BtoC EC and Internet Auction Markets forecast to increase to ¥5.5trillion and ¥2.1 trillion respectively.

BtoC EC and Internet Auction Markets forecast to increase to
¥5.5trillion and ¥2.1 trillion respectively.
— Perspectives of the IT Market's Scale and Its Trends until 2009 (2) —

January 14, 2005
Nomura Research Institute, Ltd.

Nomura Research Institute, Ltd. (NRI: Tokyo; Akihisa Fujinuma, President, CEO & COO) has completed market analyses and market scale forecasts until the year 2009 for 7 principal domestic information technology fields. NRI, as the second phase following the mobile phone and broadband markets in the previous forecast, announces forecasts for "e-business life," broadcasting, hardware, platform, security and hardware markets. (See reference for the definition of each market.)

IT Market Forecasts

(billions of yen)

Market		FY2004	FY2005	FY2009
e-business life markets	Internet advertising	173.0	218.0	317.0
	BtoC EC	2,880.0	3,560.0	5,510.0
	Internet auction *¹	1,080.0	1,340.0	2,080.0
	On-line game	77.0	107.0	200.0
	e-books	4.0	9.0	41.0
	Web music distribution	8.0	19.0	88.0
	Web video distribution	24.0	45.0	189.0
	e-learning	81.0	111.0	166.0
Broadcasting markets	Terrestrial digital	74.1	212.1	1,812.8
	Satellite digital broadcasting (BS, CS)	331.1	393.2	665.3
	Cable television	206.8	224.5	266.7
Platform markets	Electronic authentication	22.7	27.7	63.6
	Billing / settlement	124.4	148.7	199.6
	IC cards	33.8	41.9	39.1
	RFID	14.9	19.3	102.2
Security markets	Anti-virus measures *²	64.1	73.9	99.7
	Products preventing unauthorized access	29.1	31.8	30.5
	Electromagnetic wave measures	1.2	2.3	15.5
	Biometrics authentication devices	10.7	14.5	18.1


*1:	Forecast values apply only to the Internet auction market and exclude commission markets.
*2:	Forecast refers to the total of the business and consumer markets.

Market		FY2004	FY2005	FY2009
Hardware markets	Digital IT home appliances (thousands of units shipped)	7,910	9,684	15,264
	PCs (thousands of units shipped)	11,584	11,931	13,800
	Mobile phone terminals (thousands of units in demand)	46,700	48,000	42,400
	Digital cameras (thousands of units in demand)	8,000	9,100	8,900
	Car-mounted information terminals (hundreds of millions of yen)	2,974	3,199	3,042
	Flat-panel displays *³ (billions of yen)	5,596	6,963	11,360


*3:	The figures for flat-panel displays are worldwide market value forecast.

In the "e-business life markets," the BtoC e-commerce (EC) and Internet auction markets, in which the actual goods traded have been widely used on a daily basis, and are expected to continue to grow steadily. As a consequence, the BtoC EC market and the Internet auction market will grow to values of ¥5.5 trillion and ¥2.1 trillion respectively.

In the broadcasting markets, both terrestrial and BS digital broadcasting services are expected to grow as a consequence of the increasing trend towards replacing old television sets with flat-screen models, which can receive terrestrial, BS and CS broadcasts. It is expected that 37.91 million and 31.67 million households respectively will subscribe to terrestrial and BS digital broadcasting, and the total digital broadcast market will amount to about ¥2.2 trillion, by the end of fiscal 2009. However, it is not yet clear how terrestrial digital broadcasts will be transmitted to all households during and after 2006. It is thought that the ongoing plan to complete the transition from the current terrestrial broadcasting to terrestrial digital broadcasting by July 2009 will be very difficult to achieve.

In the platform markets, demand for IC cards and RFID is likely to have begun growing rapidly by 2010. It is anticipated that the number of issued IC cards, mainly credit cards, will grow rapidly, rising to 460 million during fiscal 2009. However, the market value will peak within a few years, as the unit price will decline in proportion to the extent of diffusion, unless new applications of the cards emerge.

