Post by Bozur on Nov 24, 2005 0:47:59 GMT -5
A Second Chance for Japanese Cellphone Makers
By MARTIN FACKLER
Published: November 17, 2005
TOKYO, Nov. 16 - Cellphones here have cash chips that let shoppers swipe them at the register like debit cards. They have crisp color screens for watching television shows and music videos. They have full-fledged Web browsers, and they even have fingerprint readers and cameras with face-recognition software that lock up a phone if a stranger tries to use it.
Tony Cenicola/The New York Times
Japanese cellphones are packed with features, but the cost averages about $400.
Interested in getting one? Good luck. You cannot buy one outside Japan.
And that is a problem, not just for consumers in the rest of the world but for Japanese companies, which have flooded the world with sophisticated consumer electronics from flat-panel televisions to digital cameras - but not cellphones.
For years, companies here were slow to look abroad while sales in Japan soared. Moreover, the Japanese government and cellphone carriers had adopted a technology different from that used in most countries, which would make it difficult to break into overseas markets.
So, when growth in handset sales in Japan started slowing in 2001, many other opportunities had passed: Nokia in Finland, Motorola in the United States and Samsung in South Korea had already sewn up many of the world's biggest markets. Japanese companies were left kicking themselves for missing out on potentially billions of dollars in sales.
"We were thinking only about Japan," Atsutoshi Nishida, the president of Toshiba, one of Japan's largest electronics makers, said in an interview in August. "We really missed our chance."
But now, Toshiba and other Japanese cellphone makers say they think they see a second chance to compensate for past mistakes and catch up in the global marketplace.
Their opportunity is the coming spread of so-called third-generation, or 3G, high-speed wireless networks. Four years ago, Japan led the world in completing a fully 3G network. Now, the technology is finally taking off in the rest of the world, most rapidly in Europe and Asia but also in the United States. Japanese companies hope their longer experience with 3G will enable them to break into leading world markets, where demand for more sophisticated handsets is growing.
Analysts caution that many consumers may find Japanese handsets too complex and too expensive - prices average about $400 - to be appealing. But they also say the world's move to 3G could give Japanese companies a window to increase their global market share, which in the three months through June was less than 13 percent, according to Gartner, a research company in Stamford, Conn.
"There is a whole set of technologies that Japanese firms are way ahead on," said Jeffrey Funk, a business professor at Hitotsubashi University in Tokyo. "3G gives newcomers a chance to break in."
With data transmission speeds 40 times those of existing second-generation networks, 3G makes it possible to download short movies and transmit live video from cellphones. But the high cost of installing the technology, which requires a new network of computers, routers and antennas, has made it slow to catch on.
It is only doing so now in the United States, where Verizon has installed the first 3G network in 50 cities. Cingular and Sprint are rushing to complete similar networks.
Analysts say 3G promises to be the hottest corner of the world cellphone market, which will total an estimated 820 million handsets this year, according to the European-based investment bank Dresdner Kleinwort Wasserstein. Of that, sales of 3G sets are expected to reach 58 million units by the end of this year and could double next year, the bank said.
So far, one of the few real global players from Japan has been Sony- Ericsson, which held 6.2 percent of the world market in the second quarter, according to Gartner. About the only Japanese company that has had noticeable success in the American market is Sanyo, which provides phones to Sprint.
Japan's absence overseas is an odd predicament, given the technological level of its handsets. A typical phone here can surf the Internet by sizing Web pages to fit a credit-card-size screen, play television programs and short movies downloaded from the Web. Their digital cameras are often as powerful as many stand-alone models.
Newer models have telephoto lenses, can store more than 100 digital songs like an iPod and even serve as digital camcorders, filming moving images and then replaying them on a full-size television via a cable hookup.
Compared with these futuristic devices, other phones look downright primitive. When Vodafone added Motorola and Nokia phones to its lineup in Japan earlier this year, most of the models had dismal sales because Japanese consumers rejected them as too clumsy, according to Vodafone.
Despite their woes in Japan, the world's biggest phone makers expect to be able to defend their dominance elsewhere even as the Japanese try to regain ground.
"You can't take any company lightly," Peter Skarzynski, who runs Samsung's mobile phone division in the United States, said of Japanese challengers. But he said established makers like Samsung - which has more than 20 percent of the American market - have a head start because "carriers will defer to people they know."
The biggest shortcoming of Japanese handsets is their price, which is about twice the average price of cellphones for sale in the United States and Europe, analysts say. Japanese makers say success may depend on getting enough sales volume to drive down prices, though their products will probably remain at the high end.
