Who’s going to bring Apple’s iPhone to Japan?

December 21, 2007
By Ken Worsley

iPhone Japan Apple has said that they would like to make the iPhone available in Asia sometime in 2008, and we’ve already speculated quite a bit on what form the iPhone could take in Japan. There have been a few developments, however, that make this story worth watching.

First, this past week we found out that spending on mobile phones in the US is at an all-time high, and it appears to be driven by iPhone-related revenue. We also see a report stating that mobile phone in Japan on average cost 74% more than in North America. This might take some people by surprise, but the truth is that no one really gets a 0 yen or 1 yen phone in Japan; the price of the phone is paid out as a surcharge on the monthly bill as part of the service contract.

That practice is ending, and consumers will start to see higher handset prices in Japan’s electronics shops. We think this will help the iPhone’s somewhat hefty price tag not stick out so much.

About a year ago, we pointed out (as did many others) that the iPhone would have to be 3G in Japan to sell. It appears as though Apple is developing such a model, and now they’re actively looking for someone to be the carrier.

This is where I’ve seen discussions get a tad emotional. According to the Wall Street Journal, Apple boss Steve Jobs has been speaking with NTT DoCoMo president Masao Nakamura about the iPhone and Japan. Obviously, nothing has been signed yet. In the past, we’ve heard speculation that Softbank’s Masayoshi Son has traveled to the US to check out iPhone launch events. We’ve also heard speculation that KDDI’s au brand was actively trying to bring the iPhone to Japan. It’s all speculation at this point.

Jobs, of course, should be meeting as many of these people as possible - he needs to play them against each other and see how far they’re willing to go in terms of Apple getting a cut of profits.

The possibility that most people I’ve talked to want to see happen - that au would bring the iPhone over to Japan - seems to be the least discussed at the moment. That could change at any time, and Apple must be aware that DoCoMo is infamous for scooping up rights to technology to prevent its competition from being able to sell it and then burying it in favor of more profitable units.

Apple’s goal is to have a penetration of 1% of the global cell phone business by the end of 2008. To do this, it will probably need to sell the iPhone in Japan and move a few million units. We see no reason why Apple couldn’t move 4-5 million units within 18 months of launching the product in Japan. This could make a pretty penny for Apple, as they would get somewhere in the neighborhood of $300-$400 per handset sold and a nice cut of service plan revenue, it current US/European operations are used as a model. On the other hand, we do have to worry about what features the Japanese iPhone will have.

Obviously, nothing has been said officially about the Japanese iPhone yet. We don’t know if one-seg TV, QR code readers or e-cash will be part of the package, though they ought to be.

Thus far, I think the fake Steve Jobs blog has said it best, in a post entitled, Don’t believe the hype — the Japanese are dying for iPhone:

[This article says] we’ve been meeting with Japanese wireless carriers (I’ll confirm that) but that iPhone might not be so popular in Japan because they’ve already got some really cool phones there. This is just what people said about iPhone in Europe, too. And how’d that work out?

Filed Under Business, Japan, Technology, Telecom

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Comments

23 Responses to “Who’s going to bring Apple’s iPhone to Japan?”

B Dog on December 21st, 2007 1:57 pm

Business Week has a more negative view on the iPhone in Japan…reminds me of those who said McDonald’s and Starbucks wouldn’t fly in Japan.
Ken Y-N on December 21st, 2007 2:07 pm

One-seg, given the time scales and the existing form factor, is impossible, IMO. Many people say they want it, but few actually use it. FeliCa has few people really using it - most stick with their ICOCA/PiTaPa/whatever. QR Codes, however, is just a bit of software, so that’s a given. It needs emoji, too!

I’ve not done the maths, but I think the iPhone in the US/UK is actually cheaper than a 905i plus pake-hodai, if we ignore voice, and if we include a reasonable amount of voice I suspect the US/UK would look even better.
Ken Worsley on December 21st, 2007 2:15 pm

Ken I agree on one-seg for now - it would take loger to work in, if it’s even worth it. I tend to agree that we see numbers saying that a lot of people want to use one-seg, but I wonder how much the average user who has a one-seg capable device actually uses it.

