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Saturday, Feb. 19, 2011
Firm flourishes amid smart phone boom
The growing popularity of smart phones is changing the landscape of Japan's cell phone market, which has long taken a different path from the rest of the world, and the trend is giving more business chances for newcomers from abroad, including HTC Corp. of Taiwan.
"You can see that the trend especially in the local market is changing. User experiences are changing," David Kou, country manager at HTC Nippon, said in a recent interview at his office.
Indeed, ever since Apple's iPhone debuted in Japan in 2008, smart phones have enticed cell phone users who were used to gadgets specifically tailored for the Japanese market.
According to MM Research Institute, a Tokyo-based market researcher, smart phones accounted for only 3.1 percent of overall shipments to Japan's 35 million-unit market in fiscal 2008. That figure climbed to 6.8 percent the following year, but in fiscal 2010, which ends next month, it is expected to jump up to 18.1 percent and to 40.6 percent in fiscal 2011.
For HTC, which makes smart phones, this trend is a great business opportunity.
In the overall Japanese cell phone market, HTC's presence may still be small, but when looking at the smart phone segment alone, in fiscal 2009, the firm clocked the second-biggest share, of 11.1 percent, with 260,000 units shipped. Apple, which had a 72.2 percent share, moved almost 1.7 million units.
HTC had the fourth-largest share in the first half of fiscal 2010.
Kou said the company will be closely studying Japanese user experiences and aims to keep growing by providing globally sold devices equipped with the latest technology.
"Everything is going to plan. Of course, we are also learning a lot from the local market," Kou said of HTC's business in Japan.
HTC entered the Japanese market in 2006 and first released the htc Z smart phone for NTT DoCoMo Inc. HTC has introduced 20 different handsets so far and has done business with all the major carriers here.
Its recent models include HTC Desire HD, a 4.3-inch multitouch screen device sold by Softbank Corp., and Aria, which can work as a wireless Internet router, for EMobile.
HTC is always striving to introduce the latest technology to the Japanese market.
In 2009, it debuted the HT-03A, the first phone powered by Google's Android operating system, which is used in most of the smart phones sold in Japan now. Its HTC Desire was also the first cell phone offering the 2.1 version of Android, the latest version when it was released in Japan last April.
"We are the leader to provide the latest technology. We might be a little faster than the others," he said.
In 2009, there were no other Japanese makers providing Android devices, but most smart phones in Japan are now powered with Google's OS.
"You can see that we made the right decision, and then everyone is following in our footsteps," Kou said.
HTC ranks ninth in the global cell phone market in terms of shipments. In 2010, it moved about 24.6 million units, according to U.S.-based market researcher Gartner Inc.
According to Kou, HTC's shipments in 2009 totaled about 12 million, meaning the company doubled the number of phones last year.
Kou said HTC's strength is that the company focuses only on making smart phones.
"HTC is unlike other companies. We don't make TVs, we don't make refrigerators. We only make phones, nothing else," he said.
"We have probably the largest R&D team in the world on smart phones. We work very closely with not only the carriers, but also with companies like Microsoft and Google. So, when they test new solutions, new operating systems, we are always the top choice for them to work with," Kou said.
The current smart phone boom shows HTC's strategy proved correct. But at the same time, many Japanese makers are rushing to catch up, and competition is getting fiercer.
Asked how HTC differentiates itself from other makers, Kou said technology is the company's strongest asset.
HTC phones have a variety of original functions, called HTC Sense.
For instance, the ring tone automatically gets quieter near the ear, and users can silence it altogether just flipping the phone onto its back.
When someone calls, information about the caller appears, directly connecting to the caller's Facebook account, or the caller's name and telephone number if details have already been stored in the phone's memory.
Although these features may be valuable for Japanese users down the road, at present such functions have yet to prove a hit. One reason for this may be the fact that while Softbank is providing some HTC Android phones, at the same time it is focused on pushing iPhones.
"It'll take some time for people to learn. Give us a little time, and people will understand what HTC is about," Kou said, adding that Softbank is promoting Android as well, and because sales of Desire were so high last year, it was often difficult to buy models as many outlets selling them were out of stock.
As for local features on smart phones sold in Japan, such as the electronic wallet function, Kou said HTC is constantly monitoring user experiences. However, the e-money function is used by only about 20 percent of people who own phones that have that function.
Also this year, the domestic market is expected to see debuts of phones incorporating high-speed network services like LTE and WiMax, both of which can connect phones to the Internet at speeds several times faster than is currently available.
Kou said HTC has already released WiMax-ready phones overseas and expects to have no problem selling smart phones carrying this feature to Japanese carriers.
"We will introduce a few more global devices into the Japanese market (this year), and again we will try to add more features and functions that will appeal to Japanese customers," Kou said. "HTC is moving cautiously. You could say we are a little conservative, but at least we are successful."
This is an occasional series of interviews with up-and-coming Asian companies in the Japanese market.