Japanese makers say they are trying to improve sales by linking up with foreign service providers and tapping into their broad sales networks. Two of Japan's biggest cellphone makers, Toshiba and Sharp, have allied themselves with Vodafone of Britain. NEC builds four 3G phones for Hutchison 3G, a mobile operator in Europe and Asia.
In the United States, Sanyo is already supplying Sony with phones that have mobile TV and push-to-talk functions. Ryan Watson, a Sanyo spokesman, said his company had also started selling 3G phones in Europe with the British carrier Orange and in Hong Kong with SmarTone. Japanese makers are also trying to develop their own knowledge about overseas markets. Last month, Toshiba sent a team of engineers to London to study European designs, and in June it rolled out its first 3G phone in Europe via Vodafone. Sharp had an earlier start, buying a mobile software development company in Britain four years ago.
"3G levels the playing field because Japan's ahead in a lot of 3G technologies," said Masafumi Matsumoto, a senior executive director in charge of Sharp's cellphone business.
The seeds of the failure by Japanese manufacturers to emerge earlier on the global stage go back more than a decade, when the Japanese mobile service companies chose a different technical standard from much of the rest of the world. With the advent of 3G, handset makers say, they pressed the government to ensure that Japan did not make the same mistake twice. Japanese companies joined in the development of global technical standards. Then Japan, along with South Korea, rushed to build 3G networks first, partly to create new demand in its saturated home market.
Japanese makers enjoy a technological advantage in crucial components like liquid-crystal-display screens and high-resolution cameras. The Japanese makers, most of them huge electronics conglomerates, make these components themselves, unlike Nokia and other rivals, which buy them from others - often these same Japanese companies.
But analysts caution that the complexity of Japanese-made handsets, and their hefty price tags, will limit their sales. The 3G technology has been slow to take off outside Japan, in part because many consumers balked at the cost of acquiring features they considered excessive. European and American phone designs have also proved simpler and more elegant for the vast majority of mobile phone users.
"You'll probably get a situation," said Kirk Boodry, an analyst at Dresdner Kleinwort Wasserstein in Tokyo, "where Japan gets the high end of the world handset market."
Ken Belson contributed reporting from New York for this article.
By MARTIN FACKLER
Published: November 17, 2005
TOKYO, Nov. 16 - Cellphones here have cash chips that let shoppers swipe them at the register like debit cards. They have crisp color screens for watching television shows and music videos. They have full-fledged Web browsers, and they even have fingerprint readers and cameras with face-recognition software that lock up a phone if a stranger tries to use it.
Tony Cenicola/The New York Times
Japanese cellphones are packed with features, but the cost averages about $400.
Interested in getting one? Good luck. You cannot buy one outside Japan.
And that is a problem, not just for consumers in the rest of the world but for Japanese companies, which have flooded the world with sophisticated consumer electronics from flat-panel televisions to digital cameras - but not cellphones.
For years, companies here were slow to look abroad while sales in Japan soared. Moreover, the Japanese government and cellphone carriers had adopted a technology different from that used in most countries, which would make it difficult to break into overseas markets.
So, when growth in handset sales in Japan started slowing in 2001, many other opportunities had passed: Nokia in Finland, Motorola in the United States and Samsung in South Korea had already sewn up many of the world's biggest markets. Japanese companies were left kicking themselves for missing out on potentially billions of dollars in sales.
"We were thinking only about Japan," Atsutoshi Nishida, the president of Toshiba, one of Japan's largest electronics makers, said in an interview in August. "We really missed our chance."
But now, Toshiba and other Japanese cellphone makers say they think they see a second chance to compensate for past mistakes and catch up in the global marketplace.
Their opportunity is the coming spread of so-called third-generation, or 3G, high-speed wireless networks. Four years ago, Japan led the world in completing a fully 3G network. Now, the technology is finally taking off in the rest of the world, most rapidly in Europe and Asia but also in the United States. Japanese companies hope their longer experience with 3G will enable them to break into leading world markets, where demand for more sophisticated handsets is growing.
Analysts caution that many consumers may find Japanese handsets too complex and too expensive - prices average about $400 - to be appealing. But they also say the world's move to 3G could give Japanese companies a window to increase their global market share, which in the three months through June was less than 13 percent, according to Gartner, a research company in Stamford, Conn.
