Casio Sells Three Plants to Flextronics
PlayStation2 vs. Xbox: Next Round
Toshiba Chemical Becomes Kyocera Subsidiary
Japanese Flat-Screen TV Market Growing Competitive
Casio Showcases Slim Card-size DSC in Business Show
Olympus Pushes DSC Production in China

Japan's Casio Computer Company announced in May 2002 that it will sell three of its major manufacturing bases to Singapore-based EMS giant, Flextronics International Ltd. Casio will transfer 100 percent shares in Casio Malaysia and Casio Aichi (the latter is located in Japan), as well as the assets of Asahi Malaysia, to the Singaporean firm. Casio will outsource production of the products which have been produced at the three facilities to Flextronics, with an initial commitment of three years. The value of the three-year contract is estimated at $1.5 billion. Casio plans to improve its cost competitiveness and production lead time through the new partnership with Flextronics, which is good at responding to the volatility of the market in a timely manner. Under the agreement, Flextronics will be in a position to bolster its presence in the Japanese market by making Aichi Casio into a build-to-order, repair, and distribution center in Japan.

In a related development, Flextronics will purchase NatSteel Broadway, a division of Singaporean NatSteel Ltd., Reuters reported on May 22, 2002. According to Reuters, Flextronics will take advantage of NatSteel Broadway's capacity in China in the outsourcing deal with Casio. NatSteel Broadway produces tools, plastics, and metal components for electronic products. [M. Robertson, Portelligent]

In the Japanese game machine market, in further indication that its early marketing strategy for the Xbox game machine has not gained the traction the company hoped for, Microsoft dropped the retail price of the Xbox by 10,000 yen ($77 @ yen 130/$US 1) from the previous 34,800 yen ($268) to 24,800 yen ($191) on May 22, 2002. Microsoft's rival, Sony Computer Entertainment, announced that it would apply an open price to its PlayStationon2 on May 14, 2002. Sources report that as a result PlayStation's retail price will be lowered by about 2,000 to 3,000 yen ($15-$23) from the current 29,800 yen ($229).

Despite active sales in the U.S., the Xbox has not been selling very well in Japan since it was introduced on February 22, 2002. Shortly after its debut in Japan, Microsoft suffered negative publicity when it became apparent that the machines scratched users' CDs. Microsoft hopes that the dramatic price reduction will bolster Japanese sales. Microsoft will also move to compensate purchasers who had bought the Xbox before the price reduction by offering their choice of a DVD replay kit, memory unit, or Xbox game software package.

Microsoft, which had already reduced the selling price of the Xbox in Europe and Australia, lowered the price in the U.S. to $199 on May 15, 2002. Microsoft claims it had sold 1.5 million Xbox units by the end of 2001 following the debut in the U.S. market on November 2001. On the other hand, Microsoft has sold only 210,000 Xbox in Japan as of May 12, 2002, according to statistics provided by enterbrain, a Japanese game magazine publisher. The most recent figures from Sony indicate it has sold 30 million PS2s globally. Unless Microsoft can begin to close the gap on the PS2, a cutthroat price war among consumer game machines may be in the offing.

While competition between PlayStation2 and Xbox heats up, Nintendo announced on May 21, 2002 that it will reduce the price of its GameCube to 19,800 yen ($152). The company planned to implement the new pricing beginning June 3, 2002. Nintendo also announced that it had reduced GameCube prices in the US to $149.95 on May 21, 2002. With this reduction, the GameCube has the lowest price among the major home game machines. Nintendo introduced the GameCube in September 2001 for 25,000 yen ($192). It had sold 1.57 million units in Japan and 2.23 million units in North America by the end of March 2002. Nintendo will begin full-fledged manufacturing of the GameCube in China in June 2002. [M. Robertson, Portelligent]

Japan's Kyocera Corp. announced during May 2002 that the company will make Toshiba Chemical Corporation a wholly owned subsidiary through an exchange of stock with Toshiba. Toshiba Chemical - a supplier of organic semiconductor encapsulation materials -- will change its name to Kyocera Chemical after completion of the transaction. Toshiba Chemical's consolidated sales for the year ending March 2002 were 24.8 billion yen ($190.77 million @ yen 130/$US1). Affected by the global downturn in the electronics industry, the firm posted a 11.4 billion yen ($87.77 million) loss for the year ending March 2002. It has 654 employees. The company expects to return to profitability for the year ending March 2003, as it undertook restructuring last year.

Kyocera, which derives its name from Kyoto Ceramics, is known for ceramic-based semiconductor materials such as ceramic substrates and ceramic-based encapsulants. The acquisition of Toshiba Chemical, which specializes in organic encapsulation materials, will support expansion of Kyocera's semiconductor encapsulant operation. Japanese semiconductor manufacturers have been aggressive in separating their non-core operations in recent years. NEC recently announced that it would set up a TFT-LCD manufacturing joint Venture with a Chinese firm in China and it would merge its printed circuit Board operation with Toppan Printing's PCB unit. In addition to the sale of Toshiba Chemical to Kyocera, Toshiba has sold its semiconductor packaging operation to U.S.-based packaging house Amkor. [M. Robertson, Portelligent]

In a move to follow such television manufacturers as Toshiba and Hitachi in Japan, which are aggressively promoting large flat-screen TVs, Mitsubishi Electric announced on May 22, 2002, that the firm will enter the PDP (plasma display panel) television market. Mitsubishi will source PDP panels from NEC and then assemble them into TVs at its Kyoto Plant. The company's 42-inch PDP TV, the Plasma Dia PD-42MW2, will have a price tag of 850,000 yen ($6,538 @ Yen 130/$US 1). The company plans to produce 1,000 units a month.

