early-adaptor
moving through the widespread adoption of client-serv- stage, pass through a growth stage, and finally reach a
er systems to today, when cloud computing is utilized. stage of demand saturation. ICT products and services,
As this shows, ICT is the most common tool for raising however, are distinguished by the creation of new de-
efficiencies in business activities (process innovation) rivative products and services, after an original product
and it is the driving force behind economic growth as or service spreads extensively through the market for a
seen from the supply side. Further efficiency improve- time, that use the original product or service as a plat-
ments are expected in production and distribution pro- form. Repeating this process forms new markets at mul-
cesses through, for example, the analysis of big data. tiple tiers. Repeating this process forms new markets at
multiple tiers. For example, the rapid growth of the
(2) ‌Expanding labor participation and improving labor quality smartphone has led to the development and populariza-
with ICT (supply side (2)) tion of all kinds of apps, and the dissemination of these
Telework and other working arrangements made pos- apps has led to the growth of content markets within
sible with ICT are expected to give diverse, flexible work apps (for example, the stamp market for the Line app).
options to women raising children, seniors, people with Another example is the emergence of a new transaction
disabilities, and others and, thereby, increase labor par- arrangement called the sharing economy, in which indi-
ticipation rates. At the same time, ICT progress has viduals share goods and services backed by social me-
greatly changed the skills required for employment and dia’s proliferation that makes trust relations visible. The
the in-demand skills are anticipated to change even continuation of such product innovation in the ICT field
more in the future. Therefore, it is imperative, in the in- may be able to sustain our economic growth from the
terest of improving labor quality, to foster a labor force demand side.
that can cope with these future skill changes through
early ICT education and other measures. (4) Global expansion of the ICT industry (demand side (2))
In contrast to Japan, where there are fears the declin-
(3) Creating new markets with ICT (demand side (1)) ing population will trigger a contraction in domestic de-
ICT is the source of new market creation. In the ICT mand, rapid increases in demand are forecast for emerg-
field, innovative products—such as mobile phones, com- ing countries, fueled by population growth and rising
puters, flat-panel televisions, smartphones, and tab- incomes. It is essential to aggressively tap into this over-
lets—and innovative services—such as online shopping, seas demand for our mid-to-long-term economic growth.
content delivery, online games, social media, and smart- Consequently, global expansion of the ICT industry, one
phone apps—have been developed and marketed one of Japan’s leading industries, is thought to hold major
after another, creating new markets. During Japan’s pe- significance from this viewpoint. Figure 5-1-2-1 below
riod of rapid economic growth, economic growth was summarizes the points made above about ICT’s contri-
sustained on the demand side by the popularization of bution to sustained economic growth.

Figure 5-1-2-1 ICT’s contribution to sustained economic growth

Low birth rate, aging population, declining population

Falling labor inputs Shrinking domestic demand

Supply Realize sustainable Demand

growth

Greater supply capabilities Greater demand capabilities

Improve productivity Generate demand

Ex.: Growth of cloud with new products
of industry (process
computing, application and new services Ex.: Mobile app
innovation)
of big data (product innovation) economy, sharing
Expand labor economy
participation and Incorporate
Ex.: Popularization of improve labor quality global demand
telework, realization Ex.: Packaged ICT
of ICT education infrastructure

30
3. Objective verifications
Based on the categorization of ICT economic contri- (2) ICT investment’s contribution to economic growth
butions in the previous paragraphs, in the following Next, we looked at how much ICT investment contrib-
paragraphs we verify ICT’s contributions to our macro utes to our country’s economic growth. Figure 5-1-3-2
economy to this point using objective data. Note, how-
ever, because of constraints on data availability, the fol-
below measures the contributions of production factors
to economic growth using a growth accounting method Part 2
lowing verifications do not completely cover the ICT with capital split into “ICT capital” and “general capital”
economic contributions categorized above. Refining categories. “ICT capital services,” which reflect the in-
these verifications is a future topic. crease in ICT capital stock through ICT investment, con-
tributed 0.40 percent over the 1990―1995 period and
(1) ICT investment’s contribution to growth in labor productivity 0.69 percent over the 1995―2000 period to our econom-
We begin by looking at how much ICT capital goods ic growth rate. These data indicate that ICT investment
have contributed to labor productivity growth rates by has been a major contributor to the growth of Japan’s
industry. Figure 5-1-3-1 below provides a breakdown of economy since the 1990s. ICT capital services contrib-
contributing factors to labor productivity growth rates uted 0.27 percent over the 2000―2005 period and 0.34
over the 2000―2013 period for all industries, for the percent over the 2005―2010 period, remaining a posi-
manufacturing industry, and for the service industry. In tive, although somewhat smaller, contributor. For the
the manufacturing industry, further ICT capital goods 2010―2013 period, ICT capital services contributed 0.19
contributed 0.15 percent of the 3.18 percent growth in percent of the 0.97 percent total economic growth rate
labor productivity over the period. In the service indus- (Figure 5-1-3-2).
try, further ICT capital goods contributed 0.14 percent Because of declines in the labor force population, la-
of the 0.32 percent growth in labor productivity over the bor services have been a negative contributor to eco-
period. Thus, ICT capital goods were a positive contribu- nomic growth since 1990 onward. ICT capital services,
tor to labor productivity growth rates in both the manu- conversely, have consistently been a positive contributor
facturing and service industries (Figure 5-1-3-1). These to economic growth since 1990. This suggests that ICT
data indicate that ICT investment lifts labor productivity investment plays a role in supporting economic growth
regardless of the industrial sector. in a society with a declining population.

Figure 5-1-3-1 Contribution of ICT capital goods to labor productivity growth rates by industry
(%)
3.5 3.18
3.0 0.15

2.5 1.14
2.0
1.5
0.90
1.0 1.88 0.32
0.13
0.14
0.5 0.67
0.56
0.0 0.09
-0.38
-0.5
-1.0
All industries Manufacturing industry Service industry
TFP Contribution from Contribution from ICT
non-ICT capital goods capital goods

(Source) “Study on Economic Analysis of ICT,” MIC (2015)

Figure 5-1-3-2 ICT capital services’ contribution to economic growth

(%)
2.5

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0

-1.5
1990-1995 1995-2000 2000-2005 2005-2010 2010-2013
Labor services -0.52 -0.35 -0.50 -0.40 -0.06
General capital services 1.08 1.20 0.67 -0.36 0.27
ICT capital services 0.40 0.69 0.27 0.34 0.19
Other (TFP) 0.47 -0.70 0.75 0.75 0.57
Economic growth rate 1.43 0.84 1.20 0.33 0.97

(Source) “Study on Economic Analysis of ICT,” MIC (2015)

31
 Section 2　Global Trends in the ICT Industry
In this section, we categorize trends in the ICT indus- ICT industry in those markets.
try’s global markets and verify the position of Japan’s

Part 2
1. Overall trends
As discussed in Section 3 of Chapter 1, the current ing with enterprises in other layers aiming to generate
structure (an era of co-creation and competition through new added value, as the market’s diversification and glo-
mobile and cloud) of the ICT industry supports a mix- balization accelerates and as vertical separation and
ture of business models, with enterprises in each layer horizontal integration between layers progresses (Fig-
expanding into higher and lower layers and collaborat- ure 5-2-1-1).

