ICT Attractive Markets

ICT Attractive Markets

In this report, we focus on the following four attractive markets in the ICT industry:


(1)5G market


As 5G services became fully commercialized in the spring of 2020, expectations for the expansion of 5G and related markets in Japan are rising. Investment in network infrastructure for 5G services in Japan is expected to grow rapidly from 2020 onwards, with forecasted market size of approximately 200 billion JPY in 2020 expanding at a compound annual growth rate of 54.6% between 2019 to 2024. Furthermore, 5G mobile lines are expected to account for a good share of the market, with the number of lines for IoT growing rapidly as the use of smartphones, tablets, and other devices continue to increase. Hence, the 5G market is expected to develop as an essential system for the future.


① Smart City × 5G

5G is positioned to be a new social infrastructure that will expand the possibilities of smart cities by processing large amounts of data from IoT devices in real-time. The spread of 5G will broaden both the quantity and quality of information that can be collected. The market for smart city platforms in total is forecast to be worth 1.23 trillion JPY in FY 2025-26, of which the 5G-related portion will be around 300 billion JPY, or approximately 25% (See Figure 7).


Bar graph of Smart city platform market size forecast in Japan (2018-2025), also showing the breakdown between non-5G-related and 5G-related. Market size for FY 2018 (actual) is 736.7 billion JPY, of which 5G-related is 0. Market size for FY 2019 (forecast) is 775.6 billion JPY, of which 5G-related is 0. Market size for FY 2020 (forecast) is 819.7 billion JPY, of which 5G-related is 51.2 billion JPY. Market size for FY 2021 (forecast) is 869.8 billion JPY, of which 5G-related is 108.7 billion JPY. Market size for FY 2022 (forecast) is 941.3 billion JPY, of which 5G-related is 176.5 billion JPY. Market size for FY 2023 (forecast) is 1,024 billion JPY, of which 5G-related is 256 billion JPY. Market size for FY 2024 (forecast) is 1,120.1 billion JPY, of which 5G-related is 280 billion JPY. Market size for FY 2025 (forecast) is 1,232 billion JPY, of which 5G-related is 308 billion JPY. Created based on data from Nomura Research Institute

Along with the spread of 5G, governments and companies are also working to develop smart cities. To resolve the myriad issues cities face, they have been promoting "Data-driven smart cities" since 2017. This project seeks to build an open data collaboration platform that enables a diverse range of entities, including large companies and venture companies, to participate. Local governments and companies are collaborating to conduct demonstration tests, and projects by 14 local governments and organizations have been supported up to 2019. In 2017, Accenture (Ireland) made it easier to access AI chatbots and common portals providing information on categories such as maternal and child health, for people in Aizuwakamatsu City. In 2019, Aflac Life Insurance (U.S.) leveraged lifestyle and environmental data in Chofu City to promote health and is collaborating with local universities to improve the educational environment. Thus, the collaboration between foreign-affiliated companies and local governments is also noteworthy.

In 2019, the Japanese government established the “Smart City Public-Private Partnership Platform” to encourage collaboration between businesses and sectors concerning public and private smart cities. As of January 2021, this platform includes 412 companies, universities and research institutions, 135 local public entities, and 11 government-related ministries and agencies. Members receive assistance with activities such as hands-on business support, subcommittees, partner matching, and promotional activities.


② SporTech × 5G

SporTech is expected to be one of the earliest of 5G application markets to take off. Even pre-commercialization of 5G services, sports has been a focus of companies such as SoftBank (professional basketball) and NTT Docomo (Rugby World Cup Japan 2019). However, they have also set their sights on the Tokyo Olympic and Paralympic Games, which are scheduled to be held immediately after full-scale commercialization. There are many areas where the features of 5G can be effectively advertised, such as virtual reality (VR) viewing, multi-perspective viewing using multiple cameras, and virtual watching from a remote location. The future potential is very high in this field.

The Japanese market for SporTech is projected to be worth 155 billion JPY in FY 2025-26, of which 16.4 billion JPY, or approximately 11%, will be related to 5G. SporTech × 5G can also be applied at concerts and other live events (See Figure 8).


