Japanese vendors look for overseas expansion, this time for real...

I decided to write this post in a response to a very thoughtful analysis of 2010 handset vendor trends made by Tomi Ahonen on his Communities Dominate Brands blog. Among other vendors, Tomi lays out his expectations for Japanese vendors, especially citing Fujitsu as the world's fifth biggest smartphone maker. Thanks, Tomi ;) I am not going to touch here the very tricky subject of smartphone definition, but am just going to say that in Japan the most phones sold by domestic vendors, including Fujitsu are not considered to be smartphones. However, Tomi's post made me wonder when we can expect Japanese vendors compete on a worldwide scale. After several failed attempts in the past, this and next year will be crucial for Japanese vendors to launch internationally as the window of opportunity is quickly closing.

Gloom in domestic market

The Japan mobile phone market saw sequential decline in the third quarter of 2009, becoming the worst quarter in five years in terms of total handset shipments, according to IDC Japan. Mobile phone shipments totaled 7.32 million units, down 12.8% from a year earlier. Quarter-on-quarter growth remained negative for eight quarters in a row. The major showstoppers were:

• Lack of compelling high-end handsets
• Increased handset replacement cycle
• Excess inventories on operator side

To go global or not to go?

With such a pessimistic mood in their backyard, Japanese vendors face an invitable choice - to go global or die trying. Top five domestic mobile phone vendors by 3Q2009 (see chart above) - Sharp, Fujitsu, Panasonic, NEC and Kyocera are already selling phones in some markets outside Japan or planning to do so very soon. It doesn't mean everybody will succeed and I expect some market consolidation by the end of this year or earlier into the next year. Here is a summary of who done what and what to expect next.

Sharp

Sharp is the one to watch closely after as the company is rumored to be the manufacturer of the first "Microsoft" phone - a device based on Danger Hiptop/Sidekick platform acquired by Microsoft a couple of years ago. Sharp also plans to enter markets in Europe and North America after it tasted the waters in the nearby Asian markets including Taiwan and China. Sharp sold about 1.6 million devices abroad in 2008 and aims to boost that number to 4 million units by March 2010.

Fujitsu

Fujitsu made a modest enter into the Taiwan market, partnering with FET in January 2009. Last year, the company also joined Symbian Foundation reinforcing its support for Symbian OS domestically and utilizing the membership as an opportunity to broaden the Symbian appeal elsewhere. However, Fujitsu is not only focused on Symbian - the company is also known for manufacturing Windows Mobile handsets and it created the whole market niche in Japan with its very successful Raku-Raku lineup targetd at senior end-users. Obviously, I can't say anything beyond that but expect Fujitsu to make some headlines in future.

Panasonic

Panasonic is rumored to enter neighboring markets, with the main destination being China. There are some talks of Panasonic considering South American markets, especially Brazil where the similar with Japan's mobile TV standard is being adopted.

Toshiba

Backed by NTT DoCoMo, Toshiba added its first customer win in Europe in June 2009 by partnering with Spain's Telefonica. Having attracted industry's attention with the release of the TG01 - one of the thinnest Windows Mobile smartphones produced by ODM vendor for Toshiba, the company made a decision to outsource the manufacturing of phones out of Japan from October 2009.

NEC (NEC/Hitachi/Casio)

Having retreated from overseas markets in 2006, NEC is planning a comeback. First, it joined forces with two other players - Hitachi and Casio. As the leverage, the new company can utilize Casio's existing channel in the US. As you might've known, Casio found its niche in the US with a ruggedized and water resistant phone line bound for Verizon Wireless. Hitachi also rebranded its Wooo W53H keitai into the canU S1000 and shipped it to South Korea

Kyocera

Kyocera is an old-timer in the US market and now company also sells in Soth America as well. It got into Sprint's storefronts through the acquisition of another troubled Japanese vendor Sanyo. The prospects are still not clear for Kyocera overseas and domestically the picture is even worse.

Japanese vendors overseas
Kyocera	USA/Canada/Russia/India/Thai/Vietnam/New Zealand
Sharp	Europe/North America/China/Taiwan/Hong Kong
Toshiba	Europe/Asia
NEC-Hitachi-Casio	USA/South Korea
Fujitsu	Taiwan
Source:	M-Report

Lack of smartphones make Japanese users wish more

Despite the common believe that Japan market is flooded with advanced smartphones from domestic vendors, it is not exactly so. While some well-known research powerhouses put Japanese vendors into the world's top smartphone rankings just because those vendors' phones are based on local flavors of Symbian or Linux, in Japan they are considered just as regular phones, advanced but still phones. In Japan, the smartphone definition goes beyond just simple notion of phone's operating system and includes other conditions such as a PDA-like form factor with bigger display and full text keyboard or touch screen. Surprisingly, just few models in Japan meet these conditions, making Japan's market the one with the lowest smartphone penetration. Recent study by Impress also found that Japanese users are more familiar with Windows Mobile OS and they expect their next smartphone to run on Windows rather than Apple's OS X or Android OS. This is partially explained by the WM's head start in Japan. Though the users' attitude will undoubtedly change with Android smartphones taking a full assault on Japan's shores this year.

Most Popular Smartphones
Apple	iPhone 3G
Apple	iPhone 3Gs
Sharp	Advanced W-ZERO3 (es)
Sharp	Willcom 03
Sharp	W-ZERO3 (es)
HTC	Touch Diamond (S21HT)
Sharp	W-ZERO3
HTC	EMonster (S11HT)
Toshiba	T-01A
HTC	HT-03A
RIM	Blackberry Bold

Report: state of mobile social networking in Japan

Over the course of 2009 I have accumulated some interesting stats about the mobile social networks in Japan that I would like to share with everyone. Please follow the download link to get the powerpoint slides from SlideShare.

Japan Mobile SNS Study 2010

Basically, the report is broken down into two parts: the mobile phone market update (drivers for SNS uptake) and the current state of mobile social networking in Japan. Some main points include but not limited to the following:

Part 1. Japan’s Mobile Phone Market Overview
- Japan mobile phone market is well developed with penetration rate standing at 89%
- Japan is dominantly a postpaid market
- In popularity mobile phones surpass personal computers and fixed line telephones
- 3G penetration stands at 95%, making Japan the leader in 3G
- Data usage is abundant with 84.3% of users having data plans

Part 2. Mobile Social Networking in Japan
- Social networking is on mobile radar but has plenty room for growth
- Most users access social networks from mobile
- Social network user demographics skew toward female users
- Good selection of games is an important attribute of successful social network in Japan
- Big three home-grown networks dominate the marketplace in Japan
- Mixi is a leading social networking site in Japan by a user base
- Late coming and lack of relevant local offering keep global brands at bay in Japan
- In Japan, real user identity is often hidden behind the virtual avatar
- Premium content and ad sales equally contribute to SNS revenue streams
- Battle for developers’ mindshare begins: availability of third-party applications will become a competitive advantage for social networks in Japan