"There is a whole set of technologies that Japanese firms are way ahead on," said Jeffrey Funk, a business professor at Hitotsubashi University in Tokyo. "3G gives newcomers a chance to break in."
With data transmission speeds 40 times those of existing second-generation networks, 3G makes it possible to download short movies and transmit live video from cellphones. But the high cost of installing the technology, which requires a new network of computers, routers and antennas, has made it slow to catch on.
It is only doing so now in the United States, where Verizon has installed the first 3G network in 50 cities. Cingular and Sprint are rushing to complete similar networks.
Analysts say 3G promises to be the hottest corner of the world cellphone market, which will total an estimated 820 million handsets this year, according to the European-based investment bank Dresdner Kleinwort Wasserstein. Of that, sales of 3G sets are expected to reach 58 million units by the end of this year and could double next year, the bank said.
So far, one of the few real global players from Japan has been Sony- Ericsson, which held 6.2 percent of the world market in the second quarter, according to Gartner. About the only Japanese company that has had noticeable success in the American market is Sanyo, which provides phones to Sprint.
Japan's absence overseas is an odd predicament, given the technological level of its handsets. A typical phone here can surf the Internet by sizing Web pages to fit a credit-card-size screen, play television programs and short movies downloaded from the Web. Their digital cameras are often as powerful as many stand-alone models.
Newer models have telephoto lenses, can store more than 100 digital songs like an iPod and even serve as digital camcorders, filming moving images and then replaying them on a full-size television via a cable hookup.
Compared with these futuristic devices, other phones look downright primitive. When Vodafone added Motorola and Nokia phones to its lineup in Japan earlier this year, most of the models had dismal sales because Japanese consumers rejected them as too clumsy, according to Vodafone.
Despite their woes in Japan, the world's biggest phone makers expect to be able to defend their dominance elsewhere even as the Japanese try to regain ground.
"You can't take any company lightly," Peter Skarzynski, who runs Samsung's mobile phone division in the United States, said of Japanese challengers. But he said established makers like Samsung - which has more than 20 percent of the American market - have a head start because "carriers will defer to people they know."
The biggest shortcoming of Japanese handsets is their price, which is about twice the average price of cellphones for sale in the United States and Europe, analysts say. Japanese makers say success may depend on getting enough sales volume to drive down prices, though their products will probably remain at the high end.
Japanese makers say they are trying to improve sales by linking up with foreign service providers and tapping into their broad sales networks. Two of Japan's biggest cellphone makers, Toshiba and Sharp, have allied themselves with Vodafone of Britain. NEC builds four 3G phones for Hutchison 3G, a mobile operator in Europe and Asia.
In the United States, Sanyo is already supplying Sony with phones that have mobile TV and push-to-talk functions. Ryan Watson, a Sanyo spokesman, said his company had also started selling 3G phones in Europe with the British carrier Orange and in Hong Kong with SmarTone. Japanese makers are also trying to develop their own knowledge about overseas markets. Last month, Toshiba sent a team of engineers to London to study European designs, and in June it rolled out its first 3G phone in Europe via Vodafone. Sharp had an earlier start, buying a mobile software development company in Britain four years ago.
"3G levels the playing field because Japan's ahead in a lot of 3G technologies," said Masafumi Matsumoto, a senior executive director in charge of Sharp's cellphone business.
The seeds of the failure by Japanese manufacturers to emerge earlier on the global stage go back more than a decade, when the Japanese mobile service companies chose a different technical standard from much of the rest of the world. With the advent of 3G, handset makers say, they pressed the government to ensure that Japan did not make the same mistake twice. Japanese companies joined in the development of global technical standards. Then Japan, along with South Korea, rushed to build 3G networks first, partly to create new demand in its saturated home market.
Japanese makers enjoy a technological advantage in crucial components like liquid-crystal-display screens and high-resolution cameras. The Japanese makers, most of them huge electronics conglomerates, make these components themselves, unlike Nokia and other rivals, which buy them from others - often these same Japanese companies.
But analysts caution that the complexity of Japanese-made handsets, and their hefty price tags, will limit their sales. The 3G technology has been slow to take off outside Japan, in part because many consumers balked at the cost of acquiring features they considered excessive. European and American phone designs have also proved simpler and more elegant for the vast majority of mobile phone users.
"You'll probably get a situation," said Kirk Boodry, an analyst at Dresdner Kleinwort Wasserstein in Tokyo, "where Japan gets the high end of the world handset market."
Ken Belson contributed reporting from New York for this article.