West Greets East
Growing Hitachi Denshi’s business in Japan depends in part on growing its business in the United States and elsewhere. OEM agreements, licensing ComSpace’s DCMA technology and merging with its sister companies figure in Hitachi Denshi’s success plan.
Hitachi Denshi Ltd., a Tokyo-based affiliate of Hitachi Ltd., has long been known as an original equipment manufacturer (OEM). Through the years, its mobiles, portables and repeaters have been available in the United States through the sales and distribution business first known as Midland, then as Intek Global, and currently as Securicor Wireless. The Hitachi products also are sold by Midland Canada and Midland Europe, which are separate, unrelated businesses from Securicor Wireless.
Hitachi Denshi took an unprecedented step in March. It invested in ComSpace, a Dallas company that is developing a spectrum-efficient technology using digital modulation. ComSpace’s technology, called digital-channel, multi-carrier architecture (DCMA), places as many as eight voice channels into a 25kHz-wide bandwidth-the same bandwidth that would be taken by a conventional frequency-modulated voice channel. Hitachi Denshi’s equity investment is only a few percentage points, “but it is the first time we have invested in a foreign company,” said Kazuo Suzuka, general manager of Hitachi Denshi’s Land Mobile Radio Division.
Japan’s Ministry of Post and Telecommunications (MPT) wants Hitachi Denshi and other suppliers to offer spectrum-efficient land mobile radio communications equipment for use in Japan at a reasonable price. The MPT’s desire, coupled with Hitachi Denshi’s need for economy of scale to meet price points, drives the company to seek outlets for its products worldwide.
Cultural, economic and regulatory differences slow the acceptance of new products in some parts of the world, including the Pan-Pacific region, for some companies such as Hitachi Denshi. Worldwide land mobile radio product sales are estimated to total $11 billion annually, and as much as $5 billion is sold in the United States alone. Motorola has the lion’s share of U.S. sales.
In Japan, Hitachi Denshi offers frequency-division, multiple-access (FDMA) land mobile products (with utility companies as foremost customers), and time-division, multiple-access (TDMA) land mobile products (with local government agencies as primary customers).
“With DCMA, we now have three technologies for digital migration in Japan,” Suzuka said.
The Japanese land mobile radio market is estimated to be about one-eighth the size of the U.S. market, or about $600 million in annual sales. Competing with Hitachi Denshi for the “box” business (mobiles and portables) are Kenwood, Icom, Yaesu and Motorola, among others. Competing with Hitachi Denshi for large system sales are Panasonic, Mitsubishi and NEC-companies that Suzuka said do little or no international business in two-way radio.
“If we were to sell radios only in Japan, we could not be competitive,” he said. “We want large quantity production that will affect box pricing and that will meet the MPT’s desire for a reasonable price and spectrum efficiency.”
ComSpace Suzuka had compliments for ComSpace, for which Hitachi Denshi will supply DCMA product as an OEM. In addition, Hitachi Denshi will license the technology and will manufacture and distribute DCMA products under the Hitachi brand, first in Japan and Asia and later in other parts of the world.
“ComSpace is a very good engineering company and a capable organization,” Suzuka said.
Hitachi Denshi is prepared to add to its own engineering staff, if that is necessary, to support the OEM and licensing agreement. In addition, several Hitachi Denshi engineers are being placed at the ComSpace facility in Coppell, TX, to assist with the cooperation between the two companies.
Suzuka added: “The technology itself is good for two-way radio. DCMA makes it easy for the small operator to migrate to digital quickly and easily with the same or better coverage. The base station controller is inexpensive, and the configuration uses the existing antenna system.”
Even with Hitachi Denshi’s supplier arrangements with Securicor Wireless and ComSpace, the company is talking with other two-way radio manufacturers about OEM agreements, too. Its discussions continue with Relm Wireless, a manufacturer in West Melbourne, FL, that has purchased some FM two-way radio tooling housed at the Hitachi factory in Japan. An announcement that Hitachi Denshi was discussing an OEM arrangement with Relm Wireless spurred the Florida manufacturer’s stock price from $3 to $9 per share in one day, reflecting Hitachi Denshi’s reputation.