Figure 5-2-1-1 Current structure of the ICT industry

B2C B2B
Content and LINE
Content and app Software and IBM

applications businesses System vendors Microsoft

Netflix SAP,
Services

Gree, DeNA, Facebook, Rakuten

System Fujitsu,
Platforms Platform and net businesses Hitachi,
integrat NTT Data
Google, Amazon IBM ors Upward
Cloud businesses
ICT services expansion
DC businesses Downward
Equinix expansion
Communications
Infrastructure Devices

Telecommunications carriers NTT,

(networks) AT&T
Apple, Ericsson
Cisco,
Communications Xiaomi,
Sony Communications equipment businesses NEC, Fujitsu,
equipment Nokia Networks
HP, Dell Huawei
Device businesses Samsung, Lenovo
Devices
Part and material businesses Intel, Qualcomm

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

2. Application layer: Trends in Japan’s ICT industry

The content market for smartphones, particularly mo- in Japan, has been aggressive in pushing its overseas
bile games, has been growing in Japan. At the same expansion, reaching 560 million registered users world-
time, efforts seeking to make overseas content and app wide in October 2014. In surpassing 500 million users in
markets into future growth centers have been observed, just over three years since its launch, Line is growing at
exemplified by the overseas expansion of domestic a pace faster than Facebook, the world’s largest social
game platform enterprises. Below, we look at two exam- network.
ples of such efforts by Line and GungHo Online Enter- Although Line has many users in Europe and the
tainment. Americas, currently its growth continues to be predomi-
nantly in Asia. The company has also continued to add
a. Line new features and services since its launch, and the apps,
Messenger apps for sending and receiving messages including games, supplied by Line have been download-
on smartphones are rapidly growing in reach and usage ed more than 1 billion times to date. And Line’s business
along with the popularity of social media. Messenger as an advertising media platform has been expanding,
apps are expanding in order to further their growth and especially in Asian countries where it is used heavily
to battle with other leading apps for users. Line, a mes- (Figure 5-2-2-1).
senger app that became hugely popular nearly overnight

Figure 5-2-2-1 Line’s trajectory since launch

Mar. 17, 2014 1 billion
Line Phone opened, a
Nov. 19 mobile phone service
Full rollout of Sep. 24, 2013
Mar. 28, 2012 July 3 Line Game Added video
Initial service Declaration of Nov. 21 call function
Line card released the Line platform First community
Apr. 13 Aug. 6 service
Second service Added Home Line Play released
500 million
Line camera and Timeline
released functions
300 million
Oct. 4 100
Added Call and million
Line Stamp functions
launched
Aug. 23, 2011 2012 Nov. 19 2013 Apr. 9 Aug. 21 2014 June 21, 2014

(Source) Prepared from news stories on Line

32
b. GungHo Online Entertainment popular and where there are signs of growth in the
GungHo Online Entertainment, which has used its smartphone game market driven by smartphone prolif-
mobile game business to expand in Japan and abroad, eration. PlayPhone provides global billing services for
maintains subsidiaries in the United States and South smartphone games to major telecom carriers around
Korea and opened a subsidiary in Singapore in Septem- the world. It has expanded its services to 11 carriers in
ber 2014 to strengthen its business in the Asia-Pacific
region. The company’s leading game, Puzzle & Drag-
10 countries, including emerging markets in Southeast
Asia, the Middle East, and Latin America. It also pro- Part 2
ons, has been released in 33 countries and regions. vides free software development kits to game develop-
GungHo announced in October 2014 that it had pur- ers. By acquiring PlayPhone, GungHo is attempting to
chased a controlling interest in the U.S. company Play- capture the growth performance of emerging markets
Phone, a leading global billing service that is focused on and expand into the billing platform business.
emerging markets where online games have long been

3. ICT service layer: Trends in Japan’s ICT industry

Firm domestic demand is projected for Japan’s do- business and set out mid-term financial targets of 2 tril-
mestic ICT service market for the present time, driven lion yen for overseas sales in FY 2016 and raising the
by My Number-related investment and system invest- overseas ratio of corporate sales to over 50 percent. As
ments by large financial institutions. Over the longer for specific initiatives, NTT Group is continuing to ac-
term, however, growth in the domestic market is expect- quire overseas enterprises in the ICT services field and
ed to slow down appreciably, so enterprises are current- the acquired enterprises are used as the main entities in
ly expanding into overseas high-growth markets accelerating the Group’s global expansion. Two reasons
through M&As and establishing local subsidiaries (Fig- for the Group’s decision to expand acquisitions are im-
ure 5-2-3-1). Below, we list some recent efforts in the ICT mediately strengthening its business, in terms of captur-
service market by leading players. ing customers, for example, in each region, and boost-
ing its competitiveness by incorporating expertise from
a. NTT Group the acquired enterprises. The acquisitions are also posi-
NTT Group is engaged in strengthening cloud ser- tioned to shore up weaknesses in Group companies, and
vices and accelerating global expansion as the Group there are hopes to benefit from synergies by governing
aims to move to a new stage. In its Mid-term Manage- affiliated companies and collaborating between compa-
ment Strategy, announced in the fall of 2012, the Group nies.
placed global cloud services at the heart of its overseas

Figure 5-2-3-1 Examples of Recent M&As by Japanese enterprises in the ICT service market
Company Announcement Period Company Acquired (country) Acquired Company’s Business Field
NTT Corporation June 2013 Solutionary, Inc. (U.S.) Security services
NTT Data December 2012 IFI Solution (Vietnam) Offshore development for Europe
December 2012 Innogence (Australia) SAP-related services
October 2013 everis Group (Spain) IT services
November 2013 Aster Group (U.S.) SAP BI-related products and services
EBS Romania (Romania) Near-shoring development inside
November 2013
Europe
November 2013 Optimal Solution Integration (U.S.) Provision of expert SAP services
4C Management Consulting Corporate performance
January 2014
(Denmark) management
NTT Communications June 2013 Digital Port Asia (Thailand) Data center operations
August 2013 Arkadin International (France) Cloud-based conferencing systems
Virtela Technology Service (U.S.) International data communications
October 2013
services
October 2013 Raging Wire Data Centers (U.S.) Data center operations
Fujitsu Technology Management IT consulting
February 2012
Corporation (Canada)
April 2013 Run My Process (France) Cloud services
Hitachi Group February 2014 Micro Clinic India (India) IT services
April 2014 Customer Effective (U.S.) CRM solutions
November 2014 I-Net Solutions (Singapore) IT services
February 2015 Cosmic Blue Team (Italy) IT services
(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

