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.
In case you missed it, try this if you are a Docomo iPhone customer: open the Docomo Speed Test app and tap the Area Map button. The previous red area has been replaced by yellow. The app needs to be updated but the red now indicates the areas with 1288Mbps~988Mbps Gigabit-class ‘Premium 4G‘ service, just in time for the iPhone 11 and iPhone 11 Pro release.
I am fortunate to live in a red 4G Gigabit speed area and my iPhone XS 4G speed is faster than my NTT East FLET’S HIKARI ‘mansion type’ VDSL service. It’s an older apartment building where telephone lines and VDSL are the only way to connect to the internet. That’s depressing to think about, but it will have to do until I can move to a place with direct fiber connection service. At least my iPhone XS 4G LTE is fast and will get faster if I upgrade to iPhone 11 Pro.
KDDI au is offering similar 4G LTE Gigabit-class carrier aggregation service for iPhone 11 customers. Be sure to check details and coverage with your carrier.
No sooner than Apple announced iOS 13 with enhanced Core NFC read/write support than developers are quickly preparing to use it. Engadget Japan and Nikkei both report that the Japanese government will add support for iPhone NFC tag reading Individual Number Cards this fall. Individual Number Cards are a fairly recent development for the Japanese national and local governments to gradually tie various social services and income tax filing to a single personal ID number for better management and control. It’s evolving into a general purpose national ID card.
Individual Number Cards are supported by card readers that require a personal computer and additional software. FeliCa NFC tag reading with a smartphone is much easier because it can work out of the box and an app. Android Phones are supported but limited to select AQUOS, Galaxy and Xperia smartphone models. iPhone NFC tag support in iOS 13 will considerably widen the user footprint.
The writing has been on the wall for over a year now, and sluggish iPhone XR sales only confirmed the fact, that iPhone carrier subsidies in Japan which have defined the industry since 2008, were dying. Today’s Docomo announcement unveiled new plans that discard all the complexity of previous plans like ‘FOMA’, ‘Xi’ and ‘docomo with’ all of which disappear on May 31, with 2 simple choices:
Giga-Ho: ¥4,980 a month for 30GB
Giga-Lite: ¥1,980 a month for 1GB with other date tiers available, 3GB@3,980, 5GB@4,980, 7GB@5,980
Docomo customers can apply for the plans from the Docomo web site or a Docomo shop starting May 22, service starts June 1. There are many configurations and new options available, from home internet bundle discounts to new family data sharing. And it looks like tethering fees are gone. Depending on the configuration savings can be as large as 40% compared to previous plans.
At first glance customers will still need to do some homework via the online cost simulator (something that Japanese love to do), or visit the nearest Docomo shop to find the configuration that fits your needs while giving the best discount. This is just part 1 of the continuing saga of data plans without subsidies. At the end of the announcement Docomo said stay tuned for more. KDDI au and SoftBank should be announcing new plans soon, and we’ll get Docomo part 2 when the new iPhones come out this fall.
An ominous sign? All NewsNippon (ANN) reports that just 4 days before the arrest of Huawei CFO Meng Wanzhou “a large Chinese technology company” issued a company policy stating any employee caught using an iPhone would be fined the entire purchase price and that any employee using a Chinese smartphone would be reimbursed for 15% of the purchase price. The video reports some evidence out of Hong Kong and various Chinese SNS sites that users are supporting Huawei in the ‘trade war’ and dumping iPhone.
Like all news out of China it’s impossible to know how much of it is real as other news sources report that the Huawei arrest isn’t being reported in official Chinese news channels. Take it with a grain of salt but either way it’s not a good development.