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Camera phones conquer Japan, take aim at the world

Eriko Amaha in Tokyo

It was any boy's dream. A seat at a World Cup soccer match in Japan and there in the stands to see the home team was an even bigger star -- from the Olympian world of baseball.

Home-run slugger Kazuhiro Kiyohara was in Yokohama Stadium to watch last month's World Cup match between Japan and Russia. The crowd of trendy, wealthy Japanese around him swiftly pulled out their camera-equipped cellphones to share the scene with family and friends.

For Masayoshi Yamano, head of marketing strategy at J-Phone, Japan's third-largest mobile phone carrier, that moment was the stuff of dreams - and of the future.

"Once cellphone users have familiarised themselves with the camera feature, they tend to find new ways to use it," Yamano said in an interview.

In late 2000, when J-Phone launched the world's first camera-equipped cellphones that could snap photos and send them wirelessly via e-mail, it set off Japan's hottest telecom trend since the rise of the mobile Internet.

Photo-phones have not only opened new opportunities for the Japanese, who hope to take their wares abroad, they are reshaping the industry, with Sharp Corp, a pioneer in camera-equipped handsets, gaining in prominence.

"Whether or not a handset has a camera attached is a major factor in purchasing decisions," said Hitoshi Hayakawa, analyst at ING. "Choosing camera phones over non-camera phones is becoming the leading trend in the industry."

Japan at the forefront

In Japan, where consumers often choose cellphones over PCs to access the Internet, handset makers have been at the forefront of many new technologies, including full-colour screens and wireless Web-surfing.

Miniature cameras are among the latest additions, and Japan's photo-phone shipments are expected to nearly quadruple in the business year to next March to 23 million, according to market researcher Yano Research Institute.

The means that by March 2003 one in three handsets in use in Japan will have a camera attached.

Yano expects Sharp's domestic market share in handsets to rise to 13.8 per cent this business year from last year's 9.3 per cent, even as competitors launch their own photo-phones.

Market leader NEC Corp's share, by contrast, is forecast to shrink to 17.6 per cent from 26.1 per cent.

Matsushita Communication Industrial Co, which aims to recapture the top spot it lost to NEC last year, will likely see only a modest rise to 18.4 per cent from 16.4 per cent.

Matsushita, maker of Panasonic phones, had hoped for a huge boost from its recently launched ultra-thin 504i handset, but analysts said the boom in photo phones may dampen the popularity of the sleek but camera-less model.

Sharp aims to take its camera phones to Europe this autumn, while Sanyo Electric, another early manufacturer of camera phones, is preparing to launch a photo-equipped model in the U.S. market by the end of the year.

The photo functions are also giving a lift to Japan's wireless carriers, by encouraging e-mail traffic and boosting average revenue per user (ARPU).

"ARPU for camera phones is definitely higher than for non-camera phones," said J-Phone's Yamano.

Although overall ARPU at J-Phone, jointly owned by Japan Telecom Co and Vodafone Group Plc, dipped to 7,600 yen in 2001-02 from 7,700 yen a year earlier, the share of non-voice revenue, including for e-mails, photos and Web access, jumped to 15 per cent from 8 per cent.

Of J-Phone's 12 million subscribers, 5.4 million own camera phones and the company now sells only camera-equipped models.

The success of the carrier's "sha-mail" -- derived from the Japanese word for photograph "shashin" -- has forced bigger wireless operators to weigh in with their own photo offerings.

"J-Phone had the lead with 'sha-mail' but rivals are moving to catch up, and it's possible they could leap past J-Phone," said Hironobu Sawake, senior analyst at JP Morgan.

In April, number-two wireless carrier "au", operated by KDDI Corp, started building cameras into some of its third-generation (3G) handsets, which offer faster transmission speeds than conventional mobile services.

The camera phones helped the carrier attract more than one million 3G users by the end of June, far surpassing NTT DoCoMo Inc, whose 3G service, much faster than KDDI's but with shorter battery life, pricier handsets and limited to major metropolitan areas, has garnered less than one-tenth that number.

Faced with a drop in market share, DoCoMo, Japan's dominant mobile carrier with nearly 60 per cent of all subscribers, has started offering photo-phones for its conventional 2G services.

DoCoMo's service, launched in June, does not let users swap photos directly, but requires they be transmitted to and viewed at a Web site that can be accessed via its "i- mode" Internet handset service.

The service nevertheless bolstered DoCoMo's market position as it recaptured the top spot in monthly subscriber growth in June after trailing its two main rivals in May.

(Additional reporting by Kiyoshi Takenaka)

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