Japanese Vendors, Too, Want A Piece of China
By Carlo Longino, Mon Aug 30 23:45:00 GMT 2004

The competition in China's handset market may just be getting started, as Japanese manufacturers look to stake their claim.

Western vendors have turned the tables on China's domestic producers, and now Japanese manufacturers want to pile on. As handset sales in Japan slow, companies like Panasonic, NEC and Sharp are eyeing China as their saving grace.

Domestic sales showed a year-on-year decline for the sixth consecutive month in June, with full-year sales expected to show a significant decline as the number of subscribers inches up at its slowest pace ever. Some Japanese vendors (outside the Japanese-Swedish joint venture Sony Ericsson) have launched products in the European and American GSM markets, with some devices -- including Sharp's Vodafone-customized handsets -- finding success. The companies hope to get 50% of their sales from overseas within the next several years, up from 20% to 30% now.

Sharp and NEC are entering China's low-end market, the scene of cutthroat competition as other foreign vendors claw back market share. But the Japanese companies hope that the coming Chinese move to 3G will allow them to surge ahead by using their experience in developing 3G handsets in Japan, both for WCDMA and CDMA2000 networks.

While that may be true on face value, NTT DoCoMo played a similar tune when it announced plans to take i-mode global and invest in a number of foreign operators -- investments that ended in substantial losses. While Japanese manufacturers lead in technology and hardware, they share a major weakness with China's domestic vendors: software and usability.

The user interfaces of devices from most Japanese vendors significantly trail those of Western vendors -- perhaps part of the reason the companies have not found much success. But now, just as Chinese manufacturers have realized the significance of software to compete in their own market, as well as realize their overseas ambitions, Japanese vendors must take similar steps.