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Will Japanese OEMs Surrender Also?

by Richard Guppy | Apr 24, 2014

I just got back from Japan.  What a great place, I thought again. I remembered that my previous blog was called 'DoCoMo surrenders'.  Now, I have some thoughts to share about Japanese OEMs.

One industry contact I met is an account manager at a smartphone OEM (not Apple) for one of the carriers.  I asked ‘how’s business?’  He pulled a sour face, and told me: ‘The Japanese only want to buy iPhones now: this makes it very difficult for other brands.’  The problem, according to my friend, is that ‘all devices are subsidized and cost nothing upfront, so there is no difference in perceived value at point of sale.. so, naturally, everyone wants an iPhone.’

I also spent time with a family of four who have just returned from overseas and needed four new phones in Japan.  They chose the iPhone 5C, as the incentives provided by the carrier (KDDI) were so compelling: the 5C was the cheapest phone for them to acquire and to run during the contract period, from among those they were considering (not so with the 5S, they advised) and among any of the carriers.  The deal included a ‘family bundle’ which worked well for them.

I asked them why the iPhone is so popular, aside from price.  They thought hard and finally came up with the idea that the Japanese are not so computer literate (PC ownership is relatively low/late there), and so the curated approach and user interface from Apple makes for easy usage in Japan.

So what?  Subscribers and carriers are, one way and another, preferring iPhones in Japan, to the point were other brands are suffering severely.  The implications are that Japan’s native OEMs will come under even more pressure now that DoCoMo is ramping up its iPhone sales further, and the other two carriers are responding with powerful counter-offers.  Some OEMs have already withdrawn.  The particular remaining company challenged by the iPhone is Sony: Japan is Sony’s heartland, and it has said publicly that it relies on Japan more than any other market as its core market.  ‘Japan is our most important market’, Sony said in December 2012 to a group of industry analysts.  Samsung may be impacted in terms of volume by the iPhone in Japan, but will not be as strategically impacted as Sony.

My business contact suggested that the Japanese government may be interested in introducing new regulations which limit subsidies for new smartphones, in order to reduce the impact of a ‘zero price iPhone at point of sale’.  That sounds difficult to implement, and sounds like commercial interference by the government.  But, you can understand it.. Japan’s domestic smartphone industry is at stake, and Apple stands to become the defacto standard.

Just like Motorola and its StarTAC in the 1990s in Japan.  StarTAC came and went; but iTunes and Apple’s suite of devices have more customer loyalty than the latest simple ‘hot’ gadget, such as StarTAC was.

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