The RFID-related markets will experience rapid growth from around fiscal 2007, because several events which may reduce restrictions on the introduction of RFID are scheduled to take place between fiscal 2004 and fiscal 2006. The market size of the 4 principal industries (transportation, retail, general apparel and manufacturing) alone will exceed around ¥100 billion during fiscal 2009.

In the security market, there will be increasing interest in measures against electromagnetic radiation problems and in biometrics. The market for the former is expected to grow to about ¥1.6 billion during 2009. In particular, measures against wiretapping and TEMPEST (transient electromagnetic pulse surveillance technology) will increase dramatically. The size of the biometrics authentication market will increase to around ¥18 billion during fiscal 2007, and the development of this market will depend upon the extent to which it attracts the interest of e-passport, ATM of financial institutions and resident registry network systems (Juki Net) operated by local governments.

The hardware market, which has experienced rapid growth for the last few years thanks to the spread of mobile phones and digital information household appliances, will face barriers to growth in many appliance fields, due partially to increasingly severe global competition. The same can be said of the digital information household appliance field. This will continue to grow strongly for the time being. The digitalization of household electrical appliances will continue to advance, so that digital IT household appliances equipped with networking functions will account for more than 50% of all digital IT household appliances by around 2007. However, as the life cycle of these products is shorter than those of conventional household appliances, this growth will slow towards 2009.

This is the fourth IT market forecast, following those of 2000, 2001 and 2003. It is, however, not uncommon for the assumptions on which market forecasts are made to evolve, due to rapid fluctuations in the environment surrounding IT markets and to the emergence of new services and players as a consequence of technological innovation. In accordance with the demands of these constantly evolving markets, NRI will continue to revise forecasts as and when this is necessary.

[For inquiries, please contact]
Corporate Communications Department
Nomura Research Institute, Ltd.
Phone: +81-3-6270-8100
e-mail: kouhou@nri.co.jp

[Reference]

Digital IT Home Appliance Market Forecast
The main growth factor is the replacement of old home appliances with new ones, and the upper limit of the market, in terms of quantity, is almost the same as that of currently owned conventional major home appliances.

IC Cards in Domestic Use Forecast
The number of IC cards is assumed to reach 460 million in fiscal 2009. The number of cards issued in a single year will grow rapidly until 2006. However, in the absence of new applications, the market will become saturated between 2006 and 2007, after which it will level off.

IC Cards in Domestic Use Forecast

Forecast of the Market for Electromagnetic Emanation Protection Measures
In 2004, it was no more than around ¥1.2 billion, but if the security risks posed by TEMPEST become more apparent, this market will rapidly establish itself.

<Market Definitions>
E-business life market

Internet advertising	The market for Internet advertising, comprising the cost of advertising on PC websites and mobile phone terminals, as well as the distribution of advertisements by e-mail. Website advertisement production costs are excluded.
BtoC EC	In the broadest sense, this is an e-commerce market for general consumers using the Internet, as well as mobile phones and other mobile devices. It does not include spending by business entities, such as business travel expenses. However, sales in respect of which final decision-making and contract conclusion are not finalized via the Internet, such as quotations and applications relating to the sale of automobiles and real estate, are not included when calculating the market scale. The on-line trading, on-line banking and digital content (web music/video distribution and e-learning) markets are also not included.
Internet auction	The Internet auction market covers all auction transactions on websites operated by business entities which mediate in transactions between individuals. It includes fixed-price transactions, such as Ichigeki Rakusatsu (one-click closing bid) on the Rakuten's auction website.
On-line game	e on-line game market covers the total sales of gaming services through domestic household game-machines, including portable machines and mobile phones via the Internet. However, on-line games which use softwares downloaded into household game machines and PCs are excluded from this market.
e-book	The market for the charged distribution, as electronic data, of books and magazines that were formerly sold as printed matter.
Web music distribution	This market covers music downloaded on a chargeable basis via PCs, audio equipment, mobile phones and PHS connected to the Internet.
Web video distribution	This market relates to video-content distribution services which provide such things as feature films and live videos through the Internet and mobile networks. It represents the total value of payments made by end-users for video distribution services, as well as the advertising, marketing campaign and promotional charges for these services paid by advertisers.
e-learning	This refers to the WBT (web-based training), education systems that are accessed via the Internet and intranet. The market includes WBT training content and services, but does not include the markets for system construction, operation and maintenance.