Graph of SporTech market size forecast (Japan) showing the market size (2019-2025) and the contribution of 5G-related to the market. Market size for FY 2019 (forecast) is 31 billion JPY, of which 5G contribution is 0. Market size for FY 2020 (forecast) is 53.2 billion JPY, of which 5G contribution is 0. Market size for FY 2021 (forecast) is 73 billion JPY, of which 5G contribution is 1 billion JPY. Market size for FY 2022 (forecast) is 106.2 billion JPY, of which 5G contribution is 4.7 billion JPY. Market size for FY 2023 (forecast) is 130.5 billion JPY, of which 5G contribution is 10 billion JPY. Market size for FY 2024 (forecast) is 142.6 billion JPY, of which 5G contribution is 12.7 billion JPY. Market size for FY 2025 (forecast) is 154.8 billion JPY, of which 5G contribution is 16.4 billion JPY. Created based on data from Nomura Research Institute

③ HealthTech × 5G

One of the major social issues in Japan is the burgeoning social security cost that comes with the decreasing birthrate and aging population. One of the most effective ways to stem this is to extend people’s healthy lifespans, or in other words, to focus on disease prevention. 5G is expected to be widely applied in the field of HealthTech to improve quality of life by collecting and analyzing information on users’ daily activities and vital signs (such as body temperature and pulse rate).

In addition to the above measures to extend healthy lifespans, the government is promoting workstyle reforms and health management. As a result, the overall Japanese market for HealthTech is expected to be worth 225.3 billion JPY in FY 2025-26, of which about 26%, or 58 billion JPY, will be related to 5G (See Figure 9).


Graph showing the HealthTech market size forecast in Japan (2019-2025). Market size for FY 2019 (forecast) is 72.8 billion JPY. Market size for FY 2020 (forecast) is 86.9 billion JPY. Market size for FY 2021 (forecast) is 104.3 billion JPY. Market size for FY2022 (forecast) is 125.6 billion JPY. Market size for FY 2023 (forecast) is 151.9 billion JPY. Market size for FY 2024 (forecast) is 184.7 billion JPY. Market size for FY 2025 (forecast) is 225.3 billion JPY. Created based on data from Nomura Research Institute

(2)Cloud market


As companies "Lift and Shift" their existing applications to the cloud and retrofit or rebuild them cloud-natively, the workstyle innovations prompted by the coronavirus pandemic is driving the growth of the cloud market. The domestic cloud services market in FY 2019-20 was worth 2.36 trillion JPY and is expected to grow to 5.4 trillion JPY by 2024 (See Figure 10).

Graph showing the domestic cloud market performance and forecasts in Japan (2019-2024) Market size for FY 2019 (actual) is 2,357.2 billion JPY. Market size for FY 2020 (forecast) is 2,864.9 billion JPY. Market size for FY 2021 (forecast) is 3,428.2 billion JPY. Market size for FY 2022 (forecast) is 4,012.8 billion JPY. Market size for FY 2023 (forecast) is 4,647.1 billion JPY. Market size for FY 2024 (forecast) is 5,397 billion JPY. Created based on data from MMRI.

As the shift from on-premises to cloud computing progresses, the environment is becoming more conducive to developing systems for cloud use, thereby advancing the cloud shift further. As a result, the share of the three major cloud companies (Amazon Web Services, Microsoft Azure, and Google Cloud Platform) in the Japanese cloud market in 2020 is expanding, and the second-ranked Azure is close behind the leader, AWS. Generally speaking, in the PaaS marketplace, which is the chosen infrastructure for the development of new cloud-native systems, users of all three companies are increasing. In the IaaS marketplace, which is used as a site of transition from an on-premises environment, the usage rate of top-ranked AWS reached 51.9%, and more than half of the companies in Japan that have introduced IaaS have installed AWS. Moreover, Oracle (U.S.) and IBM (U.S.) are seeing a steady increase in the number of users, while Tencent (China) has also announced its expansion in Japan in anticipation of the growth of the market.

Web conferencing was the most common SaaS that companies introduced or encouraged due to the effects of the pandemic, followed by groupware/business chat, virtual desktops, and emergency contact/safety check. As people are asked to refrain from leaving home, SaaS is being used to secure communication channels.


(3)Quantum computer


The progress of AI and IoT in recent years has meant that the amount of data generated and disseminated worldwide is increasing, but this is testing the performance limits of conventional computers. In recent years, while the amount of data generated and distributed around the world has been increasing due to advances in AI and IoT, the performance limitations of conventional classical computers are being speculated.

In order to process these vast amounts of data, "quantum computers", which use quantum mechanics for computation and are claimed to have an unparalleled processing power, are drawing attention. In fact, the field of healthcare has already found applications for quantum computers in demonstration tests such as those simulating the spread of the coronavirus. Also, the development of innovative treatment methods and other such initiatives that are expected to have a significant impact on society has been progressing. They are expected to begin moving from the demonstration phase to commercialized production in the leading fields of finance and chemistry in FY 2025-26. The focus is particularly on using “Ising Machines”, which are computers specialized in solving combinatorial optimization problems. Apart from this, quantum computers are expected to be used in various other fields, including the energy sector and the development of batteries for electric vehicles.

