Nokia exits the Japanese mobile phone market

Nokia, the world's biggest cellphone maker, is to stop selling mobile phones in Japan, apart from its luxury Vertu brand .

The move is a cost-cutting measure in response to what is expected to be a smaller market for mobile phones next year than this.

Japan is the world's fourth largest mobile phone market after the United States, China and India. 

Nokia has failed to make much headway in the Japanese market against local competition. Penetration is high, with 109 million subscribers, or 85 per cent of the population, already owning a mobile phone. In addition, a new sales model based on higher handset prices is expected to cut mobile phone sales in Japan by 20 percent.

"In the current global economic climate, we have concluded that the continuation of our investment in Japan-specific localised products is no longer sustainable," said Timo Ihamuotila, Nokia executive vice president.

He added that Nokia's Japanese business would concentrate on research, development and sourcing for the global market as well as projects such as the Vertu brand.

The quirks of Japan's mobile phone market have prevented foreign companies from successfully targeting Japanese consumers.

Most mobile phones used in Japan are part of 3G networks and include features such as mobile TV and electronic payment facilities. This makes it tough for foreign manufacturers to compete with domestic handsets.

Foreign companies, excluding Sony Ericsson, hold around 5 percent of Japan's cellphone market, according to IDC Japan, a research firm. Japanese manufacturers, in turn, have only a small presence outside their home market.

"Nokia is facing global earnings problems and many other issues, and this shows Japan was a low-priority market at a time when they are shoring up global operations, even though it may still be attractive," said Michito Kimura, an analyst at IDC Japan. "I'm not very surprised by the decision."

Nokia, which has nearly 40 per cent of the global market, had originally said it aimed to increase its market share in Japan to a double-digit figure. It took only around 0.3 percent of the Japanese market last business year, according to the Nikkei newspaper.

Instead of a broad expansion, it will now focus on Vertu, its luxury unit. Vertu, founded in 1998, sells gem-encrusted, hand-built mobiles with prices ranging from £2650 to to somewhere between £400,000 and £500,000 for a one-off piece (the price had not been finalised at the time of writing).

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