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If San Diego is the heart of Sony West, then Yutaka Sato is its eyes — eagerly focused laser-sharp on the rapidly approaching horizon of the "Digital Revolution." Sato embodies Sony. Both youthful for their age — Sato, 49, Sony, 52 — both impeccably presented, both hitting their stride on a beeline to the future. As the man in the hot seat leading Japan's $46 billion electronics giant into the soon-to-be-dominant digital wireless world in a city bristling with telecom cowboys, Sato exudes a quiet confidence. It is a trait not uncommon among many of Sony's best and brightest in San Diego, where Sony's presence since 1972 has blossomed from a "screwdriver" television assembly plant in Rancho Bernardo into a loosely knit but highly efficient phalanx of high-tech businesses spanning the San Diego region and across the border.
Look closely and you see that almost every aspect of recent technological advancement for Sony shares a San Diego link — digital television, videoconferencing, computer monitors, data storage and video games. But nowhere is this linkage more visible than in telecommunications, a high-stakes venture that began in 1994 when Sony joined forces with Qualcomm, the local 800-pound gorilla of the digital wireless crowd.
It is said Sony Corp. chose San Diego for its maiden U.S. manufacturing efforts 25 years ago because of the city's climate and its good fortune as the closest shipping route from Japan, which until then had never witnessed one of its consumer-electronics companies set up manufacturing headquarter operations on U.S. soil. Then Sony dispatched Sato here from Tokyo three years ago to head up Sony Electronics' new Wireless Telecommunications Co. as president. This time, the reason was simpler: In the wireless war for market supremacy, San Diego is emerging as the industry's boot camp of innovation.
A town bursting with great wireless minds, "San Diego is at the forefront of new telecommunications technologies. It makes sense that we are here," says Sato, who knows a thing or two about innovation and market demands. In 1986, Sato received Sony's highly prestigious and rarely bestowed in-house Samurai Award for his success in winning over U.S. consumers with the Walkman, the Holy Grail of all-time-popular Sony products. It was the year domestic sales of the portable stereo reached the astounding 10 million-unit mark.
The Next Walkman?
And while no one at Sony says so publicly, Sato and his engineers may be toying with the company’s next Walkman. Called the Cosm, it is a palm-sized communications device that looks straight out of a "Star Trek" episode. And it has the wireless world buzzing.
Unveiled as a "concept phone" in February at Wireless '98, the industry's Super Bowl of trade shows in Atlanta, the made-in-San Diego Cosm seemed to have even mature adults giggling like children on Christmas morning.
The Washington Post called it "the clear star of the trade show." But even the paper that brought you Watergate had trouble categorizing the thing, saying the Cosm "can only be described as a pocket phone/Web browser/camera/palmtop organizer." Suffice it to say it’s the closest thing to a real-life Dick Tracy, two-way TV wristwatch, except this one will fit in your pocket.
The phone's keypad faceplate flips over and locks in the back, revealing a full-color 2-inch by-3-inch viewing screen that will allow users to send e-mail, call up traffic reports, check movie times, sports scores and stock quotes and access the Internet — all with one hand. Clip on a small accessory digital camera about the size of a child's thumb and you can snap photos — in a few years, video — and record audio that can be e-mailed on the spot. Wireless Week, a trade publication, appraised the little (under five inches) telegizmo thus: "Cosm Shakes Up Industry."
Sato himself is clearly enchanted with the Cosm, but with his trademark smile politely points out that it is still in development and that the high-speed wireless networks needed to enjoy all of its functions do not yet exist. In fact, the prototype that’s paraded around isn’t a working model. A less sleek but functional version lies under observation and probing by cutting-edge engineers in the highly secure labs at the multinational's expansive local headquarters — the preferred term is "campus" — known simply as Sony Technology Center - San Diego.
Sony has recruited digital wireless carrier Sprint PCS to help conduct engineering tests of the Cosm in various U.S. markets this summer. Sato says Sprint was selected because of its extensive nationwide network and coverage. A local Sprint spokeswoman declined to elaborate on the upcoming tests — and even seemed a bit surprised by the question. "You know, three weeks ago, no one knew the word Cosm," she said in mid-March.