33
 b. KDDI Group year).
KDDI is committed to its Telehouse business, which
is involved in data centers, primarily overseas. Having c. Fujitsu
expanded into 13 overseas countries and regions, 24 cit- Fujitsu provides IT system consulting, solutions and
ies, and more than 46 operational sites (including data system integration for construction, and infrastructure

Part 2 centers in Japan), KDDI is furthering area expansion

through partnerships with local enterprises. Telehouse
services, particularly outsourcing. The company’s glob-
al expansion has focused on outsourcing, deploying data
is a global brand used by both Japanese enterprises and centers in 16 countries and about 100 locations, mostly
many local enterprises. In July 2014, the Group an- in Japan and Europe, and rolling out global standardized
nounced Telehouse Europe, its local affiliate in Europe, cloud service platforms (such as IaaS, PaaS, and SaaS)
would invest approximately 135 million pounds (roughly in Japan, Australia, Singapore, the United States, the
24 billion yen) to construct a new large-scale data center United Kingdom, and Germany. Given the rising de-
in London, England. mand to link local U.S. subsidiaries with head offices in
Through similar efforts like this, KDDI is capturing Japan, driven by the globalization of Japanese enterpris-
more customers and improving profits with its data cen- es, Fujitsu opened two new data centers on the east and
ter business in China and North America and, thereby, west coasts of the United States in May 2014 and
expanding its overseas earnings. Its consolidated over- launched the provision of outsourcing services and pri-
seas business for the year ending in March 2015 in- vate cloud (hosted) services. In this way, the company
creased substantially, with operating revenues of 320.6 continues to strengthen its global service hubs and sys-
billion yen (up 21.6 percent year on year) and an operat- tems.
ing profit of 16.8 billion yen (up 47.3 percent year on

4. Communications layer: Trends in Japan’s ICT industry

Japan extended high-quality mobile communications the high-added-value data communications service mar-
infrastructure services early on, even on a global level, ket. Looking at the groups’ actual average revenue per
under a system of three groups―NTT Group, KDDI user (ARPU) shows that while voice ARPU has plum-
Group, and SoftBank Group. As the voice service mar- meted, this drop is being compensated by strong in-
ket shrinks, these groups have been striving to expand creases in data ARPU (Figure 5-2-4-1).

Figure 5-2-4-1 Transitions in mobile ARPU (voice and data) over the last five years for the three domestic mobile carriers
[yen per month]
6,000
5,350 5,410
5,070 4,870 4,940
5,000 4,840
4,500 4,510 4,550 4,450
2,260 4,180 4,150 4,070 4,210 4,150
4,000 2,450
2,540 2,320
2,670
3,110 2,490 2,780
3,000 3,130 2,020 2,310 2,510 2,930
2,850 3,210
2,000
2,900 3,150
2,530 2,200 2,620
1,000 1,730 2,020 2,050 1,890 1,650 1,770
1,370 1,330 1,520
940
0
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
NTT DoCoMo KDDI SoftBank

Voice ARPU Data ARPU

(Source) Prepared from “Competition Evaluation 2013,” MIC

5. Communications equipment layer: Trends in Japan’s ICT industry

“Data communications equipment” accounts for the that joins core network nodes, such as mobile base sta-
largest percentage of Japan’s exports of communica- tions with control stations or exchanges. Ordinarily,
tions equipment by value. It is followed by “base sta- backhaul networks use fiber-optic lines or other fixed
tions.” The “data communications equipment” category wired connections or fixed wireless connections. An ex-
consists of digital transmission equipment and fixed-line ample of a backhaul product in Japan is Pasolink, a fixed
communications equipment (including fixed-line wire- network wireless transmitter from NEC that relies on
less and satellite systems). Although export values had the company’s stock of microwave transmission technol-
been on a downward trend until around 2012, all product ogy and miniaturization technology. Pasolink enjoys a
categories rebounded in 2014 (Figure 5-2-5-1). large share of the global market.
Demand is anticipated for the build-out of backhaul Territories that have not built optical fiber lines or
networks in conjunction with the increasing sophistica- other large-capacity line infrastructure and territories
tion and resilience of mobile communications networks too expansive to lay fixed lines have selected Pasolink
through the establishment of base stations. A typical ex- equipment to drastically slash installation costs. In fact
ample of a backhaul network is a transmission network about two-thirds of the almost 150 countries where Paso-

34
link has been deployed are developing countries in the networks around 10 kilometers in length), where Fujitsu
Asia-Pacific region, Middle East, and Africa. The prod- and NEC are the leading players in North America and
ucts in demand by the backhaul market fall into the the Asia-Pacific region (Figure 5-2-5-2). In 2014, NTT,
“data communications equipment” category mentioned NEC, Fujitsu, and Mitsubishi Electric worked on a joint
above in the transitions of communications equipment R&D project on technology that processes optical trans-
export value, and further growth is expected.
Competition continues worldwide in the development
mission signals at speeds up to 100 Gbit/sec and were
the first in the world to successfully implement the tech- Part 2
of ultra-high-speed, large-capacity optical communica- nology in a chipset (LSI). The four companies have ad-
tions technologies in order to meet soaring traffic vol- opted the technology to networks of optical submarine
umes and the expansion in cloud computing that pro- communications cables connecting 22 countries across
cesses the traffic. Above all, the optical transmission the Pacific and Atlantic oceans. As this example shows,
field is where Japanese telecommunications carriers Japanese enterprises in the optical transmission field are
and manufacturers have exerted leadership in global expected to leverage their technological superiority to
standards. One typical network example is the market expand overseas.
for metropolitan area networks (urban communications

Figure 5-2-5-1 Transitions in export value of Japanese communications equipment

Export value (in 100s of millions of yen)

2,000
1,435
1,800 1,455 1,440
1,600 367 204 1,344
1,350 216
178 1,243
1,400 63
138
1,200
1,000
800 1,385 1,398 1,302 1,306 1,389
1,202
600
400
200
50 57 42 41 44 51
2009 2010 2011 2012 2013 2014
Other network-related Data communications Base
equipment equipment stations

(Source) “Communications Equipment Production, Exports, and Imports,” Communications and Information Network Association of Japan

Figure 5-2-5-2 Metropolitan area network (WDN) market shares (2013)

North America Asia Pacific
Other, 17.3
Other, 16.5
Huawei, 2.1
Fujitsu, 33.8 Huawei, 29.5
Ciena, 2.9
Alcatel Lucent, 4.0 Fujitsu, 4.1