Agreed on QR codes as well, that should be pretty simple to code in. I can’t imagine emoji being all that tough to get on the platform either.

I find it difficult to compare US voice plans to what’s in Japan, since US carriers tend to give away so many nighttime/weekend minutes.
Posh on December 21st, 2007 2:29 pm

PLEASE don’t let it be DoCoMo! Why should expats have to pay a 30,000 yen deposit to get one? That company’s policy basically says it hates foreigners and can’t trust them, then thinks about doing business with them? It’s all for the money, fine and well…but I hope Apple is aware of their policies and tries to push them into waking up a bit.
Yapp on December 21st, 2007 3:49 pm

The Japanese services providers are stuck between a rock and a hard place.

If this thing hits big, none of them want to miss it.

At the same time, they’re not eager to give up their profit to a handset maker. They would then be under pressure from Sanyo, Toshiba, Casio, etc…

Apple might have to accept less, but find a way to make up for that elsewhere.
www.japansoc.com on December 22nd, 2007 2:41 pm

Who’s going to bring Apple’s iPhone to Japan? Japan Economy News & Blog…

Japan Economy News on what might happen with Apple’s iPhone……
Ken Worsley on December 23rd, 2007 5:59 pm

Yapp, I think you might be right about Apple getting less from the Japanese carriers. But I also think that they can afford to take things slowly here - demand for the iPhone will only build, and they get more time to potentially get in new features. In the end I think what you said in he beginning is true, that none of them want to miss out on something big.
B Dog on December 25th, 2007 3:06 am

I’d like to vote NO on Docomo as well. Everything about them irks me, and it could bring bad PR to Apple to work with a firm that practices discriminatory policies on pricing. Maybe Apple can get them to drop a deposit for the iPhone? If you’re going to pay that much for a handset, it’s doubtful you’d make a runner.
W. Anthony Malcolm on December 27th, 2007 10:36 am

Steve Jobs is no slouch in this department, I think Apple will get the best deal possible. If there is one CEO who knows how to get what is best for his company it’s this guy. The Japanese market is a bit trickier to navigate but I’m sure Jobs will get it done.

I think he has to open up the technology stream more. Apple is famous for having the technology sitting around and ready to go, but waiting for that ideal moment. I’m sure the little elves in Cupertino are scurrying away designing a 3G phone that can probably navigate the Mars buggy from the bottom of Death Valley. They will unleash the technology when they want.

I personally believe the Japanese people will eat up the IPhone because it is the slickest looking phone on the market. Image will move this thing faster than the technology. The tech stuff has to be there to be competitive. They just have to make it fit into the nice neat package Japanese have come to expect.

Lastly, I think Jobs is really, or at should be, concerned with this - pirated technology. I wrote an article about this, here’s the link - http://uenomurakami.wordpress.com/2007/09/18/all-the-pirates-in-the-house-say-iphone-ahoy/ - Basically it talks about how the “IPhone” is selling like hot cakes in Shanghai and other places in China. Jobs needs to worry about that. It’s already out there, and there’s not much he can do about it, but pirated technology moves so much quicker in Pacific Rim than in most places, I think.

Any cause for alarm you think?
Ken Worsley on December 27th, 2007 1:50 pm

I agree that pirating is a huge problem, but a stroll around any Chinese city will show you why it needs to exist, and why the Chinese government isn’t interested in stopping it. A huge portion of the workforce is surviving by making and selling these items - from clothes to DVDs and electronic hardware, they are literally everywhere. If the government were to crack down, a lot of children would go hungry.

