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No. 364, January 2000

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Japanese Companies in the US


TELECOMMUNICATIONS

The pending purchase of QUALCOMM INC.'s San Diego, California-based wireless handset manufacturing operations will catapult KYOCERA CORP. into the ranks of competitors right behind the three mobile phone world industry leaders. The cost of the acquisition, which involves operations that lost money on FY 1999 revenues of about $1.4 billion, was not disclosed. Industry analysts figure it is anywhere from $500 million to $1 billion. Qualcomm is the inventor of the CDMA (code-division multiple access) digital cellular network technology. Kyocera already is the top maker of CDMA handsets in Japan, supplying them to affiliate DDI CORP. as well as to IDO CORP. The purchase of the Qualcomm assets, which include inventories and customer commitments in addition to manufacturing equipment, will enable Kyocera to enter the North American mobile phone market in earnest. Its soon-to-be-formed KYOCERA WIRELESS CORP. unit will make handsets for sale under both the Kyocera and the Qualcomm brands. In the year through March 2001, the Japanese manufacturer's various production units expect to turn out 16 million wireless phones, double shipments to date. A significant feature of the transaction is Kyocera's commitment to purchase most of its CDMA chipsets and software from Qualcomm for five years as well as continue its existing royalty-bearing CDMA licensing agreement with the company. These sources of income are how recently high-flying Qualcomm plans to make money in the future. Under the deal, which is expected to close in February 2000, Kyocera Wireless will retain some employees of QUALCOMM PERSONAL ELECTRONICS, a manufacturing venture that Qualcomm and minority partner SONY CORP. formed in 1996 to make CDMA and PCS (personal communications services) handsets, and of Qualcomm Consumer Products. Kyocera, the world's biggest maker of ceramic packages for ICs, has operated a large factory in San Diego for nearly 30 years.

HITACHI ELECTRONICS, LTD. will build hardware on an original equipment manufacturer basis for COMSPACE CORP., the developer of the capacity-ex-panding, digital DC/MA (dynamic channel/multicar-rier architecture) technology for specialized mobile radio networks. The supply arrangement is part of an agreement designed to promote the worldwide introduction of products employing DC/MA technology at 800 MHz as well as at other frequency bands. CommSpace's DC/MA interface converts existing 25 kHz-spaced channels, such as those used in the 800-MHz frequency band, into eight digital voice/data pathways. Beyond DC/MA's capacity-boosting capabilities, the Irving, Texas company says that a major advantage of the technology is that wireless radio operators can use their existing sites and equipment. Testing of CommSpace's technology in Japan could occur within 2000.

In a contract win valued at $100 million over three years, HITACHI TELECOM (USA), INC. will supply its AMN (advanced multiservices network) ultrahigh-speed optical transmission equipment to US OPTICS, INC. for deployment in its West Coast network. Included in the order is DWDM (dense wavelength-division multiplexing) and OC-192 SONET (synchronous optical network) equipment. US Optics, a Los Angeles affiliate of BACKBONE COMMUNICATIONS INC., is an alternative ATM (asynchronous transfer mode) carrier. Its initial installation of Norcross, Georgia-based Hitachi Telecom's outage- proof four-fiber BLSR (bidirectional line-switched rings) will be in the San Francisco and L.A. areas. The network will operate over the fiber-optical facilities of participating utility companies.

Three months ahead of schedule, the northern section of Pacific Crossing-1, the first privately owned and operated transpacific undersea fiber-optic cable network, was completed and connected with a terrestrial system that runs from the PC-1 cable station in Ibaraki prefecture to Tokyo. Operation of this segment of PC-1 was scheduled to start before yearend 1999. The southern section of the advanced cable network, which will land in Mie prefecture and be linked with Osaka, is expected to be ready in the summer of 2000. At that point, PC-1 will form a 13,200-mile, four-fiber-pair, self-healing ring. The cable is designed to operate initially at 80 gigabits per second, but it is upgradable to 640 Gbps using DWDM technology. PC-1 is majority-owned by ASIA GLOBAL CROSSING LTD., itself a joint venture among GLOBAL CROSSING LTD., MICROSOFT CORP. and SOFTBANK CORP. (see Japan-U.S. Business Report No. 361, October 1999, pp. 32-33). MARUBENI CORP. owns roughly one-third of PC-1 through recently established GLOBAL BANDWIDTH SOLU-TIONS, INC. of New York City (see Japan- U.S. Business Report No. 363, December 1999, p. 13). TYCO SUBMARINE SYSTEMS LTD. is the prime contractor on PC-1; KDD SUBMARINE CABLE SYSTEMS INC. is the project's main subcontractor.

An exchange rate of ¥103=$1.00 was used in this report. aaa

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