Sato hopes a successful test of the Cosm will generate interest from digital carriers and speed up the adoption of a "third-generation" high-speed wireless network, known as Interim Standard-99, or IS-99. If that happens, Cosm could be introduced to consumers sometime next year — and it would be manufactured in San Diego.
And Sony's wasting no time getting the word out on its new technology. This spring, Sato's Wireless Telecommunications Co. will launch a multi-million-dollar marketing blitz to showcase its so-called D-WAVE (Digital Wireless Audio Visual Entertainment) phones and pagers.
Of course, Sony has Qualcomm to thank for its start in handset manufacturing using the code division multiple access (CDMA) technology, originally developed for the military to jam enemy signals but tamed by Qualcomm for commercial use. And Qualcomm, an admitted new kid on the consumer-electronics block, benefits from the innovative spunk and marketing savvy of Sony, found to be America's favorite brand name in a 1996 Harris poll — a first for a foreign-based company.
So when San Diego’s top two electronics employers established Qualcomm Personal Electronics (QPE) in 1994 — with Qualcomm holding a 51 percent majority interest — the marriage seemed blissful. With nearly 60 million U.S. cellular phone users out there — a number that analysts say may climb to 100 million by the year 2000 — high-volume production is the key to winning over network providers like Sprint, AirTouch and GTE.
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"This market is very competitive," Sato explains, "so it’s good to have a big mass-production joint operation to enjoy co-production." With wireless phones zipping out of QPE at a blinding rate of 400,000 units per month, he adds, "that means we have a great opportunity... to make a competitively priced phone together."
Jack Dollard, president of QPE, agrees. The former head of U.S. operations for Toshiba America until being lured to San Diego a year ago this month, Dollard serves at the helm of QPE and as Qualcomm's senior vice president of worldwide manufacturing.
"The phones have either been jointly developed, or they are phones that have been developed by either parent and run through this high-volume, world-class facility we call QPE at Building V at Campus Point," Dollard says. "I think we’re blending the best of both cultures as far as what we’re trying to do within the engineering, quality, materials and manufacturing ranks."
Specifics, however, are hard to come by. "I can’t go there" is a common phrase Dollard uses to courteously deflect questions about the security-conscious operation — even regarding the number of production lines at the 420,000-square-foot plant, he will only allow that "some" are dedicated to each company. He did say QPE employees fluctuate between 2,000 and 2,500, depending on market demand, but hedged on Sony's claim as the leading U.S. supplier of CDMA phones. "Let me just say that right now I cannot fill the demand of both parents," Dollard adds diplomatically.
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Genesis, the newest building on Sony's Rancho Bernardo
campus, opened last July. The $25-million, 277,000-
square-foot structure houses engineers in television,
computers and wireless telecommunications; it’s a big
part of Sony's 'convergence' efforts to meld into single
products its various digital technologies.
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Such, it seems, are the sensitivities in the topsy-turvy wireless industry, where new products and technological innovations seem to crop up daily, as do competitors. Or perhaps it’s just the inundation of advertising for competing cellular phones that makes it appear that way. And the battle may get fiercer after Qualcomm's recent announcement that it has developed a "hybrid" technology that would allow CDMA phone users — an estimated 8 million subscribers worldwide in 25 countries — to talk to users of the world's leading digital standard, known as Global System for Mobile (GSM) networks, which boasts more than 65 million subscribers in 100 countries, most notably China and the lion's share of Europe.
Sony's Birth
But cracking new markets with must-have gizmos is Sony's bread and butter. Has been, ever since its beginnings as a humble radio repair shop in a bombed-out Tokyo department store in 1946. Then known as Tokyo Tsushin Kogyo K.K. (roughly translated Tokyo Telecommunications Engineering Corp.), company founders Masaru Ibuka and Akio Morita bought the rights to a little American invention called the transistor and revolutionized the portable radio.
The penchant for taking existing technology and devising revolutionary consumer products not only transformed the "Made in Japan" label from global laughingstock to world leader but came to symbolize Japan's phoenix-like ascent from the devastation of World War II.
In 1958, the company changed its name to Sony, an easy-to-remember melding of the Latin root "sonus," meaning sound, and "sonny," as in little son. Now with nearly 60 manufacturing plants — 15 in the U.S. — and more than 163,000 employees worldwide, Sony seems a bit large for its corporate self-image as "a very small group of young people who have the energy and passion toward unlimited creation," according to one Sony Website.
