Japanese Tech Stock Weekly Summary (Jan. 19 - 25, 2009)

by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

• • •

Mobile/ Wireless

The mobile-phone market is polarizing as the global economic fall prompts some consumers to trade down to cheaper devices and operators feed demand for high-end handsets by promoting them with financial supports. Nokia (NYSE:NOK) Oyj is selling entry-level devices costing less than US$50 and advanced phones with satellite navigation, music and e-mail as fewer consumers consider mid-tier handsets. The global handset industry will shrink for the first time in eight years. Sony Ericsson Mobile Communications Ltd. (NYSE:SNE), Motorola Inc. (MOT) and LG Electronics Inc. (OTC:LGERF) have struggled to come up with hit phones or hesitated in their attempts to broaden their product offerings. Nokia, which ships 15 units per second, may boost its global market share to more than 40 percent in 2009. Samsung Electronics Co. (SSNKF.PK) will increase its market share and remain the second-biggest phone maker. Fourth-quarter profit at the unit that makes mobile-phones fell 42 percent from a year earlier, while revenue increased 43 percent, as competition drove up marketing expenses. Sony Ericsson, which has posted two consecutive quarterly losses and cut jobs, will refocus on pricier models.


Pac Rim Development, a joint venture between Telecom New Zealand, Merchant Capital and Elanida, has received a license from the US FCC to lay a submarine cable system linking Samoa, American Samoa and Hawaii. The system will consist of two cables – one linking Hawaii to American Samoa, and the other between American Samoa and Samoa. The new cable system will be built mostly with 5Gbps capacity, except for the Hawaii-Pago Pago link, which will be just 1Gpbs. The project involves removing part of the PacRimEast cable between Hawaii and Auckland and reusing it for the Samoan. Installation of the cable in Samoa will occur in late February. Pac Rim expects to complete construction on March 23 and to have the cable operational by April 10. The company stressed that these dates are subject to favorable weather conditions.


According to the report by International Federation of the Phonographic Industry (IFPA), the international body which represents the recording industry, the international digital music market grew by around 25% in 2008 to reach US$3.7 billion in the sector's sixth consecutive year of expansion – even though 95% of songs are still downloaded illegally. Digital platforms now account for around 20% of recorded music sales, up from around 15% in 2007. Last year also saw the trend towards ISP cooperation reach Asia, with the region's operators introducing a number of initiatives designed to combat piracy, the report states.


Elpida Memory Inc. (OTC:ELPDF) aims to merge operations with Promos Technologies and two other Taiwanese DRAM makers amid plunging chip demand. Once merged, the four chipmakers would seek financial support the Taiwanese government is considering offering to chipmakers, the country's main industry. Taiwan's government said this month it had asked Promos to resubmit a reorganization plan jointly filed with Elpida, apparently seeking assurances of support for the domestic sector.

S.E.S. Co. Ltd. filed for bankruptcy protection, hurt by sliding orders and tight credit lines as memory chip makers slashed or even froze spending. S.E.S., whose main customers include Samsung Electronics Co. Ltd. and Hynix Semiconductor Inc., filed for protection under a court-led rehabilitation law with 14.3 billion yen (US$158.4 million) in liabilities. Global spending on semiconductor equipment is expected to have fallen almost 30 percent in 2008, hurting balance sheets at even bigger chip gear makers such as Applied Materials Inc. (NASDAQ:AMAT) and Tokyo Electron Ltd. (OTCPK:TOELF). S.E.S., which makes machines that clean silicon wafers before they are cut into microchips, said it will receive support from South Korean partner and liquid crystal display equipment maker Zeus Co. Ltd. and an unnamed Japanese trading firm.

Sumco Corp. (OTC:SUMCY) plans to cut capital spending by 80 percent in the next business year to about 30 billion yen (US$334.5 million). Sumco cut its annual net profit outlook by 44 percent as the global financial crisis forces clients to cut production.


Baidu Japan (NASDAQ:BIDU) has cooperated with Willcom Inc., a telecom operator in Japan, to launch Chinese-language audio search service in Japan. The service is customized to Chinese people that are visiting or on business in Japan. Baidu Japan disclosed that the company and Willcom are actively co-developing shortcut plug-in products for Chinese tourists in Japan. Some local searching functions will be added in mobile phone in the future to provide more conveniences for tourists from China. Baidu Japan is the fourth largest search engine in Japan. It is reported by Japanese media that tourists from China's mainland and Hong Kong have maintained strong pep of growth in Japan in spite of global financial crisis.

Rakuten (OTCPK:RKUNF) plans to start offering a PHS (personal handyphone system) service in April by leasing circuits from Willcom. Rakuten's PHS service will offer voice calls, email communications, and internet access. Partially modified handsets from Willcom are expected to be used initially, but Rakuten is considering offering handsets under its own brand in the future. Rakuten aims to pitch its PHS service to 25,000 or so businesses which operate online stores at the Rakuten Ichiba virtual mall, as well as to roughly 42 million individual members of the virtual mall. It plans to roll out the service first to business customers in April and to individuals by the end of the year. For individual customers, Rakuten intends to issue points based on phone usage that can be used for shopping at the Rakuten Ichiba.