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New Chance for Japanese Phone Makers

China’s roll-out of high-speed mobile phone networks over the next few years might be the best opportunity yet for Japanese handset makers to crack the world’s largest wireless market.

 

Top Japanese phone makers such as NEC Corp. and Matsushita Electric Industrial Co. Ltd. until now have had limited success in China.

 

The market has been dominated by earlier and bigger entrants like U.S.-based Motorola and Finland’s Nokia on one side and aggressive Chinese manufacturers such as Ningbo Bird on the other.

 

But analysts said Japanese companies might get another chance as China looked set to issue licences next year for third-generation (3G) mobile networks.

 

Japanese mobile phone makers would be able to draw from their experience in providing 3G phones over the past few years to operators back home such as NTT DoCoMo Inc. and KDDI Corp., they said.

 

DoCoMo was one of the world’s first operators to launch 3G services in late 2001, offering broadband Internet-style services on sophisticated phones and other mobile devices.

 

The advent of 3G here in China in the coming year provides Japan with a ready-made ability to enter this market,” said Tom Manning, global director of Bain & Co.’s information technology consultancy arm.

 

Japan’s mobile phone makers together hold only 10 percent of the market in China, where there are more than 300 million wireless subscribers. Sales of phones this year in the country are expected to number as many as 90 million, worth 130 billion yuan (US$15.7 billion).

 

While Sony Ericsson has had measured success in China, most Japanese manufacturers in the past have struggled to find a foothold due to insufficient brand marketing, unappealing phone designs and their decision to target the relatively small mid to high-end market, according to analysts.

 

They have been particularly criticized for slow product roll-out, compared with competitors like Nokia, which launched 20 new models last year.

 

That makes a crucial difference in a market where users replace their phones on average of every 12 to 14 months and as often as two or three times a year.

 

Japanese companies have been relatively conservative toward the Chinese telecom market. They never thought that the market would develop so fast,” said Lin Qi, general manager of mobile phone distributor Shanghai Silverlion Mobile Telecom Equipment Co. Ltd.

 

 

Silverlion had previously distributed Matsushita’s Panasonic phones but has handled Motorola phones exclusively over the past few years.

 

However, as Japanese phone makers find their growth prospects increasingly limited at home, where about 70 percent of people own a mobile, the need to expand abroad is growing stronger.

 

NEC, Japan’s third-largest electronics conglomerate, said in July it was preparing to make China its center of operations outside of Japan. It said it aimed to double its mobile phone sales in China to two million units in the year ending next March, increasing to three million in the following year.

 

We aim to be one of the top three handset vendors in China in three years, Susumu Otani, associate vice president of NEC, has said.

 

Matsushita is strengthening its position and counting on sales in China to help bring its mobile phone unit back to profitability.

 

Japanese companies have been unsuccessful in engaging consumers directly in overseas markets because their experience at home is limited to making phones for operators, which market and sell them under their own brand names.

 

But that weakness might become a strength when China launches 3G, because operators will seek handsets that best exploit their network’s abilities.

 

We think 3G is the kind of technology that needs more synergy between the terminal and the infrastructure,” said Edward Yu, president of Beijing-based technology market research company Analysys.

 

While they undoubtedly face big challenges ahead, recent signs are encouraging with Sony Ericsson and Kyocera Corp. phones being cited among the best sellers.

 

Japanese products and companies have such sophistication targeting and managing the details of both product development and product introduction that actually the challenge is very do-able for Japanese companies,” said Bain’s Manning.

 

(Shenzhen Daily October 18, 2004)

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