Eli Tidhar,

Partner, Asia Pacific Corridor Leader,

Deloitte Israel

Satoshi Yokota,

Head of Japan EMEA

Financial Advisory, Deloitte Japan

2

Japan-Israel Conference

Startup Nation meets the

Rising Sun

September 6, 2015

3

Japan-Israel Business Development Task Force

Tax

Financial Advisory

Audit

Shumon Mori

Tohmatsu

Venture Support,

Japan-Israel

Practice Leader

Ryohei Hirota

Vice

President,

TMT/CFA

Masaya Ueda

Partner

Global listing

Services

Leader

Satoshi

Yokota

Japan EMEA

Financial

Advisory

Leader

Koichi Tamura

Partner,

Corporate

Financial

Advisory (CFA)

Leader

Yigal Dor

Managing Partner

Audit Practice

Leader

Tal Chen

Partner

High Tech

Industry Leader

Kazumasa Yuki

Partner

Cross-border Tax

Leader

Nadav Gil

Partner

Grants & Incentive

Leader

In 2015 Deloitte has established a special task force to support Japan Israel business development

Consulting

Eli Tidhar

Partner

Head of Asia-

Pacific Corridor

Takeshi Fujii

Partner, Consulting,

Innovation Strategy

Leader

Lior Yekoutieli

Global

Technology

Alliance Leader

Ilan Birnfeld

Chairman & CEO

Deloitte Israel

Ogawa Yoichiro

CEO

Deloitte Japan

Moshe Bina

Senior Manager

Tax

4

Embracing Open InnovationWhy are Japanese companies seeking opportunities outside of Japan?

5

Historically, Japan has been a rich source of innovation

Sources: Deloitte research, news articles

1597

19791954 1969

1964 1976 2011

Woodblock

Printer

WalkmanTransistor Convenience

Store

EndoscopeBullet

Train

Hybrid

Car

6

37

43

29

3435

2930

23

8

1314

13

1

15

5

16

56

2

19

4

7

15

8

3

9

26

28

22

27

0

5

10

15

20

25

30

35

40

45

2008-2009 2009-2010 2011 2012 2013 2014

*7 Pillars: Institutions, Human Capital and research, Infrastructure, Market sophistication,

Business sophistication, Knowledge and technology outputs and Creative outputs

However, Japan is falling in the Global Innovation Index(annual ranking of 143 countries’ innovation capabilities and outputs based on 7 main pillars*)

Source: Global Innovation Index

U.S.

Germany

Japan

Israel

Ranking

China

7

In addition, China is closing the gap with Japan and the

U.S. in terms of patent grants

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

No. of Patent Grants by Country

China

USJapan

S. Korea

8

Three events are driving Japanese companies to search

for innovation

Sluggish growth and

regional competition

Abenomics

encourages

companies to look

abroad

Japanese

companies

embrace Open

Innovation to grow

9

‘Abenomics’ aims to jumpstart Japan’s economy after

decades of slow growth

Source: Council on Foreign Relations, Japan Times

• Quantitative

Easing to combat

deflation

• Fiscal expansion

• $210B fiscal

stimulus

• Growth strategy

and structural

reforms

• Revitalizing

Japanese

Innovation

Abenomics aims to bring the

Japanese economy out of its slump `”

Post war economic growth ended in the late ‘80’s after the real estate bubble burst

Two decades of stagnation and deflation followed, prolonged by the 2008 financial crisis and

the 2011 earthquake and tsunami

Monetary Fiscal Structural

3 Arrows in Abenomics

10

• Create a “venture ecosystem”

University reform to launch a national system of innovation

Government ministries restructured to encourage innovation

Technological solutions for social problems

• New transport systems, automatic driving tech, robotic and medical tech, etc.

