### b. Prospects for global expansion for telecommunications equipment layer

Telecommunications equipment vendors' global expansion approaches are roughly divided into two models — (1) a "horizontal expansion model" in which vendors focus on equipment or systems representing their technological advantages and (2) a vertical expansion or "managed-service" model where vendors undertake network operation and maintenance as best partners of overseas communications service companies.

In the telecommunications equipment layer where products have growingly commoditized through standardization, however, the horizontal expansion model mainly pursues a greater sales size taking advantage of lower prices and an overwhelmingly broad product lineup through mass production. It may be difficult for Japanese vendors to follow this model and successfully develop it into a sustainable business model unless they have overwhelming technological advantages and new markets where technological development can be foreseen.

On the other hand, the managed-service model is a standard business model for the global market. Therefore, Japanese telecommunications equipment vendors must obtain business resources for providing managed services by taking advantage of M&As and strategic alliances. In order to differentiate themselves from forerunners, they must find solutions as their strengths and develop complementary, win-win relations with major communications service companies. In global expansion, it is important for them to cooperate with global telecommunications carriers based in Japan and foreign courtiers.

Other conceivable models include (3) “expansion into upper layers” based on Japan’s high technologies and know-how and (4) “infrastructure exports.” In the upper layer market that is also competitive, Japanese vendors may take advantage of their excellent technologies and know-how to increase their overseas presence and expand into foreign markets. In the infrastructure exports market where Japan faces fierce competition from such big countries as the United States and China, Japanese vendors may fuse their ICT technologies with infrastructure or cooperate with manufacturers free from commoditization in order to expand into Asia-Pacific and other emerging countries where growth potential is great with demand growing for infrastructure.

## (7) Global expansion for upper layers

### a. Upper layer market trends

The upper layer market has been expanding rapidly amid the global development of wired and wireless broadband environments and free competition between market players. The market, though dominated by U.S. companies, increased its size (sales of major market participants) even after the Lehman Shock.

Upper layer enterprises, including digital content providers, are capable of driving the entire ICT industry in terms of growth potential and profitability (Figure 1-2-210).

### b. Prospects for global expansion for upper layers

Only a limited range of enterprises including Google, Amazon, Apple and Facebook have been successful in platform development. In content and application development, requirements for local optimization in each country or region may be stronger for upper layers. When expanding into foreign countries, therefore, enterprises in these layers are expected to growingly localize know-how for ecosystems developed in their countries, while promoting M&As and strategic alliances with local rivals to secure local customer bases. Characteristically, upper layers can implement global expansion more promptly and easily than other layers. Their successful global expansion may produce massive job opportunities.

If the venture support environment is expanded to further develop upper layers, their platform development is expected to be promoted to further their global expansion.

## (8) Estimated effects of ICT industry's global expansion

We estimated effects of successful global expansion by major Japanese enterprises in ICT service, communi-

Figure 1-2-2-10 Assessment of major U.S. publicly traded ICT industry enterprises by category

Market growth (from 1Q 2012 to 1Q 2013)

(Source) MIC "Research Survey on ICT Industry's Global Strategy" (2013)