Dim forecast for Japanese handset market: reduced handset subsidies and longer replacement cycle

Japan’s mobile phone market has heavily relied on handset subsidies for a long time. Indeed, the handset subsidies were a great tool to boost new service subscriptions for wireless carriers and get a guaranteed financial inflow for handset manufacturers. However, the Japan’s handset market is nearly saturated now and relies on replacement sales to generate revenues for mobile phone makers. Pushed by the Japanese regulator, Ministry of Internal Affairs and Communications, domestic carriers are going to gradually lessen their dependency on handset subsidies. The fight for customers will shift from using cheap handsets as a competitive differentiator to low-priced calling plans. This is going to hurt local handset vendors. The recent forecast from MM Research Institute draws a worrying picture for handset makers in this country. First of all, they estimate the total handset sales in Japan to reach 49.8 million in 2007. In 2010, they expect that number to decrease to 42.05 million. One of the reasons of such decrease is the replacement cycle that is going to get longer from current 26.8 months to 34.7 month in 2010. This means fewer handset shipments for mobile phone makers and as a result, the handset manufacturer market consolidation. Japanese vendors also need to consider overseas expansion in order to sustain in business.

Source: MMRI (Japanese)