• Realize an Industrial ‘Robotics Revolution’ - Set-up the “Robotic Revolution Council”

• Government support is encouraging many Japanese companies to

invest in innovation

Innovation is a key ingredient in Japan’s strategy for

revitalization

Source: Business Insider, Council on Foreign Relations, World Bank

11

Global

Competition

Why is Innovation more important than ever for Japan?

Stagnant

Growth

Aging

Population

Pressure

from Foreign

Investors

Accelerated

Changes in

the Market

Diversifying

Customer

Needs

Changing

Rules of the

Game

Large

national debt

13

Open Innovation acknowledges the fact that not all good

ideas are, can, or should be, developed internally

Source: Open Innovation: The Response of Japanese Firms, Prof. Henry Chesbrough, SoftBank website, Recruit website

Open vs. Closed Innovation

Open Innovation

assumes…

• Work with smart people both inside

and outside the company

• External R&D creates value; internal

R&D claims some of that value

• Not necessary to originate research

in order to profit from it

• A good business model is better

than being the first to market

• Best utilization of internal and external

ideas wins

• Profit from others’ use of our IP and

buy others’ IP when it advances our

business model

Closed Innovation

assumes…

• The smartest people already work

for us

• R&D must be developed by us

• First to discovery means first to

market

• First to market means success

• Creators of the most and best ideas

win

• Control IP to prevent competitors

from profiting from our ideas

14

Japanese companies stepping up innovation efforts

internally and externally

Open innovation program

- Seek ideas from outside the organization

- Joint R&D and product development

- Leverage external experts in academics, VCs, businesses, etc.

Accelerator program

Corporate venture capital (CVC)

Cross-border M&A (incl. JV) and alliance

15

Japanese companies are now part of a 2nd wave

seeking innovation in the U.S. and Israel

Asia Pacific Americas

Second wave:

Israel and

Silicon Valley

First wave 90’s:

Silicon Valley

Japanese companies are realizing that they cannot

match the speed of market change by internal technology

development, so they begin to re-invest in Innovation

Clusters – both in the US and in Israel

© 2015. For information, contact Deloitte Tohmatsu Financial Advisory LLC

16

The

Company’s

Bridge

The People’s

Bridge

The

Opportunity’s

Bridge

200 Japanese tech SMEs will be sent to

Silicon Valley over the course of five years

Meetings with investors and designers will

help companies “rebirth” themselves

30 prominent venture capitalists and

entrepreneurs will be sent to Silicon Valley

Stanford and a Japanese university will co-

sponsor a biomedical education program

Networking and business matching events

in both Tokyo and Silicon Valley

Promotion of cross-border business

partnerships, investment, business

restructuring (M&A)

Source: Global Entrepreneurship Training Program HP（http://sido2015.com/#toppage) Toyo Keizai HP（http://toyokeizai.net/articles/-/69247?page=2）

“Together with the people of

Silicon Valley, we would like to

set up a bridge project

between Japan and

Silicon Valley.”

～At Stanford University’s

Public Symposium～（2015/4）

始動 Next Innovator 2015

Next Innovator is a training program, held over three months in

Japan and two weeks in Silicon Valley

(Sponsor: Ministry of Economy, Trade and Industry; Administered by

Deloitte Tohmatsu, Wil)

The Japanese government launched the Silicon Valley and

Japan’s “Bridge” Project to jumpstart innovation

17

Trends in Japanese Corporate Investments and Funding

18

Source: Thomson One.

Japanese In-Out M&As reaching an all-time high (1/2)

(JPY billion)

In-out M&As by volume (announced 2005 – 2015YTD)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Financials Industrials High Technology

Materials Consumer Staples Consumer Products and Services

Media and Entertainment Healthcare Retail

Telecommunications Energy and Power Real Estate

1,715

4,699

2,795

6,842

1,670

3,439

5,517

7,107

4,590

5,778

7,200

(8 months)

19

Japanese In-Out M&As reaching an all-time high (2/2)

In-out M&As by number (announced 2005 – 2015YTD)

0

100

200

300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

High Technology Industrials Materials

Financials Consumer Products and Services Media and Entertainment

Consumer Staples Retail Energy and Power

Healthcare Telecommunications Real Estate

344 350 375

434

356

535

639

720

621

655

436

(8 months)

Source: Thomson One.

