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Many Japanese companies are facing a tough question: Do they cooperate with growing Chinese companies in developing advanced technology or continue to battle their rivals and risk being shut out of China's huge market? |
At stake are international standards.
Working with major players in China could provide the boost needed for Japanese companies seeking to gain such international approval for their technologies.
But amid the heated competition around the world for such standards, developments that go against what is occurring in China could come back to haunt the Japanese companies that are investing in such development.
Some industry insiders say cooperation should start among the Japanese companies themselves to prevent costly and time-consuming battles, like the DVD format war.
Former engineers from Toshiba Corp. and NEC Corp., who lost to the Blu-ray disc in the competition to develop the next-generation DVD in Japan, are now providing support to Shanghai United Optical Disc Co.
The company's plant within an old industrial complex near the city center produces the Chinese version of the next-generation optical disc that can copy video images.
"We would not have been able to accomplish this without the support of Japanese engineers," said Xu Xianghua, the company's general manager.
China is trying to become a major science and technology player by developing its own technology, and the next-generation optical disc is considered vital in these efforts.
Hisashi Yamada, a former Toshiba executive often referred to as the "father of the DVD," has played a key role in China's plan.
In 1994, Yamada was involved in the development of the HD-DVD disc and led Toshiba's efforts in that field. However, in February 2008, Toshiba announced it was withdrawing from the competition to determine the standard for the next-generation DVD disc.
In spring 2009, Yamada, 68, became top technology adviser to Memory-Tech Corp., a disc manufacturing company that was established through capital from Mitsubishi Corp. and other entities.
Memory-Tech created Shanghai United Optical Disc along with a Chinese state-run record company.
Yamada also joined an organization promoting the Chinese version of the next-generation optical disc. Other participants are representatives of Chinese companies, experts at Tsinghua University and Chinese government officials.
The organization provides support for the creation of a new standard based on HD-DVD technology.
Yamada passed on technology to record information using ultra-fine processing of the discs.
"I feel responsibility for having encouraged China to employ the Toshiba standard, and because I am an engineer I also want to see something I developed out in the market as a product," Yamada said. "I felt I could continue to pursue my dream if I did it in China."
He was also not very concerned about criticism from within Japan that such efforts would lead to a technology drain from Japan.
"Technology is always progressing," Yamada said. "There is no future if all you do is protect what you have. If Japan is eventually caught up to, it should earn profits through patent income or software."
But in some areas, the competition involves unique technology developed in the two nations.
Some within the Japanese automobile industry are dreading what they refer to as a "nightmare scenario" concerning moves toward standardization of the lithium ion batteries installed in electric vehicles.
They fear that Japanese companies could lose the entire global market if the Chinese model for such batteries becomes the international standard.
Japanese companies have used manganese and nickel as the cathode material for the lithium ion batteries they produce.
While the cost of such materials is higher, the energy efficiency is better so fewer batteries are needed.
However, Chinese automakers, such as BYD Auto, China's largest electric vehicle manufacturer, are using iron phosphate in their cathodes.
While a larger number of batteries must be used because of the lower energy efficiency, the Chinese batteries are considered more durable and safe.
If China should limit domestic standards for lithium ion batteries to those that use iron phosphate and require similar safety standards for all lithium ion batteries, Japanese manufacturers would be unable to sell their batteries in China.
To make matters worse for the Japanese manufacturers, China could seek approval for iron phosphate batteries as an international standard.
Although U.S. and European nations have led the process of approving international standards in the past, they can no longer ignore the intentions of China, which is now the world's largest auto market.
The nightmare scenario for Japan would involve those Western nations supporting the Chinese model for lithium ion batteries.
Moreover, Japanese companies are not all on the same wavelength.
"A partnership involving all Japanese companies should be established to ensure that Japan is not disadvantaged in standards established in China or in the process to approve international standards," said Hikaru Hiranuma, a research fellow at the Tokyo Foundation.
There are instances of Japanese success in winning approval for international standards by partnering with China.
For example, in 2009, Japan's 1,100-kilovolt ultra high voltage (UHV) power transmission technology was approved as an international standard by the International Electrotechnical Commission.
China supported Japan after Tokyo Electric Power Co. provided technological assistance to a Chinese company on UHV technology.
With that example in mind, Japanese government officials are trying to gain the further cooperation of China and South Korea.
At a meeting in March 2010 of the leaders of the three nations, an agreement was reached on pursuing cooperation for standardization of technology.
In December, an agreement was reached to hold regular meetings among directors-general of ministerial bureaus of the three nations. A meeting will be held between June 22 and 24 in South Korea.
"It will be effective to partner with China and South Korea to first create an East Asian standard and then seek to have that approved as a global standard," said Hidetaka Takeda, head of the Beijing office of the Japan Electronics and Information Technology Industries Association. "While cooperating with China in standardization, the various companies could compete in the products actually manufactured."
(This article was written by Yasuyuki Nishii, a senior staff writer, and Shingo Takano.)