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April 25, 2006 12:48 pm

Sharp becomes Japan’s largest cellphone maker

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Sharp became the leading mobile phone maker in the Japanese market for the first time, according to data from MM Research Institute, highlighting the changing fortunes of manufacturers in the fiercely competitive market.

Sharp beat industry heavyweights, NEC and Matsushita, to take the top slot in the highly fragmented, saturated market, in which there are more than 10 competitors. Matsushita was second while NEC was third.

The success of Sharp, which until recently was not a leading producer, highlights the volatility of a market in which the dominance of NEC and Matsushita seemed unassailable just a few years ago.

Sharp was the supplier to the market’s smallest participant – J-Phone, which subsequently became Vodafone – until it won a contract to supply NTT DoCoMo, the sector’s dominant operator, in 2002.

It has gained popularity by offering advanced features, such as high-quality LCD screens and easy-to-use camera phones. Sharp will also start supplying KDDI, Japan’s second largest mobile phone operator, later this year.

“Since we make the liquid crystal displays and the charge-coupled devices [for camera phones] in-house, we were able to offer the latest high-specification devices in a timely manner,” says a Sharp official in explaining the group’s recent success.

NEC and Matsushita, meanwhile, have suffered from a sharp drop in profitability, prompting speculation of industry-wide consolidation.

Matsushita’s mobile phone division made an operating loss of Y7.6bn in the first nine months of this year and withdrew from its overseas GSM operations.

Meanwhile, NEC said last week it would report lower profits than previously forecast, due in part to weaker mobile phone sales.

Sanyo has tied up with global giant Nokia to develop third generation phones, while Matsushita and NEC are considering a potential alliance with Texas Instruments to lower costs and improve profitability.

Japanese operators and phone manufacturers are gearing up for the start of number portability this year, which is expected to lead to more consumers switching operators as well as trading in their phones for new models.

Currently, a user who changes operator cannot keep his mobile phone number. This has discouraged consumers from switching operators.

MM Research Institute forecasts that number portability will stimulate demand for new phones.

Although overall subscriber numbers are not expected to grow significantly, given that Japanese market penetration is more than 70 per cent, replacement sales are expected to rise as users move from one operator to another.

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