Tectonic Change in Japan's Mobile Handset Market
The past few days have seen Japan’s big electronic makers releasing their quarterly and semiannual results, and the news from Sony, NEC, Fujitsu, and others has been mostly bad where cell phones are concerned. There have also been a lot of media reports on Japan’s ailing phone tanmatsu (terminal) market, and it appears that majors changes are underway. First, the media reports. On October 10 JEITA announced that domestic shipments of cellular phones fell 18.3 percent in August 2002 from a year earlier to 3.26 million units. The drop resumed a 13-month-long decline that was only broken (briefly) in July 2002 due to sales of camera-equipped models. Moreover, shipments of PHS handsets fell by 64 percent to 73,000 units (extending their losing streak to 18months!).
Overall (PHS plus cellular), mobile phone shipments fell 20.5 percent to 3.33 million units for the 15th consecutive monthly drop (data were supplied by 16 mobile phoneand 15 PHS manufacturers).
Whoa! What gives? Japan is supposed to be the epicenter of the wireless revolution.These figures don’t seem very revolutionary… But there’s more.
Last week, the Nikkei said that Kenwood is halting production of mobile phones. The report cited plans to restructure and “concentrate on areas where it retains competitiveness, such as in-car devices.” Granted, Kenwood is only a middle-weight when it comes to cellys (they pumped out a paltry 700,000 units – many for J-Phone – in fiscal 2001), but this is one of the first times I’ve seen a Japanese wireless gadget maker actually cease production because it can’t compete. Sayonara, Kenwood.
Also, in my recent WWJ Viewpoint I mentioned that NEC had just announced that Hutchison Whampoa has increased its November 2001 order for 3G video-capable terminals (for Hutch 3G networks worldwide) from one million to twomillion units. NEC also provide the N21i i-mode-compatible model for theGSM/GPRS networks operated by KPN, E-Plus, Bouygues, and others in Europe. Looks like NEC are getting overseas sales right (despite past engineering problems ).
Nonetheless, last Friday NEC announced consolidated results for March to September 2002, and mobile terminal sales for the quarter ended Sep. 30 were down 45 percent YoY (to185.4 billion yen); the company blamed “the slow down in numbers of new mobile phone subscribers in Japan.”
As I mentioned, there were other financial reports in the past few days. On Monday this week, Sony said that group net income for the second quarter (July-Sep) was 44 billion yen- boosted by sales of digicams, flat-screen TVs, and PS2 consoles, and by strong revenues in its movie division. The PR release was thunderingly silent, however, on “cell phone” results, but if these are included under the “information and communications” product category, then 2Q 2002 revenues are down a whopping 24.9 percent YoY. Maybe troubled Sony Ericssoncan take some notes from NEC’s successes?
In Fujitsu’s reportyesterday, the firm said that despite some growth in terminal sales, its overall mobile business (including 3G infrastructure) was down 22 percent to 769.7 billion yen; the Asahi Shimbun said the company would see an additional 3,900 layoffs this fiscal year. Toshiba is also suffering the tortures of Hades,but Panasonic seems to be doing OK. And in their announcement today, Matsushita Electric Industrial (the world’s second-largest consumer electronics maker) posted a consolidated net profit of 17.85 billion yen.
Finally – some good news! Wait – there’s more.
Sharp said this week profits are up sharply (pun intended) due in large part to cell phone sales (Sharp makes the famous Sha-mail handsets for J-Phone and NTT DoCoMo); the company said sales of terminals are up 51.1 percent YoYto 116.4 billion yen. (Sharp will also start shipping GSM/GPRS handsets to Vodafone.)
Overall, I think we’re seeing a tectonic change in Japan’s mobile handset market. In the past, in the 2G digital cellular era, Japan was a PDC-standard island, and handset makers here were largely unconcerned with goings-on in the rest of the world. Several did supply models for foreign markets, but, by and large, NEC, Sony, Panasonic, Fujitsu, et al stayed here, and Nokia, Motorola, Ericsson et al stayed out there — and everyone was happy. The Japanese makers could rely on steady revenues and guaranteed carrier subsidization, and so enjoyed growing handset sales and drinks during karaoke at their favorite Ginza izakaya on Friday evenings.
But Japan’s market is approaching saturation, domestic sales are (obviously) plummeting, and makers are realizing they either have to reinforce their nascent overseas expansion plans to survive, or else – like Kenwood – get out of the business altogether.
For those – like Sony Ericsson, NEC, Sharp, Sanyo, and Toshiba – who are fighting rather than switching, it’s going to be a tough battle out there with the likes of Samsung offering stiff competition in the key US market.
In the meantime, my wife and I are due to replace our two-year-old Panasonic P209iS models from DoCoMo (which got trashed by Adam Greenfield for poor usability, but I’ve found it to be quite good and easy to dial with one hand), so maybe that will help one or more of the Japanese makers. 😉
[When released in August 2000, Panny’s 209iS, by the way, was rumored to feature a Java microbrowser developed internally by Panasonic. According to engineers, their microbrowser development was then approximately 6 months ahead of Sun’s own microbrowser effort.]
— Daniel Scuka