NEC pulls out of smartphone business

Japanese vendor NEC is ending its development, manufacture and sale of smartphones. However, it will continue providing maintenance and support services for its existing smartphones and continue developing and producing feature phones and tablet devices.

The firm said it is making the move in order to accelerate its growth strategy for its “social solutions business”, which aims to advance social infrastructure and help resolve a variety of social issues.

The smartphone business is in fact a joint venture with hardware providers Casio and Hitachi, but NEC conceded that the market for handsets has dramatically changed and that economies of scale have become increasingly important for manufacturers.

However, its handset shipments are following a downward trend and the firm admitted that it is difficult to foresee improved performance in the future.

“In light of these circumstances, NEC reached this decision to review its mobile phone handset business following a comprehensive examination of the business’ direction,” the firm added in a statement.

Sales of NEC handsets have traditionally been strong in its domestic market of Japan. However, although smartphone shipments in the country are growing – they saw a 29.2 per cent increase year on year in 4Q12, according to IDC – the primary factors for this market expansion were the strong sales of Apple’s iPhone 5, according to the research firm.

NEC accounted for a mere 3.3 per cent of sales in Japan during the three months ending June 30, according to research firm Kantar Worldpanel ComTech, while just 11.4 per cent of Japanese smartphone owners currently have an NEC device.

“Now, the pressing issue for the other Japanese brands like Sharp and Panasonic is whether they can fight off increasing competition from global giants Apple, Samsung and HTC,” said Dominic Sunnebo, global strategic insight director at Kantar Worldpanel ComTech.

“The Japanese market has previously proven very difficult for global telecoms brands to enter, but there are increasing signs that these brands are gaining traction with the Japanese youth.  More than one in 10 Japanese smartphone owners have an NEC, so there is now an opportunity for others to grow.  Local brands must ensure they appeal to these customers as they upgrade or risk losing out to the competition.”

In August 2012, NEC joined forces with a rival in the smartphone market Fujitsu and Japan’s market leading operator NTT Docomo to set up a joint venture to develop LTE smartphone chipsets.

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