Matsushita Plasma Display Production Company, Ltd. (MPDP), a joint venture between Matsushita Electric and Toray Industries, will construct a new plant and produce 1.5 million plasma displays annually beginning in fiscal 2005 (April 2005 to March 2006). The company will begin construction in January 2003 on a new building next to its existing factory in Ibaraki City, Osaka. MPDP plans to start manufacturing in April 2004 with a monthly production capacity of 80,000 units. The total investment amounts to 60 billion yen ($461.54 million). By manufacturing from back plate to end product, the company plans to reduce manufacturing costs. It will seek to achieve the 1-inch = 10,000 yen ($77) price level, estimated in Japan to represent the threshold price that ignites market growth, in fiscal 2004. The new plant will produce 37, 42, 50 and 60-inch plasma displays.

A primary competitor, Fujitsu Hitachi Plasma Display Ltd., which has Established a monthly capacity of 30,000 units, plans to expand to 60,000 units a month in 2003. Shanghai Matsushita Plasma Display Company Ltd., based in China, is scheduled to kick off production in 2002 with 20,000 units/month capacity when it reaches mass production in 2003.

Samsung Electronics Co., Ltd., of Korea, the world's largest supplier of large-format LCD panels, will enter the Japanese flat-panel TV market by introducing a 40-inch LCD-based television, reported to be the world's largest. Samsung will introduce six LCD models ranging in size from 15-inch to 40-inch. The 40-inch LCD TV is going to be sold for about 1 million yen, or roughly 300,000 yen ($2,308) more than the 42-inch plasma display TVs currently available in the market. Although a 40-inch LCD TV is more expensive than a 42-inch plasma TV, Samsung claims LCD TV consumes less power. The company plans to simultaneously introduce the 40-inch LCD TVs in the U.S. and Europe.

As the Japanese leader in LCD television, Sharp is publicly welcoming Samsung's entry, saying: "This development will lead to increased consumer recognition of LCD TVs and to a boost in demandSharp's 30-inch LCD TV has been the largest size available in the Japanese market. Sharp plans to develop a 40-inch LCD TV before the end of 2002, according to reports in the Japanese trade press.

Japanese TV demand now stands at 10 million units a year. The flat-screen TV share in fiscal 2001 (April 2001 to March 2002) was about 5 percent. Analysts forecast that the share of flat-screen TVs in Japan will expand to over 20 percent in fiscal 2005. [M. Robertson, Portelligent]

Casio of Japan showcased its new business card-size digital still camera, the EXILIM, at the recent "Business Show" (actually, an exhibition of electronics products) in Tokyo. Uniquely thin and stylish, EXILIM features a mere 11.3 mm thickness and 85g in weight. The total CCD pixel count is 1.24 million. The camera is equipped with a 4x digital zoom. In its on-board 12-MB flash memory, a maximum of 15 images can be stored at 1600 x 1200 pixel resolution. The camera features an SD card port as well as internal flash memory. It can capture up to a 30-second long video.

To achieve the compact format, Casio adopted a four-chip multichip module containing CPU, ASIC, SDRAM, and flash memory. The firm reduced assembly area by about 70 percent and cut power consumption to 1/3 compared to its prior digital still cameras. By adopting TFT LCD that supports a digital interface, the company did away with a converter that was required previously required for the interface. A higher end model of the same camera, the EX-M1, features MP3 compatibility and max 50-min voice record function. Casio will Commercialize the EXILIM on June 26, 2002 in Japan. The EX-M1's street price is expected to be set at around 40,000 yen ($308 @ yen 130/$US 1). The standard model, the EX-S1 will sell for about 30,000 yen ($231). Casio, which showcased EXILIM at CeBit earlier this year, sold a limited number of the new card-sized camera in Germany before commercialization in Japan. Casio plans to produce 50,000 EXILIMs a month (for the Japanese market and export combined) in Japan. Pictures of theE XILIM are available at http://www.exilim.jp/. [M. Robertson, Portelligent]

Olympus Optical Industries will add a facility to manufacture lenses for Digital still cameras and silver halide cameras in its Shenzhen plant, China, and also plans to construct a new facility to assemble digital still cameras next to its Panyu plant, in preparation of full-fledged production of digital still cameras in China. The Shenzhen camera lens facility will produce 52 million lenses a year. Olympus will spend 330 million yen ($2.54 million @ yen 130/$US 1) for the new facility, which will have floor area of 5295 square meters. The new Panyu plant at Olympus's Guangzho City complex will have 17,240 square meters of floor area and produce cameras, recorders, macro-cassette tapes, and MO drives. Olympus will invest 150 million yen ($1.15 million) to add a new facility to its Panyu plant. The company plans to kick off operation at both facilities in October 2002, and to produce about 1 million digital still cameras in China in 2002. Olympus, which has already been producing magneto optical disc drives (MO) in China, will begin production of MO drives at its Panyu plant with a monthly capacity of 50,000 units starting in May 2002. It plans to improve the profit structure of its imaging divisions by accelerating production of consumer products, such as digital still cameras and MO drives. [M. Robertson, Portelligent]