Broadcasting market

Terrestrial digital	This is based upon the advertising revenues of broadcasters and on NHK reception charges. However, it does not include one-segment broadcasting using extra frequency bands.
Satellite digital	The BS digital market consists of reception charges (for NHK) and viewing charges (private paid-program broadcasters). The CS digital market consists of viewing charge revenues from viewers (initial subscription fees, basic monthly charges, monthly paid program charges and pay-per-view charges) and advertising revenues, mainly from broadcasters supplying programs on consignment.
Cable television	This comprises initial subscription fees, paid program charges (packaged and individually selected programs), advertising revenues and home terminal rental charges. Although the emergence of new revenue sources such as pay-per-view, video-on-demand and other interactive services can be expected once the cable television system is digitalized, the present forecast does not include these markets. Revenues obtained by eliminating broadcasting shadows and those from the cable Internet market are excluded.

Platform market

Electronic authentication	This market includes systems for electronically authenticated users and servers, and the services handling the issuance and administration of certificates. In addition to certificate employing disclosed key technology, authentication methods include the one-time password, a password for single use which is created whenever required. The system construction market includes only the development of authentication functions and related software, but does not include the market for systems using these authentication functions. The IC card costs for storing IDs are not included.
Billing / settlement	This is defined as the billing for and settlement of electronic commerce between business and consumers (BtoC). It is the total of the amounts that a third party settlement organization receives as commissions in respect of Internet shopping.
IC cards	This market covers IC cards broadly distributed in Japan, excluding FeliCa built into mobile phones.
RFID (radio frequency identification)	This covers only those markets that are identified through RFID tags, the shape of which differs in accordance with the purpose of use. Contactless IC cards are not included. The market covers RFID tags in the frequency bands of 2.45GHz, 13.56MHz and 500KHz, as well as in the UHF bands that will be opened for use in the near future. The market size is defined as the sum of the total system price, consisting of software associated with the hardware, such as RFID tags and readers/writers and system integration services, including associated customizing.

Security market

Anti-virus measures	This is the market for computer virus infection detection and eradication software. In the consumer market, it consists of software installed in PCs and the associated license update charges. In the business market, it consists of anti-virus software used in gateways, such as mail servers; software used by various servers and desk top PCs; and the associated license update charges.
Unauthorized access prevention products	The present forecast covers the market for devices whose main purpose is to prevent unauthorized access from outside. Unauthorized-access-prevention products which at least work as firewalls are also included in the market size calculation.
Compromising emanation measures	This is defined as the total value of 4 kinds of protection, viz. those against intruding electromagnetic signals, leakage of wireless LAN information, wire tapping and TEMPEST. TEMPEST is defined as a means of obtaining illegally information from weak electromagnetic signals leaked from PC displays.
Biometric authentication device	This is defined as the market for devices and modules which provide authentication by means of various physical characteristics, such as fingerprints and faces. The present forecast is based on the market for authentication devices using fingerprints, face, veins and iris.

Hardware market

Digital IT home appliances	This market consists of digital video recorders, home appliances, game machines and home networking devices. The forecast applies to home appliances which use digital technology (especially advanced information processing and networking) and are employed inside the house and in the surrounding area.
PCs	This market includes desktop, laptop and server-type PCs. The size of the market is expressed as the number of units shipped to the domestic market.
Mobile phone terminals	This is the market for mobile phone terminals shipped in the Japanese market and includes PDC, cdmaOne (including 1x EV-DO), W-CDMA supplied by NTT DoCoMo, au and Vodafone. Wireless LAN and PHS are excluded.
Car-mounted information terminals	This forecast is based upon the value of car navigation systems and attached modules shipped in the domestic market. Dedicated terminals independent of the navigation system, such as anti-theft and on-board ETC (electronic toll collection) equipment, as well as the fees for updating electronic maps and for using the search facilities of information services are not included.
Digital cameras	Although a digital camera is defined as one whose main purpose is to take still pictures, those capable of playing music and of filming animation are also included in this category.
Flat-panel displays	These include liquid crystal, PDP (plasma display panel), organic electroluminescence and other flat-panel displays.

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