The Communications and Information Network Association of Japan – CIAJ – has released a report on mid-term demand for telecom equipment with a gloomy, though predictable, forcast. While exports have been holding YoY results, domestic sales are expected to slip about 14 percent in fiscal 2008. According to their research, confirming widely held industry views, the rapid drop in demand for handsets resulting from the newly implemented sales plan, which raised handset prices has produced this so-called negative growth effect.
With upgrade cycles becoming noticeably longer and diminishing consumer appetite among subscribers pushing down demand for cellular phones, which makes up more than half the telecommunication equipment market, the FY2008 telecommunication equipment market is expected to be 3.734 trillion yen, or a negative 13.9% growth over the previous year. Demand for infrastructure and Internet-related equipment is expected to grow during FY2009 through FY2013 as the switch to IP and broadband continues, but with cellular phone upgrade cycle becoming longer and competition from foreign vendors more aggressive, CIAJ forecasts the total market value in FY2013 at 3.623 trillion yen, a decrease of 16.4% over the figure for FY2007.
While all vested interests had opposed the regulators move towards ‘reality pricing’ on handset sales and voice minute charges, in the end they had no choice. Clearly a better communications effort to explain the new system, and avoid that up-front sticker shock is in order. Meanwhile, the UMPC space is really heating up here over the last few months with flat-rate data card plans offering free mini laptops in exchange for a 2 year contract. Basically the same game with a different end-point device.