The Business Times

Japan pinball maker tied to iPhone hack set for terror fight

Published Wed, Apr 13, 2016 · 01:13 AM

[TOKYO] Cellebrite Mobile Synchronization Ltd, the forensics unit of a little-known Japanese pinball company, is fast becoming the go-to guys when law enforcement needs to unlock smartphones. Its group chief executive officer has plans to keep the firm on the frontlines against terrorism.

In his first interview since Sun Corp was thrust into the spotlight in the legal tussle between Apple Inc and US law enforcement over the hacking of an iPhone, chief executive officer Masanori Yamaguchi says his company wants to expand its work countering tech-savvy terrorists.

Mr Yamaguchi says he's willing to spend as much as 20 billion yen (S$249 million) to acquire or merge with companies to expand its sought-after data extraction business. Sun's shares jumped to a week-high in Tokyo.

"Demand will never go away," Mr Yamaguchi, 67, said from the company's headquarters in Aichi prefecture southwest of Tokyo.

"Extracting mobile phone data is the fastest way to solve crimes nowadays."

Petah Tikva, Israel-based Cellebrite is said to have worked with the Federal Bureau of Investigation to crack an iPhone connected with the San Bernardino, California terrorist attack in December and the company also helped authorities access devices used by assailants in the Paris shootings last year, according to people familiar with the matter.

Interpol Agreement

Aside from the FBI, Cellebrite now has a client list that includes some of the world's most secretive spy organizations, such as the US Central Intelligence Agency and Interpol, according to the people, who asked to not be identified because the information is private.

Interpol signed an agreement with Cellebrite Tuesday in which the company will provide a unit of the international police organization with digital forensic equipment and training services over a three-year period.

Sun is intent on growing its business, said Mr Yamaguchi. Demand for the mobile forensics services of Cellebrite will grow as much as 20 per cent annually in revenue, he said.

"There are very few companies like us, and I think this is our strength," Mr Yamaguchi said.

"As for the next step, we're open to the idea of teaming up with companies that possess unique technology in forensics. We will continue to search for an appropriate partner."

The sensitivity of the technology, and the edge it provides to law enforcement, means companies and government agencies are reluctant to discuss methods of data extraction. Sun declined to release names of cases or clients, while the FBI, which said a third party had demonstrated a way to get into the iPhone connected to the San Bernardino shootings, has also not disclosed its partner.

The CIA and the office of the Paris prosecutor in charge of the investigation into last year's attacks there declined to comment. Interpol said it couldn't confirm whether Cellebrite aided in hacking phones used in the Paris shootings as law enforcement in that city handled the investigation.

Sun's stock had eased after surging from March 21, the day the FBI said a third party had demonstrated a way to get into the iPhone. On Wednesday, the shares rose as much as 6.8 per cent to 960 yen in Tokyo, reaching the highest intraday level since April 5.

The company, which employed 40 workers when Sun acquired it in 2007, has grown to become a 500-person firm with nine offices on four continents focusing on work to extract data, decode and analyze Apple devices, including iPods, iPads, and iPhones.

Its technology can also be performed on locked Apple devices with simple or complex passcodes, and can also be used to recover deleted data, according to the company's website.

Acquisition Targets

Sun is looking for targets with expertise in unlocking data on personal computers, Mr Yamaguchi said. The company could issue and sell as many as 2 million new shares, about 10 per cent of existing shares, to raise funds within two years, he said.

The proceeds, about 1.8 billion yen at Tuesday's share price, would be used to build the company's forensics business as well as augmented reality and machine-to-machine communications, he said.

"We've had unexpected feedback," he said.

"Although we appreciate attention being paid to our company, we must focus on our business and make every effort to improve our services."

Sun has been building components for pinball-like game machines found in Japan's pachinko parlors since the 1970s, and moved on to developing personal computers, video games and more recently, iPhone mahjong apps.

In 2007, as sales slumped, Sun acquired Cellebrite for a reported US$17.5 million. It hadn't ventured into forensics at the time, and later expanded its customer base beyond mobile phone retailers to police and law enforcement authorities throughout the world, said Mr Yamaguchi.

Revenue from Sun's mobile data solutions division overtook pachinko parts in the fiscal year ended March 2014 and contributed 13.6 billion yen or 50 per cent of sales in the last fiscal year, according to data compiled by Bloomberg. The bulk of Sun's mobile data solutions business comes from Cellebrite, company spokesman Hidefumi Sugaya said March 31.

Cellebrite's website is full of kudos from police forces around the globe crediting its technology for facilitating investigations. On the Cellebrite website, the Providence, Rhode Island police department, for example, says the company helped it solve the 2014 gang-related murder of a 12-year-old girl and three other women at a graduation party.

Transparency Market Research, a global market intelligence company, forecast in March that increasing terrorist attacks and crime will push the digital forensics market to 13 per cent annual growth to US$4.97 billion by 2021.

Cellebrite has emerged as a leading player in the security privacy industry, said Richard Overill, a senior lecturer in computer science at King's College in London who has studied the sector since 1992.

Mr Yamaguchi says the company commands a 55 per cent market share of the US forensics market.

"The general opinion is that Cellebrite's digital forensics products for mobile devices are leading edge state-of-the-art," said Mr Overill.

"They have put more effort, experience and expertise into studying the potentially exploitable vulnerabilities in these systems than other companies, and as a result have been able to produce superior products."

Sales in Sun's mobile data solution business is expected to expand 10 per cent to 20 per cent annually in the coming years, as demand for Cellebrite's devices and services are likely to increase, especially in China and India, Mr Yamaguchi said.

"We've been cutting weight of pachinko-related business while becoming increasingly reliant on Cellebrite," said Mr Yamaguchi.

"We want to keep improving our technology to provide better services and skills to make the world safe and peaceful."


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