It’s part of the cost benefit analysis of doing business in China. Putting production in China must be cheap enough to offset losses caused by the fakes being sold. Right now, the average Chinese customer might only be able to afford a knock-off, especially with expensive items, so there might not be a pressing need to go after pirating until it does start to truly hurt profits.
Albrecht on January 9th, 2008 1:03 am

Actually, I think pirating is a huge problem that goes well beyond the issue of lost profits. Most inventory of counterfeit goods are of notoriously poor quality, which taken cumulatively over an extended period of time can present serious reputation risk in terms of product reliability and therefore brand image. Calvin Klein had serious problems with pirated clothes in the 1990s that ultimately damaged their brand image in Asia. Similarly, Callaway Golf has resorted to putting a consumer alert on their home page to warn customers of low-quality fakes. Add this reputational damage to the lost profits and pirating is always an issue.

However, I agree with Ken in that the Chinese government has no real motivation to stop piracy right now. It`s a massive industry that supports way to many people. Plus, how in the hell do you even explain the concept of intellectual property in a society that has been browbeaten with the communist mantra of state ownership for 60 years? Sure, the nouveau riche in their luxury condos might understand, but those at the bottom of the income ladder just need to make a few yuan to get by.
Albrecht on January 9th, 2008 1:09 am

The Apple decision should be interesting, especially if they choose NTTDoCoMo as their partner. Given that KDDI and Willcom were just awarded the two new WiMax licenses, NTTDoCoMo would be shelling out a lot of money to lease space on that frequency.
Ken Worsley on January 9th, 2008 1:24 am

Good point there. I think DoCoMo (and others) should be pushing for more than two licenses to be issued, and they certainly would have a case to back up that argument. Current 3G WiFi just isn’t going to be widespread enough to make the iPhone really take off. It’s a shame, given the population density of Kanto and Kansai, because there’s so much potential profit left on the table. If WiMax is to be well-developed and widespread, it makes little sense to limit the licenses to only two carriers. Bad for the consumer, to say the least.
Yapp on January 9th, 2008 11:27 pm

Is there any reason to believe that WiMax will be more widely used and available than Wifi is now? I know nothing about why these two companies were given the licenses…
Albrecht on January 10th, 2008 10:48 am

WiFi coverage in Tokyo is limited in terms of availability and speed, plus it`s expensive. WiMax will bring broadband capacity to wireless data users. Realistically, it will be a 1st-to-3rd generation leap for wireless data transmission in Japan vis-a-vis what currently exists in North America and Europe.

Why these two companies were given licenses is a typical Japanese regulatory drama. Willcom uses proprietary Japanese technology called PHS, which is used only in Japan and in small pockets of China. Looks like ego probably drove the Post of Internal Affairs and Communications to license a Japanese-created technology, even though it has virtually no appeal outside of Japan. It`s very good news for Willcom, but bad news for the overall Japanese telecom sector as half the WiMax license holders will have no global expansion opportunities. Check out this blog, whose author calls it another example of Japanese `Galapagos-ization` of the telecom industry. Great line.
http://d.hatena.ne.jp/michikaifu/20071224/1198544573 Strangely, in my opinon, Willcom is owned by U.S.-based PE The Carlyle Group.

As far as KDDI, they were probably chosen on the strength of their partnership with Intel and their technological prowess and East Japan Railway Co and their right-of-way access. There is great synergy between these partners for building out a massive, nationwide infrastructure. Other partners in their venture include Kyocera, Daiwa Securities and Bank of T-M/UFJ. They`re pretty stacked. No arguments from me on this choice.

As a point of interest, DoCoMo`s primary partner was Acca Networks; Softbank had a massive consortium inlcuding Nifty, eAccess, Goldman Sachs and Temasek Holdings. This makes the Willcom choice even more bizarre.
Kraig on January 10th, 2008 8:32 pm

This is exactly what the Japanese service/bandwidth providers have to be worried about with Apple:

From Wired: http://www.wired.com/gadgets/wireless/magazine/16-02/ff_iphone

The Untold Story: How the iPhone Blew Up the Wireless Industry

But as important as the iPhone has been to the fortunes of Apple and AT&T, its real impact is on the structure of the $11 billion-a-year US mobile phone industry. For decades, wireless carriers have treated manufacturers like serfs, using access to their networks as leverage to dictate what phones will get made, how much they will cost, and what features will be available on them. Handsets were viewed largely as cheap, disposable lures, massively subsidized to snare subscribers and lock them into using the carriers’ proprietary services. But the iPhone upsets that balance of power. Carriers are learning that the right phone — even a pricey one — can win customers and bring in revenue. Now, in the pursuit of an Apple-like contract, every manufacturer is racing to create a phone that consumers will love, instead of one that the carriers approve of.

