I don’t put much faith in market data from companies selling research to sell their other ‘services’. If you ever observed how the backend research process works, you wouldn’t either. Nevertheless it’s fun to read and compare signposts along the never ending journey. MM Research Institute (MMRI) issued a PR tease for their Japanese smartphone marketshare report covering results for the first half of the Japanese 2021 fiscal year (April~September).
The Keitai Watch site paid for the full report and posted some numbers for the various MMRI breakdowns.
Marketshare ranking (all mobile phones)
FCNT (Fujitsu): 6.7
The category breakdowns show some interesting new developments
Marketshare ranking (smartphones only)
FCNT (Fujitsu): 5.9
The story here is that iPhone was selling well leading up to the iPhone 13 rollout, with the addition of Rakuten Mobile offering deeply discounted iPhone 12 and iPhone SE that could be bought with Rakuten Points certainly helping the most, once again demonstrating the power of the Rakuten Economic Zone.
Marketshare ranking (non-carrier SIM-Free only)
The non-carrier SIM-Free ranking interests me most. OPPO and XIAOMI released some interesting low end FeliCa Osaifu Keitai capable models recently. The surprisingly strong showing tells me that the market wants inexpensive SIM-Free Osaifu Keitai models. If there was a SIM-Free FeliCa/Osaifu Keitai ranking it would probably be Apple, OPPO and XIAOMI. OPPO wins because they deliver 5G and FeliCa for a very low price.
The Japanese Ministry of Internal Affairs and Communications (MIC) has listed 15 dual SIM iPhone models including iPhone 13 as “non-compliant” to government technical standards due to an inability to place emergency calls in certain dual SIM use situations. Apple posted a Japanese only support page on October 23 that acknowledges the emergency call issue when both data only SIM and voice call SIM are installed with a workaround: users need to make sure the SIM number in Mobile Data settings is a voice SIM in order to make emergency calls to 110/118/119 numbers (police, coast guard, ambulance).
Apple needs to fix this issue as quickly as possible. They should have caught it before iOS 15 shipped.
Journalist Tsutsumu Ishikawa posted an interesting article covering the May 17 Ministry of Internal Affairs and Communications (MIC) industry workgroup meeting examining fair competition in the Japanese smartphone market. Specifically it was a review of the effects from the October 2019 rule changes that eliminated JP carrier subsidies.
What other media outlets didn’t pick up was that Ann Rollins, Senior Director of Government Affairs at Apple attended the meeting and gave a presentation. Rollins pointed out that the MIC rule changes eliminating carrier locked devices and 2 year contracts, haven’t helped the industry (Rollin’s comments translated from Ishikawa san’s Japanese article):
Since the October 2019 rule changes, customer MNP switching between carriers has (seriously) declined instead of increasing, contrary to the objective of the rule changes…
While the smartphone penetration rate is rising, the number of shipments is sluggish. This is due to various factors, such as the lengthening of the handset replacement cycle and the use of used handsets, but from the perspective of the new handset market, despite the big event of switching to 5G, the situation is stagnate…
Unfortunately, the penetration of 5G devices accounts for only 3% of the total number of (Japanese) mobile phone subscribers. For example, there is official data that the penetration rate in South Korea is 17%. In order for customers to actually enjoy the benefits of new technologies and services through 5G, the spread of compatible devices is indispensable, but at present, the spread of 5G is generally sluggish…
Infrastructure and devices can be said to be two wheels. No matter how much you build a highway, it doesn’t make sense if you don’t have cars running on it. Now that the separation of mobile carrier contract plans and smartphones has been achieved, it may be necessary to make an exception for 5G purchases from the viewpoint of promoting the growth of 5G smartphones…
Measures are needed to prevent delays in the growth of 5G. What is important for users is the total cost of mobile phones. Now that complete separation has progressed and low-priced plans have appeared, it is desirable to leave what should be left to market competition to market competitively, which can be expected to further reduce total costs. We request that you (MIC) scrutinize the need to maintain a uniform device purchase subsidy and consider exceptions for 5G in order to provide users with a variety of options.
Unfortunately the MIC 2019 rule changes came just in time…for the COVID pandemic. iPhone 12 was not even a upgrade consideration for me because NTT docomo switched to 3 year contracts. My iPhone 11 Pro will be paid off by October 2022. When my partner upgraded his iPhone in December, the docomo representative said a lot of customers were taking a wait and see approach. The 5G network is still building out and there is the Face ID with face mask problem. He went with an iPhone SE2 because of price and the ease of Touch ID, the SE unfortunate success factor. I think lots of people did the same which matches another finding of the MIC workgroup: high-end smartphone upgraders have migrated to the middle range.
While there no guarantee MIC will consider Apple’s suggestion, allowing carriers to discount ‘up to ¥20,000’ would help the 5G transition. The market is still repositioning with recent carrier ‘budget brand’ initiatives like NTT docomo ahamo KDDI povo and Rakuten Mobile gaining 1st tier iPhone carrier status. Things are in flux but Apple asking MIC for 5G carrier subsidies does say something about the state of things.
In Japan, iPhone purchases were traditionally subsidized, bundled with carrier contracts. Today, local regulations have significantly restricted those subsidies as well as related competition. We estimate less than half of iPhones sold in Japan in Q1 this year were sold via subsidy.
One year later Apple announced record earnings for Q1 2020 but Japan iPhone sales with down 10% y/y. Luca Maestri only explained the situation at the end of the earnings call, answering the very last analyst question:
So Japan was down 10 percent during the December quarter. It was primarily due to iPhone performance, which was challenged because there were some regulatory changes that took effect on the 1st of October, where essentially the regulators decoupled the mobile phone pricing from the two year contracts and they’re capping the maximum amount of carrier discounts that can can be made. At the same time, I would say that within a more difficult macro environment, iPhone did incredibly well during the quarter. Six of the top seven selling smartphone models in Japan during the December quarter were iPhones. So it was a very strong performance by iPhone in a difficult environment. Also in Japan, we had very strong double digit growth from services, stronger than company average, and very strong double digit growth in wearables, also stronger than company average. So we feel very good. You know, Japan is is a country where historically we’ve had great success. The customers are very loyal and very engaged. And we have a very strong position there and we feel we have a very good momentum.
I don’t think Japanese iPhone customers will stay loyal and engaged if Apple sticks with the same old sales strategies now that the era of carrier bundling is over. A new approach is needed. Maestri alluded to one clear advantage remaining for Apple in the Japanese market: Apple Pay Suica on Apple Watch, an advantage no other device manufacturer has matched yet. That advantage along with the golden opportunity of the Tokyo Olympics this year are market opportunities which Apple is not taking advantage of.