DoCoMo's iPhone offer turns up the heat on Japanese handset makers

DoCoMo's iPhone offer turns up the heat on Japanese handset makers

TOKYO - The decision by Japanese mobile carriers to offer the newly unveiled 5C, a lower-end handset that was expected to be released only in emerging markets, will likely seal the fate of troubled Japanese handset makers as it erases their price advantage.

The likes of Sharp Corp and Fujitsu Ltd are also threatened by NTT DoCoMo Inc's decision to offer the iPhone for the first time to its roughly 60 million subscribers after haemorrhaging customers to iPhone-touting rivals SoftBank Corp and KDDI Corp.

Although it had been speculated that Apple would release a low-end iPhone for emerging markets, some were surprised that the less expensive plastic 5C, unveiled on Tuesday, will be offered by DoCoMo and the other two major Japanese carriers.

"Japanese handset makers are already bound for extinction and this will just accelerate that process," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

Now Sharp, Fujitsu and Kyocera Corp, which have seen their market share shrink as the iPhone grew to claim more than a quarter of the Japanese smartphone market, could go the same way as NEC Corp, which is pulling out of handsets, or Panasonic Corp, which is cutting back.

Until now, Japanese handset makers had been somewhat shielded from the threat of the iPhone under the auspices of DoCoMo, which promoted their devices to its massive user base in the absence of an Apple product.

For example, Sony Corp 's Xperia A sold 1.3 million units this summer in Japan, briefly overtaking the iPhone as the most popular handset as DoCoMo discounted it as one of its top two picks.

With more than half of DoCoMo subscribers considering buying an iPhone even before the carrier announced it would offer the handset, according to a survey conducted by Tokyo-based IT consultancy MMD, domestic handset makers could see their sales plummet.

That could be exacerbated if the 5C is sold for a price that competes with low to middle-end smartphones. Although Japanese carriers have yet to detail their pricing plans, the handset will retail at US$99 (S$125) on a contract with US carriers, compared to US$199 for the 5S.

DoCoMo will still promote handsets from Sharp, Fujitsu and Sony as its top picks for winter, but any boost to sales is seen as limited.

"You're going to see a lot of Android users switch to the iPhone," said Atsuro Sato, an analyst at research firm Gartner in Tokyo. "I think the winter campaign's effect will be limited. It looks like Kyocera, which is betting on its overseas prospects, is the safest among Japanese makers."

Japanese suppliers for iPhone parts, however, could benefit if the cheaper model is a hit in emerging markets, analysts say. On the other hand, if its price tag of US$733 for an unlocked phone in China proves prohibitive, parts makers' margins may be crimped.

On Wednesday afternoon, share prices of Apple suppliers Taiyo Yuden Co Ltd, Murata Manufacturing Co Ltd and Ibiden Co Ltd were down between 1.4 and 2.5 per cent, underperforming a 0.8 per cent rise in the Nikkei index.

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