# Section 3 Directions to Boost International Competitiveness in Japan's ICT Industry

### 1. Current state of and challenges for Japan’s international competitiveness

## (1) Assessment of Japan's international competitiveness

Although Japan placed eighth in the world in 2005 in an annual ICT competitiveness ranking by the World Economic Forum (WEF), we have languished between 15th and 20th in more recent years, placing 16th in 2014, as Western European states and Singapore have dominated the top positions (Figure 2-3-1-1).

## (2) Strengths and weaknesses of Japan's ICT industry

A survey conducted by MIC asked Japanese ICT corporations about their strengths and weaknesses pertaining to global expansion. In general, many corporations viewed “functionality and quality,” “technological and R&D capabilities,” “product development capabilities,” and “enhanced customer support services” as strengths while acknowledging “price competitiveness,” “localization proficiency,” “speed of decision making,” and “procurement capabilities and speed” as weaknesses.

One notable difference between corporations in the application layer and those in other layers was seen in the "speed of decision making." Application layer corporations ranked this factor around the middle in both the strength and weakness rankings, but a decidedly large number of corporations in the ICT services layer and the communications and device layers recognized it as a weakness. Another pronounced tendency was in "price competitiveness," which all layers viewed as somewhat of a weakness, but many more device layer corporations, over 60 percent, saw it as a weakness.

Another interesting result was “functionality and quality of products and services,” because the lower the layer the more likely this factor was considered to be a strength, while only device layer corporations felt “brand power” to be a strength. This is believed to be a representation of the high quality and reliability of our manufacturing industry (Figure 2-3-1-2).

## (3) Directions among ICT corporations

Currently, just over 20 percent of Japanese software corporations have expanded overseas, while just under 40 percent in the SIer and information services sector and communications sector have done the same. At the same time, the overseas expansion percentage is around 60 percent in the ICT device, electrical device, and precision device industries. Thus, manufacturers were more likely to be actively expanding overseas, while the majority of corporations in all layers generally expand overseas by setting up local subsidiaries (Figure 2-3-1-3).

When the same corporations were asked about their highest current priority country or region, China and the United States took the top-two spots, the same as in the last survey, well ahead of India in third place and the ASEAN nations of Thailand, Vietnam, Singapore, and Indonesia filling out the next four spots. When asked about the country or region with the most future promise however, India, which was third in the previous survey, came in on top, with Vietnam in third place, Brazil in fourth, and Myanmar in fifth. This demonstrates a preference for the Asia Pacific region, which is expected to see solid future growth (Figure 2-3-1-4).

When asked about their overseas expansion prospects, about 30 percent of corporations said they will boost exports and some said they expect to also increase direct investment in overseas corporations, largely investing within their own industry sector. As in the last survey, corporations who said they will increase overseas expansion were asked about their outlooks for domestic investment and domestic hiring. Just under 40 percent said they expect to increase domestic investment and over 30 percent said they expect to increase domestic hiring. Thus, many corporations indicated that they will boost domestic investment and domestic hiring in tandem with pushing forward with overseas expansion (Figure 2-3-1-5).

Figure 2-3-1-1 ICT competitiveness rankings (WEF)