Japan-US Business Report LogoJapan-U.S. Business Report

No. 347, August 1998

Issue Index

Japanese Companies in the US


TELECOMMUNICATIONS

In an unusual, perhaps unprecedented move by a Japanese company producing in the United States, MI-TSUBISHI ELECTRIC CORP. plans to outsource U.S. production of cellular telephones to big contract manufacturer SOLECTRON CORP. The five-year deal, designed to trim MELCO's production costs, is expected to close by yearend. Milpitas, California-based Solectron will take over MITSUBISHI CONSUMER ELECTRONICS AMERICA, INC.'s Braselton, Georgia wireless telephone manufacturing operations as well as some 350 assembly line workers and support personnel. It will make cellular telephones for sale in North America under both the MELCO name and private-label brands. The Japanese company expects to sell 500,000 mobile phones in the United States in FY 1998. To support the partnership with Solectron, particularly in the area of digital mobile phones, recently formed MITSUBISHI WIRELESS COMMUNICATIONS, INC. of Duluth, Georgia will establish a new design center at a still-undecided location in the United States.

In a major endorsement of SONY CORP.'s software technology, number-two U.S. cable TV operator TELE-COMMUNICATIONS, INC. will use the Windows CE-based Home Networking Module platform in its advanced digital set- top boxes. The middleware allows digital devices equipped with Sony's i.LINK interface to send and receive digital commands and digital audio/video streams. TCI's National Digital Television Center also will license Sony's Aperios operating system as a backup for its set-top boxes. Analysts said that the deal could be doubly significant for Sony since TCI is set to merge with AT&T CORP., raising the possibility that the Home Networking Module could be adopted as well by the communications giant for its next-generation home networking system. Sony's software is at the heart of an interactive digital in-house networked system that it developed with the leader in set-top boxes, GENERAL INSTRUMENT CORP. (see Japan-U.S. Business Report No. 345, June 1998, p. 7).

As soon as 2000, when the Federal Communications Commission will allow consumers to buy their own set-top boxes rather than just rent them from CATV providers, MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. will start to sell digital set-top boxes in the United States. Able to receive today's analog TV signals as well as forthcoming digital broadcasts and to be two-way interactive-capable, the MEI devices will use the Windows CE operating system.

KOKUSAI DENSHIN DENWA CO., LTD. sold its 9.5 percent stake in international communications carrier PACIFIC GATEWAY EXCHANGE INC. for roughly $72 million. KDD paid $20 million or so for its stake in the Burlingame, California company in a June 1996 deal designed to help it gain management and marketing expertise. Now that KDD AMERICA, INC. has launched domestic and international service (see Japan-U.S. Business Report No. 345, June 1998, p. 7), its parent felt that the time had come to sell its PGE holdings and to invest part of the proceeds in its new U.S. operations. But KDD will continue to connect its lines with Pacific Gateway's network for international calls and other services.

Trying to get on an equal footing with major competitors at home, NIPPON TELEGRAPH AND TELEPHONE CORP.'s American subsidiary has applied to the FCC for permission to begin facilities-based communications services between the United States and Japan. NTT AMERICA, INC. currently is restricted to leased-line or resale transpacific services, although it can provide any type of service from here to third countries. INTERNATIONAL DIGITAL COMMUNICATIONS INC., JAPAN TELECOM CO., LTD. and KOKUSAI DENSHIN DENWA CO., LTD. already have FCC permission to build their own networks for services across the Pacific (see Japan-U.S. Business Report No. 346, July 1998, p. 7).

An exchange rate of ¥141=$1.00 was used in this report.
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