/

Japanese makers play catch-up in smartphone market

by Kazuaki Nagata

Staff Writer

In 2013, Japan’s smartphone industry faced the shocking news that NEC Corp. and Panasonic Corp. were withdrawing from making those handsets for consumers.

It wasn’t that long ago when these two makers held stable positions in the cellphone market, but the situation changed completely after Apple Inc. came in with its iPhone.

The iPhone has been growing ever more powerful in Japan, with NTT Docomo Inc., the biggest carrier, starting to sell them in September.

Although some Japanese makers are still standing and searching for ways to somehow gain momentum amid the fierce smartphone competition both at home and globally, it is unclear whether their efforts will pay off.

“There are so many reasons” why Japanese handset makers are having a tough time, said Tsutsumu Ishikawa, a journalist watching the cellphone industry. “One reason is that they were slow to get in on the first wave of smartphones, when they were just making phones based on requests from the Japanese carriers.”

The Japanese carriers buy phones from the makers and then do all the marketing, so the makers didn’t have to put much effort into promotion, Ishikawa said.

Plus, apart from SoftBank Corp., which became the first iPhone provider in Japan, the Japanese carriers didn’t really think smartphones would catch on here all that quickly, so the makers were slow to jump into the smartphone battle.

Meanwhile Apple and South Korean makers like Samsung Electronics Co. jumped out to the early lead and built up experience and product know-how, leaving the Japanese makers struggling to make up for lost ground.

“I think the situation of the domestic market is changing in a drastic way with Docomo now selling iPhones,” Yoshisuke Hasegawa, general manager of Sharp Corp.’s communication systems group, said during a press meeting Nov. 7 in Tokyo.

Sharp explained its smartphone strategy during the meeting and announced its goal to become the No. 1 Android handset maker in Japan in fiscal 2014.

Hasegawa said Sharp has IGZO (indium gallium zinc oxide) technology that can create high-resolution and energy-saving displays to differentiate its handsets from other makers.

But the goal to become the No. 1 Android maker in Japan looks like weak sauce for Sharp, which held the top market share from fiscal 2005 to fiscal 2010, because it excludes Apple as a competitor and because Sharp is one of the few makers that provide handsets to all three major carriers.

For instance, Sony Corp. and Samsung do not supply SoftBank.

Even so, it at least is a target Sharp stands a good chance of meeting.

According to market researcher Kantar Worldpanel ComTech, 76 percent of the smartphones sold in Japan were iPhones in October, just after the 5C and 5S models were released in September.

The winter shopping season had been expected to go well for Sharp and Fujitsu Ltd. as Docomo chose to heavily promote their smartphones, but its debut of selling iPhones seems to have overridden that strategy.

Fujitsu is another struggling maker, although it had the No. 1 domestic share in fiscal 2011 and was No. 2 in fiscal 2012.

With a share of 7.5 percent, it fell to sixth place in the first half of fiscal 2013, according to MM Research Institute.

The firm also slashed its estimated annual shipments of cellphones from 5.2 million to 4.2 million in October, while denying it would withdraw from the smartphone business.

One strategy for Fujitsu is to target senior users after winning their hearts with its Raku Raku series of standard mobile phones, most of which are the clamshell-type or slide-type with buttons.

It introduced its smartphone version last year and also started selling it in France in June through a carrier called Orange.

“The issue of aging societies is common in advanced nations, so there is a potential in the senior market,” said Ishikawa.

But he questioned whether Fujitsu can nail the marketing, as it lacks the necessary sales and promotion force.

While many Japanese makers are hurting in the smartphone competition, Sony Corp. managed to increase its presence in the past year.

“I think we are starting to feel some response,” said Kichiro Kurozumi, vice president in charge of UX product planning at Sony Mobile Communications Inc., in late October.

The electronics giant has said smartphones are a growing segment and will concentrate on it.

Thanks to the popularity of its Xperia series, Sony’s share was second in the domestic market in the first half of this year, with 16.8 percent, up by 6.9 percentage points from the same period the year before.

Sony also increased its share and shipments in Western Europe, according to IDC, a U.S.-based market researcher. In the April-June period, Sony’s smartphone share was 11.3 percent, putting it in third place, and its shipments increased by 85 percent to 3.7 million units compared with the same period in 2012.

One contributing factor may have been the termination of Sony Ericsson, which was jointly held by the Swedish firm, and making it a wholly owned subsidy called Sony Mobile in 2012.

Becoming physically and mentally a part of the Sony group, Kurozumi said it can achieve “a different level of cooperation” with Sony’s other divisions.

For instance, he said top engineers from other divisions now get together to work on handsets. One of these is the recently released Xperia Z1, which comes with a built-in camera nearly as good as a compact digital camera, taking advantage of Sony’s cutting-edge imaging technology.

Sony is also focused on creating peripheral devices that work with smartphones, such as a smart watch and a lens-type camera that can be attached to a smartphone, figuring these will be vital in the future, said Kurozumi.

“At some point, the growth of smartphones will slow down and that’s when real competition begins,” said Kurozumi, adding that since Sony has electronics and audio products as well as video games, it can propose many products that work with smartphones.

Ishikawa said while it is true that Sony has strengthened its brand, it is still having a tough time increasing its shares in North America and China, the key markets.

When it comes to the North American market, Kyocera Corp. appears to be gaining popularity with a focus on prepaid cellphones. The maker had the fourth-largest share, at 6 percent, following Apple, Samsung and LG in the January-September period this year

As opposed to slugging it out with Apple over high-end smartphones, Kyoto-based Kyocera is targeting customers looking for a cheaper option.

But if it just comes down to price, Chinese makers have the advantage, so Kyocera is building phones with some features, such as making them water- and shockproof, making them popular with people who live rough and tumble lives.

Kyocera plans to ship 12 million handsets this fiscal year, an increase of 9 percent from 2012.