Japanese eager to get hands on iPhones

USA Today: http://www.usatoday.com/tech/wireless/phones/2007-08-21-japan-iphone_N.htm

By Paul Wiseman, USA TODAY

TOKYO — Japan already has the funkiest cellphones in the world: More than their U.S. counterparts, Japanese consumers use mobile phones to watch TV, pay bills, order concert tickets, read manga (comics) and summon help from global-positioning satellites to figure out where they are.

But market analysis suggests there’s still a niche in Japan for Apple’s (AAPL) iPhone. Japanese gadget geeks — and cellphone service providers — are intrigued by the iPhone’s sleek design and touch-screen display. “This is the first phone that thrilled me,” freelance journalist Tsutsumu Ishikawa says. “People regard it as cool and advanced. And the interface is easy to use.”

Apple won’t introduce the iPhone in Japan until next year.

Ishikawa couldn’t wait. He flew to Hawaii on June 29 to buy one the first day they went on sale in the USA — even though he can’t make calls on it in Japan.

Similarly, researchers at Nomura Research Institute think tank here picked up an iPhone from an American colleague. “I have been very proud of Japanese mobile phones,” says Nomura consultant Shunichi Kita, fiddling with an iPhone on which he has downloaded the animated movie Finding Nemo. “But this time, I have an uneasy feeling. I am very sorry Japanese manufacturers didn’t produce a phone like this.”

Kita estimates that Apple can sell 2 million to 3 million iPhones annually in Japan — about 5% of the market. The research firm Yahoo Value Insight found that 13% of the 400 Japanese Internet users it surveyed in July want an iPhone, and 15% of those would switch service providers to get one.

Conquering Japan won’t be easy for Apple. Obstacles include:

•Technology. The iPhone isn’t yet available with the third-generation, or 3G, mobile cellular networks widely used in Japan — although Apple-related websites are filled with speculation that iPhone will go 3G next year. The iPhone doesn’t work with 3G networks in the USA, either.

•Price. The Yahoo Value Insight survey found that Japanese consumers want to pay around $190 for an iPhone. In the USA, they cost $499 or $599, plus the cost of two years of service with AT&T. In Japan, much like in the USA, phone companies often offer discounts on mobile handsets to get consumers to spend their money on services instead.

•Culture. “The iPhone’s broad and easily accessible screen could actually be a liability in Japan,” says Roland Kelts, author of Japanamerica: How Japanese Pop Culture Has Invaded the U.S. Japanese are “accustomed to doing more in smaller spaces — and keeping things to themselves. The (pornographic comics) you download on the subway may be all too visible to your neighboring commuter” if you’re using an iPhone.

•Cutting a deal. Japan’s three top service providers — SoftBank, KDDI and DoCoMo — are accustomed to calling the shots. They direct customers to specific websites and services, and bar them from others.

Apple, which keeps tight control of its image, might have trouble negotiating a deal in Japan similar to its exclusive arrangement in the USA with AT&T, says journalist Ishikawa, who covers Japan’s telecommunications industry. He says SoftBank may have an advantage: The firm’s founder, billionaire Masayoshi Son, turned up at the Macworld conference in January, where Apple CEO Steve Jobs announced the iPhone.

SoftBank spokesman Naoki Nakayama says Son has a “personal friendship” with Jobs but won’t comment on whether the two companies are negotiating a deal. Nor will Apple.

KDDI spokeswoman Kana Hisaoka says, “We don’t deny that we’re interested in such a popular product.”

But she won’t confirm whether the firm is in talks with Apple.

“We are interested” in the iPhone, says DoCoMo spokesman Roland Arafat. “But nothing has been decided.”

Apple has already made a splash in Tokyo. IPods are popular despite considerable competition from domestic MP3 players, author Kelts says. The five-story Apple store in the heart of the city’s upscale Ginza shopping district is packed on a weekday lunch hour with consumers browsing everything from iMac computers to iPod-compatible karaoke machines.

Just outside, Tokyo college student Akinori Machino, 22, says he’s got 5,000 songs loaded on his iPod and would gladly buy an iPhone if one were available.

“We figure the screen will be very beautiful,” says Ryo Kikuchi, 30, manager at a food company. “You can see movies better.”

“I would like to buy one,” adds photographer Hiroyuki Kuwata, 35, a Mac enthusiast. “I’d like to use the touch screen.”

Japanese phonemakers aren’t waiting around for Apple to gobble market share. “Domestic producers are hustling to leapfrog iPhone’s offerings,” Kelts says.

Manufacturer Sophia Mobile has just come out with a touch-screen phone — the Sophia Nani — which has been labeled an “iPhone killer” by tech websites such as Softpedia. But it is being marketed by a second-tier Japanese service provider, Willcom.

Mitsubishi Electric actually beat Apple to the Japan market with a touch-screen phone, the FOMA D800iDS.

But it hasn’t had much impact, Nomura’s Kita says: Service provider DoCoMo marketed the Mitsubishi phone to elderly customers, not as a cutting-edge gadget for trendy teens.

Contributing: Naoko Nishiwaki

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