Alcatel Lucent,
Tellab, 11.0 6.5

Ciena, 15.7 Cisco, 16.1 NEC, 17.4 ZTE, 23.1

(Source) IHS Technology

6. Device layer: Trends in Japan’s ICT industry

(1) Device product market more.
Japanese manufacturers have lost ground and pres- Although the competitiveness of Japan’s end product
ence in the competitive smartphone market. In the manufacturing industry―smartphones, mobile phones,
midst of the heated market conditions, the future moves TV receivers, and the like―is on the wane, exports of
of Japanese phonemakers are under scrutiny: Sony, who Japanese parts and materials supplied for these end
continues to challenge the major global manufacturers products (in the global market) have remained solid.
by selling on brand power and functionality, and Fujitsu Japanese enterprises have high technological competen-
and Kyocera, which have some presence in niche mar- cies in many areas of the parts and materials market.
kets where emphasis is placed on particular functions Therefore, as domestic device manufacturers struggle,
(Figure 5-2-6-1). attention is focusing on domestic parts and materials
manufacturers that provide device parts. Despite their
(2) Developments in the parts and materials market sales being small compared with those of communica-
Mobile devices, for example, consist of a multitude of tions device and electronic equipment manufacturers,
parts and materials: touch panels, LCD panels, high- many parts and materials manufacturers derive a large
performance processors, large-capacity DRAM, flash percentage of their sales overseas and maintain high op-
memory, wireless LAN modules, GPS modules, acceler- erating profit rates (Figure 5-2-6-2).
ometers, electronic compasses, gyroscopes, and many The competitiveness of our enterprises in the parts

35
 Figure 5-2-6-1 State of overseas expansion efforts by Japanese manufacturers
Leading products for
Manufacturer Summary of overseas expansion efforts
overseas markets
Sony ・Developing global business around the Xperia brand.
・The strategy is to develop the business in the new super midrange category
Part 2 with models that offer superior cost performance with modest specifications.
Sony presented the Xperia M4 Aqua, a super midrange device, at the Mobile
World Congress 2015. The Xperia M4 Aqua is positioned to challenge the
rising dominance of new Chinese manufacturers in emerging and developing
countries throughout Asia.
Xperia M4 Aqua ・The plan is to focus as much as possible on global markets with a limited
number of core models.
Fujitsu ・As other domestic manufacturers pull out of the handset business, Fujitsu is
aggressively pursuing its handset business within and outside Japan because
it considers the positioning of devices of paramount importance in providing
consistently high value.
・Fujitsu introduced the Raku-Raku Phone for seniors in Japan in 2001 and
followed this with the Raku-Raku Smartphone. The Stylistic S01 Android
smartphone for seniors, which is based on the Raku-Raku Smartphone, is
Stylistic S01 being sold in cooperation with Orange, the leading French carrier.
Kyocera Kyocera is working to open up world markets with smartphones specialized
・
for specific needs. The company announced in February 2015 that it would be
marketing the Torque, an extra-durable smartphone that has gained
popularity in Japan and the United States, in Europe. It expects to sell the
Torque primarily to enterprises. Kyocera has made use of its technologies to
tailor Torque’s strengths to address the extensive latent needs in enterprise
applications.
Kyocera has been working to expand its business; for example, exhibiting a
・
prototype of the smartphone running Windows Phone 8.1 at the Mobile World
Congress 2015.
Torque Kyocera has captured a certain share of the U.S. market by providing extra-
・
durable smartphones that are water and shock resistant and low-cost
smartphones for the prepaid market. The rugged design that can withstand
drops, vibrations, and extreme temperature fluctuations is compliant with the
U.S. Department of Defense procurement standards.
(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

Figure 5-2-6-2 O verseas sales percentages and operating profit rates of communications device and electronic equipment man-
ufacturers and parts and materials manufacturers
(%)
16
Size of the bubble indicates
Operating profit rates (2014)

14
the relative size of sales Murata
12 (2014) Manufacturing
Nidec
10 Kyocera
Hitachi Rohm
8
Mitsubishi
6 Alps Electric
Electronic
4
NEC
2 Sharp
Fujitsu TDK
Panasonic
0
0 25 50 75 100 (%)
Overseas sales percentages (2014)

Communications device and electronic Parts and materials

equipment manufacturers manufacturers

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

and materials market is expected to manifest itself when 1.8290 trillion yen. Many Japanese enterprises, such as
it comes to building the next mainstay products after Rohm and Murata Manufacturing, are highly skilled in
smartphones in the IoT age. For example, domestic sensor technology and are positioned to lead the sensor
manufacturers own the top market shares worldwide in market both in terms of manufacturing and application.
sensor devices, which are a crucial component under- As the smartphone market matures and IoT continues
pinning the IoT. According to a JEITA study, Japanese to develop, these companies are expected to bolster
manufacturers shipped 883.9 billion yen worth of sen- their supplies for wearables, connected vehicles, and
sors in 2011, more than half of the global demand of other new markets.

36
7. Infrastructure exports
The government has positioned the overseas expan- dardization activities and similar endeavors in the many
sion of infrastructure systems as one of its growth strat- infrastructure-related fields and systems and, from this
egy tenets and is putting tremendous energy into ad- foundation, strive to consolidate and bolster the com-
vancing various overseas expansion measures in this
area, particularly in high-level public-private joint trade
petitiveness of Japanese technology while promoting
strategic collaborations between enterprises. Overseas Part 2
promotions led by the Prime Minister himself. Promis- expansion of infrastructure systems also requires us to
ing fields for overseas expansion of infrastructure sys- take aggressive approaches through public-private part-
tems that have been cited include high-speed rail links, nerships (Figure 5-2-7-1).
expressways, bridges, ports, airports, industrial parks, Attention is focusing on efforts by ICT enterprises to
nuclear power plants, electric power, disaster-prepared- expand in ways tied to the global expansion of the infra-
ness and disaster-relief management using satellites and structure mentioned above. It is desirable that ICT en-
satellite data, environment management and recycling terprises package ICT-utilizing infrastructure installa-
(waste processing), medicine, water and sewer services, tions to include not only constructing the systems but
e-government, disaster-preparedness measures (against also providing operational support and after-sales ser-
flooding, earthquakes and tsunami, landslides, and oth- vice. The table below provides some examples of recent
er disasters), early warning systems, climate change infrastructure export projects by Japanese ICT enter-
measures (satellites), and financial systems. To be suc- prises (Figure 5-2-7-2).
cessful, Japan must take the lead in international stan-

Figure 5-2-7-1 Examples of infrastructure-related fields where Japan is leading standardization

Field Specific examples
Energy High-efficiency coal-fired power generation systems, geothermal power generation systems, combined-cycle gas
thermal power generation systems, electric power system stabilization/automated power distribution systems, etc.
Transportation High-speed rail systems (bullet trains, SCMaglev), urban rail systems (subways, monorails, etc.), IC cards for public
transportation systems, fast chargers for electric vehicles (CHAdeMO charging method), vehicle safety and
environmental performance, intelligent transport systems (ITS), earthquake-resistant bridge technologies, rapid
construction technologies for breakwaters and wharfs, air traffic control systems, port Electronic Data Interchange
(EDI) systems, Nippon Automated Cargo And Port Consolidated System (NACCS), etc.
Information and Terrestrial digital broadcasting systems, ICT for disaster preparedness, sensor networks (for the environment, disaster
communications systems preparedness, etc.), detection systems for unlawful radio stations, optical communications access systems, 4K and 8K
(ultra-high-definition television), postal infrastructure systems, central bank core systems, etc.
Living environments Measures for non-revenue water (leakage), water and sewer systems, desalination systems, industrial waste water
recycling technology, water purification tanks, etc.
Medicine Medical systems (hospital operation and management systems), particle-beam cancer treatment equipment,
catheter insertion methods, Japanese models of dialysis systems, etc.
Agriculture Plant variety protection systems and methods of evaluating traits of genetic resources, agriculture infrastructure
systems, value-chain construction for agricultural produce
Space, marine, disaster Quasi-zenith satellites, energy-efficient marine vessels, offshore structures (megafloats, etc.), fire, safety, and disaster
preparedness, and other fields preparedness infrastructure systems, etc.
(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