A Quarter Century In San Diego
A whopping 15 million TV sets and 30 million picture tubes later, Sony's San Diego presence has evolved mightily — from a single manufacturing plant in 1972 that kept about 60 employees busy assembling televisions from Japanese parts to a stand-alone think tank of innovation and production that employs more than 4,000 workers here and another 8,000 at plants in Tijuana and Mexicali. Sony estimates it has invested more than $1 billion in the region, including Baja, and more than $150 million in San Diego just in the last three years.
The San Diego Sony empire encompasses 2.2 million square feet of commercial space spread over 94 acres throughout the county. Two-thirds of that acreage sits on a hill overlooking Rancho Bernardo, once a retirement community but now gaining a reputation as a "Silicon Valley South."
Sony executives in Japan must be pleased with progress here, because the man responsible for the bulk of the operations (Sato's Wireless excepted), Tadaktsu Hasabe, has been promoted to Sony's global operation. The former president of engineering and manufacturing of Sony Electronics, Hasabe is moving up to deputy president of Display Co., one of 11 companies that comprise Sony Corp. While Hasabe's schedule had him splitting his time between San Diego and Pittsburgh manufacturing plants, his replacement will be stationed in San Diego. At press time, Sony had not named that person, although industry sources have him coming from Sony's New York offices. (Hasabe declined to be interviewed for this article.)
San Diego Councilwoman Barbara Warden, whose district includes the Sony campus, remembers covering the groundbreaking ceremonies in her previous incarnation as publisher of the Bernardo News.
"NCR might have been the first company up there, and I think Hewlett-Packard had a plant, too, but this was big-time stuff because we didn’t even have one restaurant in the whole town," Warden recalls with a hearty laugh. "Old (Highway) 395 was one lane each way. I remember thinking, 'Golly, this is big time! But we’re not sure what it means.' It’s still amazing to me what a major player they've become here. Sony's a great corporate citizen."
And it keeps growing. Last August, the Sony Technology Center unveiled its $25 million, 277,000-square-foot Center for Engineering and Development, dubbed Genesis. The sleek white stucco and blue glass center has become an in-house think tank for Sony Electronics, the $9.6 billion U.S. electronics arm of the Japanese giant.
This summer, the tech center will bring online a sixth production line in a $60 million expansion that Sony hopes will bolster its position as the top U.S. manufacturer of computer picture tubes, or CRTs (cathode-ray tubes). The line, which will produce state-of-the-art 19- and 21-inch CRTs, is expected to boost the center's employment ranks by more than 10 percent, says Greg Dvorken, a Sony spokesman.
Tei Iki, senior vice president for Display Systems,
shares a videoconference with a Sony employee
in Seattle. The $7,000 Mini 1000 System is
designed and manufactured in San Diego.
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"We’re at that stage right now where everyone's trying to decide which way the market's going — whether you have WebTV, where you have a television trying to be a computer, or the other side with a computer as television. So we’re trying to put ourselves in both markets," Dvorken says during a tour of the manufacturing plant, known as the "Mile of Tile" for the hallway that stretches the length of the massive picture-tube production center. Most of these tubes are destined for sales floors in the U.S. and Canada.
Local Sony engineers like Ludovic Legrand and Hisafumi "Q" Yamada are even developing the next generation of televisions here, although these digital televisions — sporting a wider screen and five times the resolution of today’s best TVs — will be manufactured at its Pittsburgh plant. The first product line is expected to hit stores in October.
Nevertheless, Sony hopes to be pumping out about 6 million picture tubes annually — both for mid-sized televisions and computers — by the end of 1999, roughly triple current production. "This alone is a $1.3 billion business in San Diego," says Tei Iki, senior vice president overseeing display production whose 24 years as a Sonyite in San Diego has translated into a perspective not frequently shared by his colleagues.
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"Basically, I’m interested in changing the inside," Iki explains. "Externally we have a nice building, but we’ve got to get some stuff out so I can get our engineers really productive."
Like so many high-tech companies, Sony is struggling to find qualified engineers. He notes a recent study found 4,000 openings locally for 435 engineering graduates. As a result, "this last year, engineering salaries have gone crazy. It’s well documented that there's a shortage."
