Top electronics firm Hitachi Ltd and rival Toshiba Corp said yesterday they will team up with other Japanese and Chinese firms to develop software in China, where labour costs are much lower than at home.
"It is cheaper to operate in China but we plan to import the software to Japan afterwards, that is the main target," said Hitachi spokesman Atsushi Kanno.
The two technology leaders will club together with systems integrator Otsuka Corp and Tokyo-based software developer Original Soft Co to launch a 50-50 joint venture in Shanghai with major Chinese software house Top Group.
"We are still awaiting final approval from the Chinese government but we plan to open the firm on October 31, Halloween," Kanno said.
Shanghai Sakura Information Systems, capitalised at ?600 million (US$4.95 million) will sell software to firms in Japan and also China, targeting annual revenue of ?2 billion.
"It is much cheaper to develop software in China if you consider the labour costs and, also, the level of technology expertise there is very high," said Toshiba spokes-woman Midori Suzuki.
"We also plan to open an academy to train technology students in Shanghai," she said.
More and more technology firms in Japan are opening offices in China and shifting production there in a bid to cut costs amid a global high-tech slump, said Hitachi's Kanno.
"We are not the only ones doing this," he said.
The group will own 50 percent of the venture, with Hitachi and Otsuka taking a 22 percent stake each, Original Soft 4.5 percent and Toshiba the remaining 1.5 percent.
The cost of hiring Chinese systems engineers is about one-third to half that of their Japanese counterparts, making it about 30 percent to 40 percent cheaper to develop software in China than in Japan, the Nihon Keizai newspaper reported, quoting sources close to the venture.
The four Japanese technology firms have already established Nichu Techno Park, a similar joint venture in Tokyo which is 44 percent-owned by Hitachi and Otsuka, with Original Soft taking nine percent and Toshiba three percent.
"We felt the company had good merits for our business," said Hitachi's Kanno.
Hitachi and Toshiba along with Japan's other technology giants will have to shift more operations to China and other countries around Asia in a bid to cut costs as the technology slump continues to bite, analysts said.
"[Toshiba] is slow to outsource production to other Asian nations such as China," said UBS Warburg technology analyst Yoshiharu Izumi.
Meanwhile, Japan's trade surplus fell 43.1 percent in the first half of fiscal 2001 from the year earlier -- to ?3.3 trillion (US$27.3 billion) -- for the fifth consecutive period of year-to-year decline, the Finance Ministry said. Exports dropped 6.1 percent in the April-September period to ?24.3 trillion, while imports rose 4.6 percent to ?21 trillion.
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