Hitachi Denshi would like to see an informal interest group promote DCMA as a defacto digital standard. The company may be able to facilitate such a group through its OEM contracts.
ComSpace offers DCMA technology licenses to manufacturers for a fee. ComSpace can also provide engineering services for assisting in DCMA product development.
Suzuka said that licenses for competing digital technologies, including integrated digital enhanced network (IDEN) and terrestrial trunked radio (TETRA) are expensive. Those two technologies focus on networking, which Suzuka said many small operators do not need, and which makes infrastructure more expensive. DCMA offers a reasonably priced alternative, opening the door wider to Hitachi products in the United States while once again helping the company to compete in Japan. The more common DCMA becomes, the more it will help to reduce costs.
“Two-way radio is expensive in Japan, compared to elsewhere,” Suzuka said.
He named Motorola as the only non-Japanese company to have made much progress in selling two-way radios in Japan, whereas Nokia, Ericsson and Motorola sell cellphones in Japan. Motorola’s Japanese entry came after a long struggle with authorities that resulted in a market allocation.
Strategy Suzuka explained that Hitachi Denshi’s land mobile radio strategy involves three steps. The first step, which already has been accomplished, is the OEM agreement with ComSpace.
The next is a second OEM agreement to make DCMA equipment. Suzuka said that Hitachi Denshi’s license with ComSpace makes such an agreement possible, though none has been executed yet.
The third is the distribution of radio communications equipment under the Hitachi brand.
“My dream is our own branded organization,” Suzuka said, though he perceives that it may take several years to accomplish, if at all.
For now, he said that Hitachi Denshi is pleased that people know the company is a two-way radio manufacturer, regardless of whe-ther its own name is on products.
Hitachi Ltd. Hitachi Denshi’s parent company, Hitachi Ltd., owns about 60% of Hitachi Denshi, a radio and video equipment manufacturer.
Hitachi Ltd. also owns part of Kokusai Electric, a Japanese company that makes wireless network infrastructure equipment. Kokusai Electric has supplied the infrastructure and terminals for the cellular system operated by NTT DoCoMo. The company also supplies pagers and microwave equipment.
Another Japanese company partly owned by Hitachi Ltd., Yagi Antenna, is known as an antenna manufacturer. It also constructs towers, antenna systems, cable television systems and base stations.
On Oct. 1, the three companies, Hitachi Den-shi, Kokusai Electric and Yagi Antenna, will be brought together in a merger initiated by Hitachi Ltd. The name for the enterprise following the merger has not yet been settled. Each company wants its name represented, and how that will be resolved is uncertain. For now, the name is given as “Hitachi Kokusai Electric.” Hitachi Ltd. will own an estimated 30% to 40% of the post-merger enterprise.
Suzuka said that the three companies had complementary businesses that competed little with one another. Combining them could bring strengths in serving customer needs that exceed the individual companies’ abilities.
“I want to use these strengths in the two-way radio business,” Suzuka said.
Market outlook Suzuka opined that the two-way radio business might be shrinking, although if it is, the pace is gradual. At the same time, he said that emergency communications, which are not supported by public networks, remain an ideal application for two-way radio.
“Two-way radio is a niche business that may never disappear,” he said.
Suzuka expects the number of competitors to decline as fewer manufacturers support two-way radio. Even so, he said that the demand for two-way radio communications equipment is important to Hitachi Denshi.
Although Suzuka said that voice communications is at the core of two-way radio, other technologies will expand as complements. He cited data communications, location systems, telemetry, multimedia and Internet access among the technologies that complement two-way voice communications.
With two U.S. OEM agreements in hand and more possible, with DCMA as a third digital migration technology for use in Japan and around the world, and with additional strength from merging with Kokusai Electric and Yagi Antenna, Hitachi Denshi stands ready to grow its share of the land mobile radio market.