Coming to the quantum computer-related activities in Japan, the Cabinet Office in January 2020 formulated the Quantum Technology Innovation Strategy and is actively promoting R&D in this field. Waseda University, Keio University, Tohoku University, and others are leading joint industry-academia research, and are fast approaching the world's first practical application of this technology. Several Japanese companies such as NEC and Fujitsu are also moving towards the commercialization of quantum computers. Demonstration experiments in the fields of finance, chemistry, e-commerce, manufacturing (especially simulation), logistics, and academic applications, have been gaining momentum, and applications such as material calculations and simulations have already started to appear.

Furthermore, in recent years, a string of foreign-affiliated companies have announced their further business expansion within Japan. In December 2019, Cambridge Quantum Computing Japan (U.K.), a venture company from the University of Cambridge, announced its full-scale entry into the Japanese market following Japan’s substantial investment in research and projects aimed at commercializing quantum computers. Around the same time, the University of Tokyo and IBM (U.S.) established the “Japan-IBM Quantum Partnership”. This is a broad partnership framework involving a wide range of other universities, public research institutions, and industries. They also plan to install the “IBM Q System One”, a quantum computer owned and managed by IBM, at IBM offices across the country. The world's first quantum computer based on quantum annealing technology was commercialized by D-Wave Systems Inc. (Canada) in 2011. In June 2019, it established a Japanese subsidiary to advance research into the application of quantum annealing and further promote its use in society. The company has announced that it will work together with NEC to carry out development, marketing, and sales activities in this field.

In this way, backed by domestic and overseas industry, government, and academia, the quantum computing market in Japan is expected to be worth 6.2 billion JPY in FY 2020-21, and reach 43 billion JPY in FY 2025-26 and 230 billion JPY in FY 2030-31 (See Figure 11).


Graph showing the quantum computer market size and trends forecast in Japan (2020-2030) Market size for FY 2020 (estimated value) is 6.2 billion JPY. Market size for FY 2021 (forecast) is 13.7 billion JPY. Market size for FY 2022 (forecast) is 18.1 billion JPY. Market size for FY 2023 (forecast) is 23.5 billion JPY. Market size for FY 2024 (forecast) is 31 billion JPY. Market size for FY 2025 (estimated value) is 43 billion JPY. Market size for FY 2026 (forecast) is 63.6 billion JPY. Market size for FY 2027 (forecast) is 95 billion JPY. Market size for FY 2028 (forecast) is 125 billion JPY. Market size for FY 2029 (forecast) is 170 billion JPY. Market size for FY 2030 (forecast) is 230 billion JPY. Created based on data from Yano Research Institute

(4)Edge computing


With the rising popularity of cloud systems and IoT, “edge computing”, where the processing is done at the terminal, has become the focus of attention in order to achieve efficient network operation, low latency, and to prevent information leaks due to unauthorized access. Japan is highly competitive in the automotive and industrial robots industries, which will be the focus of edge computing in the future. Hence, the government is also paying attention to its potential impacts.

The domestic market for edge computing is gradually gaining momentum with the entry of domestic and foreign companies. In April 2017, Fujitsu Network Solutions announced that it would adopt Relay2's (U.S.) Next-Generation Cloud Wi-Fi Integrated Edge Computing Platform to expand its business in the growing edge computing market. In response to the growing trend of shifting from cloud-based to edge-based computing to protect personal information and resolve communications issues, Lenovo Japan (Hong Kong) started to sell two new types of edge-based ultra-compact personal computers in July 2019. In addition, in January 2019, Gorilla Technology Group (Taiwan) allied with Asteria Corporation, a Japanese software company that offers "Gravio" (an edge computing middleware for IoT and AI), to jointly drive the global spread of edge computing required for AI and IoT.

Under these circumstances, the development of IoT infrastructure for edge computing is steadily progressing. The domestic IoT edge infrastructure market grew by 25.1% (33.1 billion JPY) in 2019 and is expected to reach 74.2 billion JPY by 2023 (See Figure 12).


Graph showing the IoT edge infrastructure market trends in Japan (2019-2023) Market size for FY 2019 (actual) is 33.1 billion JPY. Market size for FY 2020 (forecast) is 40.7 billion JPY. Market size for FY 2021 (forecast) is 50 billion JPY. Market size for FY 2022 (forecast) is 61.4 billion JPY. Market size for FY 2023 (forecast) is 74.2 billion JPY. Created based on data from IDC Japan

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