Figure 5-2-7-2 Infrastructure projects by ICT enterprises (including M&As)

Enterprise Examples of infrastructure projects
Hitachi Hitachi announced in February 2015 that it had acquired a signal business and rolling stock business from Finmeccanica, a
leading Italian defense and aviation corporation. Finmeccanica is a large heavy machinery firm involved in automobile
production, shipbuilding, railroads, electronics, and other fields. It was also involved in the manufacture of the ETR 500
and other rolling stock for Italy’s national ETR high-speed railway.
Since Finmeccanica was planning to specialize in the aerospace and defense divisions, Hitachi was able to acquire the
signal and rolling stock businesses. The total value of the acquisition is believed to be Hitachi’s largest ever corporate
acquisition. Hitachi’s goal with the acquisition is to strengthen and expand its public innovation business unit that
combines IT with public infrastructure.
NEC, NTT The three companies formed a consortium and won an infrastructure construction contract from Myanmar in May 2013.
Communications, The contract includes installation of facilities to construct communications infrastructure, upgrading the Internet access
and Sumitomo environment, and assisting the operations of the communications infrastructure.
Corporation The consortium will construct the country’s main communication infrastructure, including a 30 Gbps large-capacity
optical backbone communications network linking the cities of Yangon, Mandalay, and Naypyidaw, optical
communications networks in each of the cities that provide 10 Gbps LTE communications, fixed-line telephone, and
Internet communications, and 50 LTE base stations combined for the three cities.
Toshiba Toshiba took over Landis+Gyr, headquartered in Switzerland, in May 2011. Landis+Gyr is a multinational corporation
involved in the design, manufacture, and sales of energy meters, communications equipment, and software that collects
and manages data from meters. By integrating Landis+Gyr’s smart meter solutions with Toshiba’s infrastructure, business,
and home electronic products, Toshiba is aiming to construct smart communities that produce and consume energy
efficiently and sustainably.
Through Landis+Gyr, Toshiba acquired PowerSense, a Danish optical sensor manufacturing technology company, in May
2014 and GRIDiant, a U.S. technology company that makes control and analytic software for power distribution systems,
in June 2014. As a result of the Landis+Gyr takeover, Toshiba has been expanding its business in the energy sector,
including winning an order for smart meters from British Gas, the largest power and gas utility in the U.K.
(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

37
 Policy Focus: Fund Corporation for the Overseas Development of Japan’s ICT and Postal Services
Our economic growth requires us to aggressively capture ASEAN and other overseas demand for communications,
broadcasting, and postal services ahead of other countries. An effective means of accomplishing this is to expand
overseas by providing ICT services and broadcast content as packages; i.e., providing operational, maintenance, and
management services together with constructing infrastructure in the partner country. The personal connections
Part 2 made when deploying Japan’s terrestrial digital television broadcasting standard overseas, a project tackled by MIC
together with the government, can help expand the market for all of Japan’s ICT fields. Active overseas expansion mak-
ing use of these personal connections is expected.
At the same time, overseas communications, broadcasting, and postal businesses are regulated sectors, and, as
such, are subject to government risks and resulting demand risks. This situation makes it difficult for private compa-
nies to enter these markets on their own. It is believed that providing assistance to companies in these businesses, in
the form of long-term risk management, will be effective to offset the risks.
Given these circumstances, MIC submitted in March 2015 the Fund Corporation for the Overseas Development of
Japan’s ICT and Postal Services bill to the 189th session of the National Diet. The bill was passed in May 2015. The Act
on the Fund Corporation for the Overseas Development of Japan’s ICT and Postal Services stipulates the establishment
and operational scope of the Fund Corporation to Aid Overseas Communications, Broadcasting, and Postal Services.
The Fund Corporation leads the disbursement of the FY 2015 budget of 20 billion yen in industry investments and 7
billion yen in government guarantees, which is earmarked to provide funds, deploy experts, and provide other forms
of assistance to companies engaged in overseas telecommunications businesses, broadcasting businesses, or postal
services, or related businesses (Figure).

Figure Overview of the Fund Corporation for the Overseas Development of Japan’s ICT and Postal Services
Government and Private sector

investment

企業 Japan ICT Fund Private

Private
（単/複） cooperation (Fund Corporation for the Overseas Development cooperation
companies Banks etc.
of Japan’s ICT and Postal Services)

Business
Participation, Integrated Investment Financing
investment
operation action etc. etc.
support

Local business entity (Business Operator)

investment

Partner country

・Establishment of the Fund Corporation

-The Fund Corporation is established with the approval of the Minister for Internal Affairs and Communications.
-The government shall always hold at least 50 percent of the Fund Corporation’s total shares.

・Main operations of the Fund Corporation

-Provide the following forms of assistance to companies engaged in communications, broadcasting, or postal ser-
vices overseas:
-Financing (joint investment with the private sector)
-Business planning and operational support
(negotiations with partner country’s government, deploy experts in the communications, broadcasting, or postal
field, etc.)

・Management of the Fund Corporation

-Corporate governance regulations under the Companies Act apply, as it is an incorporated company.
-Supervised* by the Minister for Internal Affairs and Communications.
*Decisions on assistance criteria, approval of assistance decisions, supervision orders, etc.

38
Policy Focus: Overseas expansion of ICT infrastructure systems centered on terrestrial digital television
In keeping with the Japanese government’s overall efforts to deploy infrastructure systems overseas, MIC has posi-
tioned international expansion in the ICT field as a priority policy and is aggressively pursuing initiatives in this area,
such as high-level public-private joint trade promotions.
As part of the government’s strategy to export infrastructure systems, MIC is actively working to incorporate Ja-
pan’s terrestrial digital TV standard, disaster-preparedness ICT and other cutting-edge ICT systems, and Japan’s super- Part 2
lative postal systems into the public infrastructure systems of partner countries. It aims to do this by being involved
from the proposal formation stage onward through inter-governmental dialogs and other representations.
As more countries adopt Japan’s terrestrial digital TV standard, a certain amount of results are being seen from the
overseas expansion, such as an increase in overseas orders for digital broadcast transmitters from Japanese manufac-
turers.
In 2016, taking advantage of the tenth anniversary since Japan’s terrestrial digital TV standard was first adopted
overseas, MIC, in cooperation with private enterprises and other organizations, will put priority on activities to raise
awareness and build cooperation on the international proliferation of fiber optics and other ICT technologies and ser-
vices that Japan has accumulated, centered on terrestrial digital TV.
　A major premise of fully manifesting the strengths of Japan’s ICT technologies and services in international markets
is ensuring the freedom to distribute information on the Internet. Therefore, MIC will work in partnership with
developed countries in the West to continue to ensure freedom on the Internet (Figure).

