Most of Japan’s next-generation cell phones are going to have 2 megapixel cameras next year, right? There is already a supply crunch developing for CMOS sensors, right? The global shipment of cellies is going to near 490 million units in 2004, right? And, finally, Japanese makers are gearing up for an assault on the world market via Vodafone, right? Probably not, don’t think so, well if you are very lucky and Vodafone central is a long way from Tokyo- there is something fishy about Vodafone talking up its love of Japanese handsets…these are the sorts of answers that you get if you talk to IDC Japan’s top wireless device analyst Michito (Mitch) Kimura, who has his own take on things. Recently, WWJ listened in on Kimura’s presentation about camera phone trends, followed up with an interview, and came back with the following snapshot.
IDC’s latest (November) figures have 2003 global phone shipments pegged at about 460 million, and the optimists at the company see a surge to up to 490 million in 2004 (some have said half a billion). For 2003, there was huge growth in the Indian and China markets, lead by cdma, for example. But there was strong growth also in Europe, Japan and North America. That’s to say there was strong geographical growth
The dominance of the Big Three, Nokia, Moto and Samsung is unlikely to change for the time being. These companies have controlled about half of the world’s market share recently, in fact Nokia will have probably shipped about 175 million phones, about 50 million more handsets than in 2000.
However, some companies who are predicting global handset sales topping half a billion may have been drinking too much coffee, asserts Kimura. iSuppli Corp. in November raised its 2003 forecast for cell phone shipments from 480 million to 510 million units and bumped up its 2004 forecast by 10 million units to 550 million. Semico Research Corp. on the other hand, is forecasting 430 million units this year, while Nokia Corp. projects 460 million. At CIBC World Markets, it’s 484 million units.
Kimura, after years of tracking the semiconductor industry’s wild swings and imbalances privately pegs next year’s growth at under 490 million and wants to look beyond the recent delays in rollouts in the rollup to Christmas.
At the same time, Kimura believes that Japan’s camera phone market is on the cusp of a big change, with a new generation of FOMA phones out sometime during or after next February. Carriers are ordering and Sharp, Sanyo, Fujitsu, Mitsubishi, NEC, and Panasonic all gearing up to camera-only phones for PDC. The end of the ability to buy a PDC phone without a camera is with us.
Kimura saw Vodafone’s face, and he wasn’t a believer…in the sense that he feels Vodafone is throwing up a bit of a smokescreen about using Japanese makers, particularly from Sharp and NEC who have experience outside Japan. While Darryl Green has publicly said he wants to provide a Vodafone world bazaar for J. Phones, J makers actually just can’t gear up for a world market. And, why should they risk capex and production ramps when they can make a tidy profit taking orders from DoCoMo?
There is a lot of propaganda out there in terms of Vodafone saying it wants NEC and Panasonic to sell to the world. But in terms of these companies・total capacity, there is a limit to what they can do. Japanese handset players (no matter what NEC might say about its sales to Hutchinson 3) will primarily continue to focus on the Japanese market. Look at it this way, he says, Nokia can make 160-170 million handsets a year, that’s 10 times what NEC can make.
In fact, while NEC and Panasonic are looking into ways to ship out more cellies through Taiwanese OEMS, Kimura has already heard from one Japanese maker that they are already straining their capacity and are getting cold feet about putting in the capex to invest in a massive leap into the unknown.
Japanese mobile phone makers don’t care about their market share, they care about the profit per handset they can make. Remember when they tried to enter the European market in 1999. NEC had big plans in Czechoslovakia, but they had to scrap those, he says.
We’d hate to be proved wrong about the huge opportunities for the best handset technologies in the world for Japanese makers. But, and oh dear, Japan ain’t what it used to be. The crushing losses of the last semiconductor turndown for Japan’s IDMs have certainly robbed them of the cash. And have the endless reorganizations and restructurings, the new alliances that double the bureaucracy that should have been slashed to make decision making as fast and decisive as it is with a monster like Samsung, perhaps robbed Japanese companies of the courage and vision to do battle with Nokia and Motorola, even if they wanted to. Well, that’s a pessimist’s view. Perhaps Vodafone is blowing bubbles, or perhaps it wants to be a global DoCoMo, stamping everything with the big V.
Kimura notes that Japan is two or three steps ahead of the rest of the world (excepting Korea, of course) which, in his book, adds up to being out of step: The tango with DoCoMo being more convivial to foxtrotting around the world with Vodafone. So, for Big V, will it be a case of knock, knock, knocking on Nokia’s door? A smorgasbord of pickeled fishy requisit-te-te-te-tes (apologies to The Chemist’s Sketch by Monty Python) sitting better with the British palette than a plate of delicate sushi?
The next red herring Kimura wants to kick into touch is the idea about the impending lack of CMOS sensors for camera phones. The digital camera market is heading for more growth with about 10 million digi cameras to be shipped in the run-up to Christmas. Of these more than 70 percent will be of the 3 megapixel class. Overseas, a trend has developed so that there is supposed to be a dogfight emerging for the all important modules for 2 megapixel sensors.
Desire Battles Deliverability
Internationally, there is already talk of supply shortages of color screens, image sensors and NOR/NAND flash, with the handset supply chain being additionally stressed as the scarcity of parts spreads to other commodity areas. Strategy Analytics pegs camera phone sales for the first half of 2003 at 25 million and estimates that 65 million camera phones will be sold worldwide in 2003, and that camera phones will account for 13 percent of global handset sales in 2003. At the moment 90-95 percent of cameras in phones use CMOS, and Nokia, Motorola, Siemens and Samsung are all starting to adopt CMOS for cameras.
With the raising demand in the third quarter and a rush expected for the fourth quarter, it is being said that there is going to be a shortage of camera modules. This simply isn’t true, says Kimura.
Why? Because module makers have the capacity to make up to 120 million modules and the total market shipment for camera phones will at most be 80 million, well within the capabilities of suppliers. The real problem for camera phones is the cost of the product mix within the camera. If, as it looks, its going to be a sellers market more than ever this year, makers such as Nokia are going to struggle to make handsets for reasonable prices.
Difficult Journey to 2 Megapixels in Japan,
Consumers looking forward to a big rush of 2 megapixel cameras in Japan, beware: DoCoMo, for example, is looking to concentrate on FOMA, probably with one megapixel as its benchmark, says Kimura. That’s something of a relief for handset makers and less expensive for Big D too. Adding just a camera module with autofocus and without the concomitant flash memory boost costs $50 dollars and the real costs of making super 06 (or whatever DoCoMo is going to call its next non-FOMA) PDC models is $600 dollars or more, says Kimura. With DoCoMo already subsidizing FOMA handsets to the tune of upwards of $500, the road to a massive rollout of 2 megapixel cameras is a path all sides fear to tread, he says.
The problem also lies with that very powerful species of interested parties, the Japanese consumer. If a bunch of 2 megapixel cameras come out, they will have to have expensive features such as autofocus. But if they do, then they might price themselves out of popularity. It’s a sticky wicket, what, old chap?