Asian tech groups fail to exploit early advantage against Apple

Soon after Apple launched its larger-screen iPhones last week, rivals in Asia sent out mocking messages on Twitter, taunting the US company for being slow to catch up with the industry trend.

“No one is going to buy a big phone,” Samsung Electronics teased, quoting a 2010 remark by Apple’s late co-founder Steve Jobs. “Guess who surprised themselves and changed their minds?”

From Taipei and Tokyo, smartphone rivals HTC and Sony sent out similarly irreverent tweets.

The light-hearted tone of the messages concealed a serious headache for Apple’s Asian competitors. While they have often moved into new product areas such as large-screen phones, smartwatches and payment technology before the US tech group, they have consistently been unable to match the excitement generated by Apple product launches – or its success in monetising and globalising their usage.

Apple’s two new iPhones have larger screens than their predecessors, taking the company into “phablet” territory pioneered by Samsung, which launched the fourth version of its Galaxy Note at the beginning of September.

“When the Note was announced, I couldn’t understand it,” said Ben Wood at the research group CCS Insight, referring to the 2011 launch of Samsung’s first phablet. “It looked ridiculous. And now it’s become a legitimate category.”

Samsung declined to reveal how many Notes it has sold since the new launch, but said it shipped 10m units of the previous model in the first two months after its launch last year.

Still, analysts believe that Apple’s lead in the brand stakes – in spite of Samsung’s huge outlays on marketing, on which it spent $14bn last year – will eat into the Korean group’s first-mover advantage. “Consumers have an incredible emotional engagement with the Apple brand,” said Mr Wood. “Samsung hasn’t achieved that.”

If Samsung’s advertising campaigns have at least helped it narrow the popularity gap with Apple, Taiwan’s HTC shows the challenges facing smaller Asian smartphone producers seeking to compete at the high end of the market.

While its One series of phones have been praised by some reviewers as the most attractively designed smartphone to date, the lack of marketing clout to support it has left the company floundering commercially. HTC has predicted a 12th consecutive quarter of declining revenues in the third quarter of this year.

A similar tale is told in the smartwatch sector.

Samsung is the global leader by volume sales, having released five different smartwatch models since the first Galaxy Gear was unveiled a year ago.

The company “is ahead on technology”, said Mark Newman, analyst at Bernstein, arguing that the group has “positioned itself well for the next decade of growth” in wearable electronics.

Its South Korean rival LG Electronics launched its G Watch in July with an improved version to follow by the end of this year.

Yet neither of these launches came close to matching the hype around the Apple Watch.

“Apple understands the watch business better than Samsung,” said Daniel Kim, an analyst at Macquarie, noting Apple’s poaching of executives from the fashion industry such as Angela Ahrendts, former chief executive of Burberry.“Samsung’s smartwatches look ugly and there is a lack of useful apps.”

Corporate Japan abounds with innovations that failed to become global hits. The Japanese call this “Galápagos syndrome”, whereby companies forge ahead into new technological territory but fail to find a market outside of the country – only for foreign rivals to take the idea global.

In 1999, Kyocera introduced the world’s first mobile phone with a built-in camera and sparked the cameraphone boom in Japan, years before this function became commonplace outside Japan.

In 2004, Sony came out with an ebook reader three years before Amazon’s Kindle but lost out in global sales due to higher pricing and a fewer number of offerings. The company also launched the LiveView smartwatch in 2010, beating both Samsung and Apple to the market.

Analysts said Japanese companies are often content with being the first to market the latest technology but are less successful at showing consumers how those technologies will make their lives easier. “The obsession with technology overlooks what is really needed to convince the consumer to buy: the ease to use. And that’s what Apple has capitalised on,” said Atul Goyal, analyst at Jefferies.

Mobile payments are the latest example.

Ten years ago, NTT DoCoMo introduced phones dubbed osaifu-keitai, or mobile wallets, running on Sony’s patented Felica technology, an early form of the near-field communication technology that will be used by Apple Pay. Nearly half of Japan’s mobile phone owners now use the FeliCa system, which has become embedded in daily routines from using public transport to unlocking doors.

Yet NTT DoCoMo and Sony, through their joint venture FeliCa Networks, have struggled to export the concept of using mobile phones as electronic wallets. Only in Hong Kong, where Sony’s FeliCa chips were used to create Octopus smart cards in 1997 and for mobile payments from last year, has it had any success.

“We went in too early and the environment wasn’t ripe,” an executive at FeliCa Networks said earlier this year.

Critics say Japanese companies focus too much on perfecting their technologies in their home market, leading to a system or standard that is unique to Japan. In the US and Europe, Sony was unable to convince carriers, transportation operators and other partners to adopt the FeliCa system since the overseas markets use differing types of contactless pay technology.

Yasutoshi Kikuchi, partner at Roland Berger, the consultants, added that Sony needs to shift away from gadget-making and focus on where it can generate revenue. Apple’s success, for example, stems from its ability to tap into existing users by offering not only new devices but added services such as the iTunes store.

In the same way, Sony is now trying to build the PlayStation gaming console into a subscription-based platform, bringing together users of various gadgets from mobile phones, televisions, tablets to portable game players with a wide ranging of offerings from games and movies to live TV programs.