Figure Overseas expansion to all ICT sectors centered on terrestrial digital television

Guatemala

Japan Honduras

Costa Rica

Venezuela
The Philippines

Ecuador Brazil

Peru
Botswana Sri Lanka Bolivia

Maldives Chile
Paraguay
As of March 2015
Countries that have adopted the Japanese ISDB-T standard 17 countries (including Japan) Argentina
Uruguay

Overseas expansion of Japan’s Expand to all ICT sectors

terrestrial digital TV standard Package development
2 0 0 6 2 0 1 4 〈Solutions to social issues x ICT〉
Countries with the Countries with the G-Space x ICT → ICT systems for disaster
preparedness
Japan standard Japan standard Expand collaborative ties
developed with the terrestrial Transportation x ICT → ITS
1 17 digital TV standard Agriculture x ICT → Smart agriculture
120 million 630 million Education x ICT → Distance learning
people people Note: Contributes to resolving each
country’s social issues

Section 3　Perceptions and Predictions by ICT Enterprise Executives in Six Countries

In this section, we perform an international compari- prises in six countries: Japan, the United States,
son of the state and perceptions of ICT global develop- Germany, China, South Korea, and India.
ment using the results of a survey of ICT industry enter-

1. Perceptions of the competitiveness of own country’s ICT industry

ICT-related enterprises in the six countries were the other hand, enterprises in the U.S., Germany, and
asked how they rate the international competitiveness of India gave higher competitiveness scores for the higher
their own country’s ICT industry by layer. The results layers: IT services, platforms, and content and applica-
show that, in general, enterprises in the three Asian tions.
countries―Japan, China, and South Korea―gave high- By country, Japanese enterprises rated the competi-
er competitiveness scores for the lower layers: commu- tiveness of Japan’s ICT industry highest in the commu-
nications layer, device layer, and component layer. On nications layer, followed by the content and application

39
 layer, and the component layer. This indicates a strong tendency appears in Germany, apart from the platform
perception that the ICT industry’s competitiveness is layer. On the opposite side of the U.S. and Germany is
driven by the communications layer. China, whose enterprises rate China’s competitiveness
Among U.S. enterprises, the difference in scores for highly in the communications layer and device layer.
the device and component layer and the communica- This reflects their recognition of China’s huge domestic

Part 2 tions and higher layers was enormous. Above all, U.S.
enterprises feel that the U.S. industry is strongly com-
communications market and China’s increasing pres-
ence in the global device market in recent years (Figure
petitive in the content and application layer. The same 5-3-1-1).

Figure 5-3-1-1 Perceptions of the competitiveness of own country’s ICT industry

0 10 20 30 40 50 60 70
58
43
Japanese 48
66
enterprises 36
49
63
53
U.S. 56
34 54 Content / apps
enterprises 40
63 Platforms
53
Germany 55 ICT services
33 55
enterprises 41 Communications
37 Components
50
Chinese 53
62 Devices
enterprises 37 61

56
45
South Korean 33
65
enterprises 56
45
63
36 62
Indian 52
enterprises 45
42

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

2. Most important overseas expansion issue

The surveyed ICT enterprises in the six countries labor and labor liquidity” and “determining manage-
were asked what was the most important issue they ment or business strategies.” Compared to enterprises
faced with respect to overseas expansion. Overall, enter- in other countries, Japanese enterprises were far more
prises tended to pick external factors such as “regulato- likely to view labor issues as a problem. This under-
ry environment” or “financing environment” most fre- scores that labor is an urgent issue for Japan’s industry
quently. Japanese enterprises, however, had strong (Figure 5-3-2-1).
issue recognition with internal factors such as “securing

Figure 5-3-2-1 Overseas expansion issues (most important issue)

(%) 1.9
100 2.9 2.7 1.0 1.4
8.6
10.5 10.9 16.2 12.8
19.0 8.6
80 8.6 6.4 11.0
8.6 10.5 Other / none
10.0
13.3 12.0 Determining management or business strategies
21.9 15.2
17.1 Securing labor and labor liquidity
60 19.1
20.0 18.7 Infrastructure environment
15.2 16.2
28.6 Competitive environment / business practices
40 23.6
15.2 16.2 20.9 Financing environment
26.7 (private investment / government funding, etc.)
20 10.5 Regulatory environment
27.3 26.7 26.7 23.1
16.2 18.1
0
Japan United States Germany China South Korea India
(N=105) (N=105) (N=110) (N=105) (N=105) (N=105)

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

3. Promising fields as seen by enterprises in different countries

The surveyed ICT enterprises in the six countries showed the most interest in “cloud/virtualization (SDN/
were asked what fields they saw as promising. The most NFV)”―elements of the platform layer that have been in
frequent responses in all the countries except Japan the limelight in recent years (Figure 5-3-3-1).
were concentrated in the ICT use and application layer After averaging and adjusting for variances between
or the content and application layer. Enterprises in Chi- countries, the interest in the platform layer and the ICT
na, India, and Germany had the greatest interest in use and application layer markets, with some excep-
“smart towns/smart cities” and “smart infrastructure tions, was relatively higher among enterprises in all six
(electricity, energy, water, gas, etc.).” U.S. and South Ko- countries. At the same time, all enterprises tended to be
rean enterprises were most interested in “applications/ least interested in the component layer.
software.” Japanese enterprises, on the other hand,

40
 Figure 5-3-3-1 Perceptions of promising fields
(%)
50
ICT use and application Content / Platforms Networks Components
55 applications

40

45

Part 2
Response rate

30

35

20

25

10

15

0
Smart towns / smart cities

Smart infrastructure
(electricity, energy, water, gas, etc.)
ICT use in food and agriculture
(sixth industrialization)
ICT use in medicine, health
management, and healthcare

ICT use in financing

ICT use in disaster preparedness

ITS / automated driving

(ICT use in the transportation sector)

Applications / software

Content

Web service platforms

Big data

M2M

IoT

Cloud / virtualization (SDN / NFV)

Security

Data centers

Fixed-line broadband

Mobile broadband

4K / 8K

Smart TVs / hybrid TVs

Smart appliances

Mobile devices

Wearable devices

Robots / AI

Other
Japanese enterprises U.S. enterprises German enterprises Chinese enterprises South Korean enterprises Indian enterprises
(N=105) (N=105) (N=110) (N=105) (N=105) (N=105)

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

Section 4　Structural Changes in the Economy Caused by ICT Advancement

In this section, we analyze three noteworthy structur- recently; the second is the changes that ICT is starting
al changes in the economy brought about by ICT ad- to bring to bear on the entrepreneurial process; and the
vancement. The first is the changes caused by the Inter- third is the changes that are occurring as a result of ad-
net of Things (IoT), which has gained a lot of attention vances in the use and application of big data.