20

Source: Japan Venture Research

VC funding from businesses increasing over time

(\10 bn)

0

10

20

30

40

50

60

70

80

2008 2009 2010 2011 2012 2013 2014

Financial player Strategic player Others

Amounts of Funds Established for Domestic Venture Investments

Financial Institutions Business Enterprises Independent

22

Source: Companies’ HP: Nikkei: Capital IQ: Globes

Recent activities between Japan and Israel (1/2)

Sector Japanese Co Israeli Co Summary

Technology

N.A.

Softbank seeks Israeli start-up partnerships esp. those related to

smart homes, connected vehicles, digital marketing, and

healthcare. (2015/08)

Sun Corporation agreed to invest in Infinity Augmented Reality and

Bacsoft to gain technologies such as Augmented Reality and M2M

solution. (2015/08)

AbaGada

Dentsu acquired digital performance agency AbaGada for est. $60-

90m to turn it into the hub of internet advertising business in the

Middle East. (2015/04)

SHIFT invested in Online Permissions Technologies, supporting a

foreign company looking to expand in Japan. (2015/07)

Pixela and Altair Semiconductor formed an alliance. Pixela’s

objective is to use Altair’s know-how to develop an IoT applications.

(2015/07)

Patient monitoring supervision platform operator, EarlySense

announced a strategic cooperation agreement with Mitsui Co to

gain foothold in the Japanese market. Mitsui invested $5m in the

company. (2015/04)

IQP partnered with Fujitsu to develop IoT applications. (2015/02)

MA Alliance Others

23

Recent activities between Japan and Israel (2/2)

Objectives Year

Sector Japanese Co Israeli Co Summary

Technology

Rakuten acquired Viber for $900m to expand its user base to help

realize the vision of becoming of the world’s No.1 internet services

company. (2014/02)

Toshiba acquired both OCZ Technology Group, a solid state drive

manufacturer, for $35m and their R&D center in Ramat Hachayal –

making this Toshiba’s first R&D center in Israel. (2013/11)

Yaskawa Electric, a Japanese robotics company, provided $17m to

Argo Medical Technologies (makers of the ReWalk exoskeleton for

spinal injury victims), for R&D in return for exclusive distribution

rights. (2013/09)

Healthcare

A consortium consisting of Takeda Pharma, Johnson & Johnson

and Orbimed opened FutuRx a biotech incubator. (2014/04)

Sony invested in Rainbow Medical to further its R&D efforts in

medical devices business. (2013/05)

Teva and Kowa Co formed a 50-50 JV (Teva-Kowa Pharma) in

2008, and in 2009 acquired majority stake in Taisho Pharma which

led the firm to be a Top 5 generic player in Japan. In July 2011, the

JV acquired Taiyo Pharma, and on September Teva bought the rest

of the JV’s stake for $150m to further expand its presence in Japan.

(2011/09)

MA Alliance Others

Source: Companies’ HP: Nikkei: Capital IQ: Globes

24

Special task force has been set up in Deloitte Japan to bridge Corporate Japan and

Israel

Deloitte Japan is planning to organize an event in Tokyo in beginning of

next year for Israeli companies that are interested to partner with Japanese

companies to capture business opportunities in Japan that stand to

emerge towards the Tokyo 2020 Olympic Games.

Participating companies are expected to pitch their business ideas to

Japanese companies, interested in working with Israeli companies

in the context of the Olympic Games.

Please stay tuned for details!

See you in Tokyo!

Jan 2016 Deloitte event in Japan

25

For more Details

Eli TidharAsia-Pacific Corridor Leader

Strategy consulting partner

Deloitte Israel

Etidhar@deloitte.co.il

03-6070500

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