Iki works closely with UCSD's Jacobs School of Engineering, which last year received a $500,000 endowment from Sony, a move seen as one part civic altruism and two parts corporate survival. Iki envisions the creation of a "center for display research" at UCSD, which will allow Sony to track hot engineering students and attract research grants.
And he's enlisting the help of Gov. Wilson to make that happen. With education now on the governor's plate, the time is ripe. "What he's trying to do is help the economy here, because a few years ago this place sucked," Iki says with no hesitation. And he's tired of politicians and media pundits who suggest that all the middle-class jobs have vanished with the wellspring of manufacturing jobs south of the border.
In a recent PBS documentary analyzing San Diego’s claim as the city of the future, Mayor Golding says of San Diego’s relationship with Mexico: "It’s a good deal because...the Mexican side of the border has certain things we don’t have, such as a very low labor cost....[T]he kinds of jobs they have there, frankly, to a large extent this country has already lost. And, if we didn’t have them in Mexico, they'd be in Asia. And at least, when they're in Mexico, we get the corollary jobs in research, management, administration."
Sony, for its part, points out that 70 percent of its 4,000 employees in Rancho Bernardo work in manufacturing at wages hovering around $9 an hour.
Warden, who wrapped up her term as deputy mayor in December, says Golding may want to visit her district soon. "I’m not sure I would agree with her statement, because I think that there are a large number of manufacturing jobs just created in the past few years in my district," she explains. "And they're not low wage, and they come with good benefits."
Such confusion may be understandable, given this shocker: When Warden visited the Sony plant in 1994, shortly after being elected to the council, she was greeted by nine gentlemen, including one who had flown in from Japan just for the occasion.
"They had a little reception for me at the end, and I said, 'You've been most gracious, and I appreciate it,'" Warden recalls. "And they said, 'In all the years we’ve been here, you are the first city official to visit Sony.' I thought it was sort of strange."
Sony PlayStation
And granted, there is a lot to see — and not all of it can be found in Rancho Bernardo. Down the road in Sorrento Mesa in three nondescript industrial buildings sit some of Sony's greatest gaming minds. With Sony's PlayStation game console now the dominant platform over Nintendo and Sega — with 9.2 million units sold last year easily making it Sony's most popular product since the Walkman — game productivity is the cornerstone of success.
If you've played a Sony PlayStation sports game — from NFL GameDay to NBA ShootOut or NHL FaceOff, to name just a few — you've delved into a graphically wowing adventure that was developed in San Diego. This month, get ready for MLB '99, Sony's baseball game that boasts play-by-play calling from famed broadcaster Vin Scully and video ballplayers that mimic the pitching motions and batting stances of 200 major leaguers. Next up, an online version of Sony's popular NFL GameDay.
Nearby, programmers are equally swamped with Sony's venture into the equally competitive world of multiplayer computer online role-playing games, or RPGs in cyberspeak. Sony Interactive Studios America's first online game, a tank simulation game called Tanarus, has begun to find a following since its launch earlier this year. Players pay $9.95 a month to subscribe at Sony's online Web site, called The Station.
Key members of the Sony brain trust designing the next television for your living room are, from left, Ludovic Legrand, senior engineer and digital compression specialist, and Hisafumi "Q" Yamada, vice president of Sony's local U.S. research laboratories. Q has worked on digital TV since 1978 and been in San Diego designing DTV sets for the U.S. market for three years.
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But Tanarus was just a warm-up for Sony's two-year project called Everquest. Due out this fall, the graphically spectacular online game will allow players to create characters and plunk them into a medieval world on a server that will run 24 hours a day, seven days a week. "Everybody's pretty excited about it," says Charles flock, a former urban planner turned test manager for Sony Interactive.
In fact, it’s difficult to find a Sony employee who isn’t excited about playing a part in the digital future. Just ask Sara Paz, at 26 the youngest of 15 family members who work for Sony locally, including her mother, numerous uncles and aunts, and cousins.
"I guess you could say it’s kind of contagious," explains Paz, a quality-control specialist in display systems. "If you see someone who's very happily employed and they're always talking about their employment, then you would want to say, 'Well, gosh. Can I get a job there?'"
That's Sony-quality music to the ears of local company bigwigs like Sato, who strive every day in San Diego for Walkman-esque success.
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