1. IoT’s impact on industry

This paragraph provides a general overview, inter- provide services.
spersed with examples from multiple perspectives, of An unmistakable indicator of the advent of the IoT era
the impact of the Internet of Things (IoT), which has is claimed to be the explosive growth in the numbers of
gained a lot of attention recently, will have on industry. things connected to the Internet. According to IHS, the
number of things connected to the Internet (i.e., IoT de-
(1) From ubiquitous networks to the IoT vices) in 2013 was approximately 15.8 billion. The com-
The ubiquitous-networked society, in which every- pany estimates this figure will soar to about 53.0 billion
thing and everyone is connected to networks every- by 2020 (Figure 5-4-1-1).
where and all the time, was conceived in the first part of IoT is being closely watched in the automotive and
the 2000s. Its actualization has rapidly taken off in recent industry sectors because of its growth rate (Figure 5-4-1-
years primarily due to advances in component technolo- 2). On the other side, according to Cisco, of the 1.5 tril-
gies that will be mentioned below. The ubiquitous net- lion things existing today in the world, 99.4 percent of
works that are finally coming into being are now ex- them are not connected to the Internet. Assuming in the
pressed by the term Internet of Things (IoT). IoT means future many more of these things will be connected to
that a multitude of things―not just conventional ICT the Internet, it is possible to glimpse the scale of the la-
devices like computers, smartphones, and tablets―will tent value the IoT concept holds.
form part of the Internet by virtue of sensors and wire-
less communications. (2) Specific impacts of the implementation of the IoT
The IoT concept refers to a state where vehicles, What specific ramifications will the realization of the
white appliances, robots, facilities, and nearly all other IoT have? Here, we give a general overview of real ap-
things connect to the Internet and exchange information plications divided into three areas: the manufacturing
with each other. According to the concept, as things are industry, public infrastructure, and personal services.
converted into data and automation based on these data
progresses, new added value will be generated. The IoT a. Impacts on industry (manufacturing and other industries)
will also contribute to transforming things into services, The IoT can improve production lines in manufactur-
where not only are products sold; products are used to ing plants, by making it possible to collect and analyze

41
 Figure 5-4-1-1 N
 umber of things connected to the Internet Figure 5-4-1-2 I oT devices by sector/application and their
(IoT Devices) growth rates
600 (%)
Projected figures 40
530

Average annual growth in device numbers

Automobiles Industry
(Infotainment, etc.) (Energy, construction and
500
466 industrial automation)
IoT devices [in 100s of millions]

30

Part 2 404
Medical care

(2014 to 2020)
400 Consumer products
(Monitors, equipment,
349 measuring instruments, etc.) (Home electronics,
20 home automation, etc.)
296
300
242
10 Communications
197 Computers (Communication devices for
200 individuals and enterprises, IT
158 (Desktops, portable
computers, services, etc.) equipment, etc.)
123
104 0
100 0 20 40 60 80 [in 100s of millions
of devices]
No. of loT devices (2014)

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (Source) IHS Technology

Figure 5-4-1-3 Examples of IoT products and efforts for industry

Application Enterprise Summary
Product quality Kyocera Communication Systems The company has developed a platform called Shuzo that modularizes system
management integration, which previously was done on a sensor-by-sensor basis, and collects
M2M and IoT data from multiple sensors regardless of the sensor type. This
results in improved product quality on the manufacturing floor and higher
availability factors for production.
Demand forecasting Komatsu Komatsu has developed the KOMTRAX system, which uses communication
modules installed on its construction equipment sold around the world to
collect data on the construction equipment and determine its operational
status. From these operational status data, it is possible to measure CO2
consumption volumes and predict business conditions.
Fault predictions Omron and Kewpie Kewpie has used Omron platforms in its manufacturing plant to detect tiny,
instantaneous changes in electric current values. Detecting signs of
abnormalities like these throughout the production process has led to increased
production efficiencies.

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

data that were previously unusable such as separate devices and services are expected to emerge. Albeit IoT
manufacturing conditions or log data from production products and services are still in their nascent stage,
equipment. From examples around the world in apply- they share a common underlying architecture: data col-
ing the IoT to industry, it is clear that enterprises have lected from sensors is analyzed via the cloud and utilized
various aims when applying the IoT, such as ascertain- to provide new value to users.
ing and improving the availability factors of manufactur-
ing facilities or making business processes more effi- (3) Directions for Japan’s ICT industry
cient by tracking the operational statuses of products for While the struggle for supremacy in the IoT world in-
customers (Figure 5-4-1-3). tensifies, Japan’s ICT industry is expected to spot do-
mains that can broaden business opportunities. To dis-
b. Impacts on public infrastructure (energy, transportation, etc.) cover such opportunities, it is important to have a keen
Energy, transportation, logistics, and other public in- perception of the essence of the IoT and sufficient com-
frastructure have been tapped as promising application petitiveness in the target domains to take a leading role
fields for the IoT. The aim is to collect and analyze data and function in related businesses.
from sensors placed at various installations and facilities For Section 3 of this chapter, we conducted an interna-
and use the data to improve the safety and efficiency of tional survey (Japan, United States, Germany, China,
public infrastructure. Serious deterioration of infrastruc- South Korea, and India) on perceptions about the busi-
ture in Japan is creating facility investment and mainte- ness impact of the IoT, which ICT enterprises in many
nance issues. It is hoped that the IoT will mitigate these countries have been following with close interest. East
issues. Asian enterprises in Japan, China, and South Korea tend
to focus on the technological infrastructure of the IoT,
c. Impacts on personal services such as “accumulation of big data” and “advances in data
As the IoT expands, primarily targeting the business- analysis,” whereas enterprises in the United States, Ger-
to-business (B2B) sector, it will also precipitate signifi- many, and India, which have a head start in the IoT, tend
cant transformations in people’s lives. to focus more on the application and use of the IoT, such
As presented in Chapter 4, three types of new ICT de- as “promote labor saving” and “accelerate responses/
vices―wearables, connected vehicles, and partner ro- improve operational efficiencies” (Figure 5-4-1-4). These
bots―are anticipated to form the nucleus of personal results indicate a strong interest by ICT enterprises in
IoT services. Besides these, however, many other IoT many countries in business domains that collect and ac-

42
 Figure 5-4-1-4 The IoT’s impact on business
(%)
100 2.9 2.9 1.0
2.9 7.6 8.2 2.9
14.3 1.9 3.8
12.4 4.5
16.2 7.6
9.1 No impact / don’t know
7.6 7.6
80 9.5 29.5 Other
10.5 6.7
15.5 Accelerate global expansion (reallocation of production bases,

