by Andy Kitson on September 21st, 2009
Last week, three of Japan’s largest consumer electronics companies agreed to combine their mobile handset businesses in a stand-alone joint venture. The stated aim is to help the three companies – Casio, NEC and Hitachi – to make significant savings in production and marketing costs and to improve their positions in the cut-throat domestic market.
The venture, a combination of the handsets division of NEC with a pre-existing partnership between Casio and Hitachi, will have a combined share of the Japanese handset market of just over 20%, based on unit sales data for the year ended March 31, 2009.
However, with demand for new mobile phones in Japan at an all-time low – due in part to excessive market saturation and consumers’ reluctance to upgrade their phones at a time of great economic uncertainty – it remains to be seen whether the venture could maintain this market position.
The venture will compete with at least five other domestic rivals (Sharp, Panasonic, Fujitsu, Toshiba and Kyocera) and a handful of foreign players (including Sony Ericsson, Apple, HTC and Pantech Curitel) for business from just three principal network operators: NTT DoCoMo, KDDI‘s au unit, and SoftBank Mobile.
In order to survive, a change of tactics is required: break-out into the international market. But, unless the Japanese vendors are prepared to fundamentally change their business models, this will not be as easy as it sounds.
Currently, many Japanese handsets are over-laden with technology-based features that a large number of users don’t really need. This has driven up the prices of the handsets and makes it difficult to sell them outside of Japan. Furthermore, many devices are also fairly idiosyncratic in the way they work, particularly with regards to wireless broadband-enabled Smartphones. There is much to appeal to Japanese consumers, but little of interest to users elsewhere.
The new venture aims to expand its overseas presence. Casio Hitachi Mobile provides some handsets to Verizon Wireless in the US and LG Telecom in Korea, but none have the cachet or sheer style appeal enjoyed by the iPhone, the growing family of BlackBerries, and the revitalised offerings of LG Electronics and Samsung.
If a change of tactics is needed, it will need to be employed at the software level, rather than the physical form factor. Windows and Linux-based operating systems are already used by Japanese vendors on their phones, but these are not best suited to the future smartphone market – a market that is being targeted because the Japanese vendors openly concede that they cannot hope to match Motorola and Nokia in the low-cost arena.
Perhaps an ‘open’ OS should be adopted as a standard by all Japanese vendors. An ‘open’ platform, such as Android, would allow greater flexibility in adapting handsets for the international arena. This would then allow the vendors to develop their own applications stores – a move that could then provide a new platform for growth in the jaded domestic market…?