Cities compete to become Japan’s Silicon Valley

[chahlley]

                                                          (World Today Friday 27 October 2017)

        Cities compete to become Japan’s Silicon Valley

Nintendo is based in Kyoto, one of Japan's potential Silicon Valleys. Photo: Reuters

Updated 5:00 PM, October 27, 2017 

TOKYO — Every modern economy wants its own version of Silicon Valley and in Japan the urge to find or create one is just as strong. Although the country’s pedigree as an innovator is not in doubt, rapidly adapting to the digital age has proven challenging for its once-mighty consumer electronics companies.

“We’d love to capture the dynamism of Silicon Valley and bring it to Japan,” Prime Minister Shinzo Abe said during a trip to the technology hotspot in 2015 as part of his drive to revitalise his country’s economy.

Japan has many places professing to be technology hubs but there is lively debate about whether any of them can justifiably claim to be a Silicon Valley, where innovation becomes self-propelling and technology start-ups flourish.

Fukuoka, a port city of 1.5 million people on the south-western island of Kyushu, has a strong claim to the title. One of its biggest strengths is its mayor, Mr Soichiro Takashima, who took up the post in 2010 and has been championing the start-up scene.

Mr Takashima has been able to capitalise on Fukuoka’s status as one of Japan’s special economic zones and has introduced the country’s first “start-up visa”: this eases some of the conditions for foreign entrepreneurs intending to start a business and reduces the corporate tax rate for start-ups.

Also in Fukuoka’s favour are cheaper office rents and a university network that is attracting foreigners and is strong on engineering, information technology and medical science.

The efforts seem to be paying off. Fukuoka added 260 companies in emerging industries in the four years to 2016 and welcomed 11,638 new employees, according to city officials.

Line, the popular smartphone chat app, and Gumi, a Japanese game publisher, are among the more established companies that have set up satellite offices in Fukuoka, but these are far from the heavy-hitters of the tech and start-up worlds.

Therein lies the case for Kyoto. The ancient capital has long had a claim to the title of Japan’s Silicon Valley, thanks to the proliferation of top-class engineering, technology and biotechnology companies there and the city’s reputation as an academic powerhouse.
Although not household names, Murata Manufacturing, Rohm and Kyocera supply Apple and boast world-leading market shares in their various industries. The city is also home to Nintendo, the great innovator of the video-game industry.

A key difference with its American role model is that Kyoto’s companies are tilted towards hardware, whereas Silicon Valley is now dominated by software and internet names such as Facebook, Google, Amazon, Uber and Airbnb.

Japan’s love of hardware innovation is evident in Tsukuba Science City, a science park about an hour’s drive north-east of Tokyo. Established in the 1960s, it is home to more than 60 national research institutes and boasts half the national research budget.

The area is already the site of a test track for self-driving vehicles and will soon be home to a “city of robots” that Cyberdyne, a Tsukuba-headquartered robotics start-up, will put to work in hospitals and assisted-living facilities.

Tokyo’s Shibuya district could also be a contender for the title of Silicon Valley of Japan . . . for the second time. The lively suburb is known for “the Hachiko scramble”, the world’s busiest pedestrian crossing. During the dotcom boom, it housed Japanese internet start-ups and went by the name “Bit Valley”: a play on the English translation of Shibuya, which means “bitter valley”, and the computer term “bit”.

Shibuya is a magnet for those developing software and related services. It is already home to co-working spaces, accelerators and venture capital firms vital in start-up ecosystems. It is also primed for a revamp before the Tokyo 2020 Olympic Games as part of the local government’s effort to woo tech companies to return.

A common criticism about Japan is that it does not have the appetite for risk and tolerance of failure that defines the Silicon Valley model. Young people have favoured steady jobs at large corporations rather than developing technology at small, little-known companies.

Mr Tomofumi Watanabe, head of Sumitomo Mitsui Financial Group’s Silicon Valley digital innovation lab, says the attitude of the younger generation is changing.

“They have a more entrepreneurial mind, so they may start a new business themselves instead of getting into a big company. Now they can see several successful people — CEOs or CFOs on TV or in the newspaper — (and that) is changing the younger generation’s attitude towards entrepreneurship.”

“That these technology hubs are competing against each other is not a bad thing,” says Mr Hideaki Tanaka, dean of the graduate school of global governance at Meiji University. “But Japanese politics always seeks uniform development across Japan: they don’t want to prioritise. That is a Japanese problem.”

FINANCIAL TIMES