60 13.3 21.0
22.9 16.2 accelerate overseas expansion by SMEs, etc.)
Increase added value with new business models (revenue sharing,
connections to leasing / insurance, etc.)
Business
infrastructure Part 2
14.3 31.8 27.6 Promote labor saving (automated collection of machinery operational
17.1 23.8 26.7 statuses, measurement of power and gas, billing)
40 Application
Accelerate responses / improve operational efficiencies (monitoring and use
14.3 management, preventative maintenance, reduce distribution
9.5
9.5 10.9 warehouses, demand response, etc.)
20 Advances in data analysis (marketing and fault factor estimating,
33.3 30.5
25.7 25.7 weather and disaster simulations, etc.) Technological
21.0 20.0
Accumulation of big data (logs of trends in weather, distribution, infrastructure
0 people, and machinery)
Japanese South Korean Chinese U.S. German Indian
enterprises enterprises enterprises enterprises enterprises enterprises
(N=105) (N=105) (N=105) (N=105) (N=110) (N=105)

(Source) “Study Report on Structural Changes and Future Prospects for the Global ICT Industry,” MIC (2015)

cumulate data, as well as analyze, apply, or respond to and South Korean enterprises that are very attracted to
the data, all of which is engendered by the IoT. the sensor domain. Therefore, it is vital to construct an
With respect to the sensor technology that enables IoT ecosystem as early as possible that includes the data
the collection of data, Japan holds a relatively large por- analysis, response, and application domains, through
tion of the sensor market. And while Japan is thought to the aggressive pursuit of cross-industry collaborations
be highly competitive in this market, it is very likely and tie-ups with overseas enterprises.
Japanese enterprises will have to compete with Chinese

2. Advancement of big data application

It has been several years since the application of big be approximately 14.5 exabytes for the total of nine in-
data became a watched trend in the ICT industry. Solu- dustries (service industry, information and communica-
tions using big data have now advanced past the experi- tions industry, transportation industry, real estate indus-
mental phase and are being developed into businesses. try, finance and insurance industry, wholesale and retail
Nevertheless, it is difficult to grasp the state of big data industry, electricity, gas, and water industry, construc-
use and application by just following individual case tion industry, and manufacturing industry). Over time,
studies. In this paragraph, therefore, we analyze the cur- the data distribution volume has risen from approxi-
rent state of big data application from two sides―a mac- mately 1.6 exabytes in 2005 to an estimated 14.5 exa-
ro study (estimating the volume of big data traffic in Ja- bytes in 2014, a jump of about 9.3 times in nine years (an
pan) and a micro study (a survey of the current state of average annual growth rate of 28.2 percent) (Figure 5-4-
big data application by enterprises and other organiza- 2-1).
tions)―based on past surveys up to last year.
(2) Current state of big data application by enterprises
(1) Estimations of the volume of big data distribution in Japan Below, we analyze, based on survey data, what types
The data distribution volume in 2014 was estimated to of data enterprises use in what domains and how they

Figure 5-4-2-1 Transitions in domestic data distribution volumes

(TB)
16,000,000
14,524,752
14,000,000

Up approx.
12,000,000
9.3 times in 10,804,988
nine years
10,000,000
8,020,140
8,000,000 6,050,339
4,913,064
6,000,000 4,076,772
3,477,480
4,000,000 2,614,878
2,004,730
2,000,000 1,556,589

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(estimated)

(Source) “Study Report on Big Data Distribution Volume Estimates and the State of Big Data Application,” MIC (2015)

43
 analyze the data and what extent of benefits have they Figure 5-4-2-2 B enefit attainment ratios through the ap-
attained. plication of data
(%) (%)
60 70
a. Benefit attainment ratio through the application of data 50 65
67
We calculated the attainment ratio of benefits from the 57
40 60
61

Part 2 percentage of enterprises that use data in each given do-

main and the percentage that obtained benefits through
30
20
57
54 39
55
55
50

the application of data. The highest attainment ratio was 10 23 16 19 18 45

31 10 12 10
for “logistics and inventory management,” at 67 percent. 0 40
General Planning, Production and Logistics and Servicing and
Contrarily, “general management” had the highest data management development, manufacturing inventory maintenance
and marketing management
application percentage but the lowest benefit attainment
Enterprises that use data Enterprises that attained benefits
ratio. We can read from these results that it is relatively Attainment ratio (blue line graph÷red line graph, right axis)
easy to obtain benefits through the use and application
(Source) “Study Report on Big Data Distribution Volume Estimates
of data in the “logistics and inventory management” do-
and the State of Big Data Application,” MIC (2015)
main (Figure 5-4-2-2).

b. Comparison of enterprises that have attained benefits through the Figure 5-4-2-3 C omparison of benefit attainment (analysis
application of data versus enterprises that have not frequency)
We conjectured there might be some differences in (%)
40 Analysis frequency: high Analysis frequency: low
the analytic methods and data used in analyses between 31.6
30 25.5 26.8
enterprises that have attained benefits through the ap- 25.1
22.3
19.9 21.8
plication of data those that have not. To test our conjec- 20
13.0
ture, we compared enterprises that have attained bene- 10 6.3 7.6
fits versus enterprises that have not, targeting
0
enterprises that use data analyses for “planning, devel- Shorter than Shorter than one Shorter than one Shorter than one Unknown
one day week but more month but more year but more (interval longer
opment, and marketing,” an area that had a relatively than one day than one week than one month than one year)
high rate of data application across all industries. Enterprises that attained benefits in“planning, development, and
We first compared enterprises on their data analysis marketing”(n=1,192)
Enterprises that did not attain benefits in“planning, development,
frequency. A majority of enterprises that have attained and marketing”(n=763)
benefits analyze data at intervals shorter than one (Source) “Study Report on Big Data Distribution Volume Estimates
month, whereas a majority of enterprises that have not and the State of Big Data Application,” MIC (2015)
attained benefits analyze data at intervals of one month
or longer (Figure 5-4-2-3). This finding suggests that, in
order to attain benefits through the application of data, Figure 5-4-2-4 C omparison of benefit attainment (no. of
data should be analyzed at relatively short intervals. data types used in analyses)
We next compared enterprises on the number of data (%)
40
Data types analyzed: few Data types analyzed: many
types used in analyses. Among enterprises that have at- 30.6 30.2
30
tained benefits, the most common response was for five 24.5
20.2 20.1 20.1
or more data types used in analyses. Conversely, a ma- 20 18.2
15.7
13.4
jority of enterprises that have not attained benefits an-
10 7.0
swered they used two or less data types in analyses (Fig-
ure 5-4-2-4). 0
1 2 3 4 5 or more

Enterprises that attained benefits in“planning, development, and

marketing”(n=1,192)
Enterprises that did not attain benefits in“planning, development,
and marketing”(n=763)

(Source) “Study Report on Big Data Distribution Volume Estimates

and the State of Big Data Application,” MIC (2015)

44