Dominique Numakura's Newsletter from Japan

Cellular phone market in China

Nikkei BP, an electronics media in Japan has been reporting the latest market situation of cellular phones in China. Previously, the domestic cellular phone manufacturers had enjoyed continuous increase in demand and shipments.  However, they have been experiencing a long slump since the 3rd quarter of 2004.  The monthly production in the current quarter is almost half of the peak of the year 2003. The amount of the inventory in the market is larger than the amount of one quarter demand thus causing domestic manufacturers to reduce production.  On the other hand, the industry giant Nokia has been shipping more products recently. Nokia increased its share 7 points to 20% in the last one year. The other domestic manufacturers reduced their share to 40% from 50%. It means Nokia took over the share.

When the domestic manufacturers were increasing the cellular phone business, they were focusing on the low end products because they were not competitive in high end products supplied by foreign suppliers such as Samsung and Motorola. Nokia has a minor share in the past but has made a strategic promotion introducing low cost products, cheaper than 1000 RMB. These cellular phones do not have many functions usually they have a simple white and black display. The majority of the Chinese people buy these kinds of cellular phones because of the low incomes. 

It is understandable that foreign suppliers target the high end market to eliminate the competition against the domestic manufacturers however; Nokia chose a different direction to fight against domestic manufacturers directly and is winning. This could be a good research project for an economist. How could Nokia compete against the domestic manufacturers in China? The results would be very valuable in India or other developing countries in the future.

An analyst of the media said that there could be severe situations for the domestic manufactures in the near future. More new manufacturers continue to enter the cellular phone business making competition even stiffer in a shrinking market. The appreciation of RMB against the foreign currencies is another bad factor for the domestic manufacturers. Many of the domestic manufacturers may have to terminate the cellular phone business in the next 12 or 18 months.  We should take note of these events and learn from them.

Dominique Numakura

Headlines of the week

Sharp (Major electronics company in Japan)
Commercialized a new driver IC module LCD by SOF (System on Flex) technology with 30 micron pitch terminations.

Toshiba (Major electronics company in Japan)
Has developed a new power FET device for the microwave telecommunication equipment. 4 chips are packaged in one small package to optimize the thermal conductivity.

Renesus (Major semiconductor manufacturer in Japan)
Introduced a 176 pin LQFP as the system in package for the new LCD timing controller IC "R8J66730FP".

JEITA (Japan)
Announced that 3.667 million cellular phones were shipped in Japan domestic market in July. It was 14.1% smaller than the same month of 2004 but, more than 80% of the shipment was occupied by 3G type products.

Nippon Paint (Major paint supplier in Japan)
Has been developing a new multi-layer optical guide on a flexible substrate. It has a transmission loss of 0.1 dB/cm.

Hitachi Displays (Major display device manufacturer in Japan)
Has commercialized a new 3D LCD introducing the DFD technology.

Citizen Electronics (Major device supplier in Japan)
Has developed the world thinnest LCD device (0.65 mm thick) introducing a 0.4 mm thick LED light source for the next generation cellular phones.

Hitachi Metal (Major metal company in Japan)
Will build the second manufacturing plant of the sputtering target in Korea to cover the growing demands of LCD manufacturers such as Samsung and LG.
 
Hitachi Zosen (Equipment manufacturer in Japan)
Has developed a new extrusion technology instead of casting process for the optical films of LCD devices.

JVC (Major electronics company in Japan)
Commercialized a new MP3 product with a 1" hard disc drive with 6 GB memory size.

Toshiba (Major electronics company in Japan)
Has developed small size fuel cells with 100 and 300 mW for the MP3 products.  3.5 cc methanol works for 35 hours.