Four pages in that article…have to wonder which consulting firm is going to get it translated and on desks at KDDI/DoCoMo/Softbank first.
Albrecht on January 11th, 2008 2:09 am

Nice article about iPhone penetrating the mobile phone market, but I think it greatly exaggerates ‘blowing up’ the industry. It’s far more evolution than revolution. I worked at AT&T Wireless in the 1990s (through the IPO) and, true, we treated Nokia, Motorola and Ericsson like crap. But given the industry’s position in the growth-share matrix, we had to control costs on hardware until we could build enough scale to compensate for the cash usage of network expansion. The entire industry was so fragmented for so long that enticing new customers to come on board to get numbers up was the only way to get financing to build out networks; the phones were loss leaders and we shared that loss with the manufacturers. Because of this loss, the phones were SOC-locked (System Operator Codes). The 1999-2005 consolidation of the wireless industry was the result of a maturing industry, so naturally, new revenue models will follow. I never recall anyone in my division, Growth Markets, ever expecting our network to be anything other than dumb pipes. We even built simultaneous voice and CDPD networks (but never were able to generate revenue for the data network–ahead of the times on that one as wireless-internet-access-via-mobile-phones product, called PocketNet, was a horrendous failure in 1997-98). We just wanted to figure out how to pay for expanding our infrastructure faster than the competition. It turns out M&A was the best way to achieve the scale merit necessary to build a coast-to-coast network in the U.S.

As for Japan, there will be plenty of traffic for the mobile carriers once MVNOs gain more popularity. Early adopters are already heavy users, generating lots of additional traffic–and revenue–for the providers. I think the iPhone will do well here.
WG on January 12th, 2008 1:21 pm

Another “no” vote for DoCoMo. They are the biggest, though I still can’t get why. Now that people can change companies and keep their number, it’s easy to switch. If KDDI has this faster internet connection, it’s a no-brainer.
Albrecht on January 13th, 2008 4:15 pm

I am no big fan of NTTDoCoMo, but considering their resources, name and network coverage, they have big inherent advantages. Number portability has dented their numbers, but the future of mobility will be content–not purely connectivity–a segment in which DoCoMo is clearly lacking. I agree with WG, KDDI is sitting pretty right now.
Kraig on January 14th, 2008 5:32 pm

As for Japan, there will be plenty of traffic for the mobile carriers once MVNOs gain more popularity.

Will this be the new trend? How much more does it end up costing the consumer rather than using a direct plan?
Miles on January 31st, 2008 12:33 pm

> Apple must be aware that DoCoMo is infamous for scooping up rights to
> technology to prevent its competition from being able to sell it and then burying
> it in favor of more profitable units

Ken, can you provide specific examples of this? It’s not that I disagree — I am just trying to get up to speed on the history of this market.
Ken Worsley on January 31st, 2008 4:49 pm

I would start with Blackberry and the marketing strategies that were used when it was brought to Japan. Was it actually promoted or just buried so as not to eat away at existing (and more profitable for DoComo) revenue models?
Kiyuu on April 15th, 2008 3:02 pm

I was anticipating the arrival of the iPhone in Japan until the iMac I bought last July died. It’s been almost a month since it was picked up for repair by AppleCare in Japan and still nothing. Apple support in Japan is so infuriatingly bad it will be a long time before I ever consider buying another Apple product. To celebrate my newly found disdain for Apple, I went to my nearest Softbank store and bought the Internet Machine. There’s no iPhone in my future now!

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