At first glance, Japanese cellphones are a gadget lovers dream: ready for Internet and e-mail, they double as credit cards, boarding passes and even body-fat calculators.
Competition is fierce in the relatively small Japanese cellphone market, with eight manufacturers.
But it is hard to find anyone in Chicago or London using a Japanese phone like a Panasonic, a Sharp or an NEC. Despite years of dabbling in overseas markets, Japans handset makers have little presence beyond the countrys shores.
Japan is years ahead in any innovation. But it hasnt been able to get business out of it, said Gerhard Fasol, president of the Tokyo-based IT consulting firm, Eurotechnology Japan.
The Japanese have a name for their problem: Galápagos syndrome.
Japans cellphones are like the endemic species that Darwin encountered on the Galápagos Islands fantastically evolved and divergent from their mainland cousins explains Takeshi Natsuno, who teaches at Tokyos Keio University.
This year, Mr. Natsuno, who developed a popular wireless Internet service called i-Mode, assembled some of the best minds in the field to debate how Japanese cellphones can go global.
The most amazing thing about Japan is that even the average person out there will have a superadvanced phone, said Mr. Natsuno. So were asking, cant Japan build on that advantage?
The only Japanese handset maker with any meaningful global share is Sony Ericsson, and that company is a London-based joint venture between a Japanese electronics maker and a Swedish telecommunications firm.
And Sony Ericsson has been hit by big losses. Its market share was just 6.3 percent in the first quarter of 2009, behind Nokia of Finland, Samsung Electronics and LG of South Korea, and Motorola of Illinois.
Yet Japans lack of global clout is all the more surprising because its cellphones set the pace in almost every industry innovation: e-mail capabilities in 1999, camera phones in 2000, third-generation networks in 2001, full music downloads in 2002, electronic payments in 2004 and digital TV in 2005.
Japan has 100 million users of advanced third-generation smartphones, twice the number used in the United States, a much larger market. Many Japanese rely on their phones, not a PC, for Internet access.
Indeed, Japanese makers thought they had positioned themselves to dominate the age of digital data. But Japanese cellphone makers were a little too clever. The industry turned increasingly inward. In the 1990s, they set a standard for the second-generation network that was rejected everywhere else. Carriers created fenced-in Web services, like i-Mode. Those mobile Web universes fostered huge e-commerce and content markets within Japan, but they have also increased the countrys isolation from the global market.
Then Japan quickly adopted a third-generation standard in 2001. The rest of the world dallied, essentially making Japanese phones too advanced for most markets.
At the same time, the rapid growth of Japans cellphone market in the late 1990s and early 2000s gave Japanese companies little incentive to market overseas. But now the market is shrinking significantly, hit by a recession and a graying economy; makers shipped 19 percent fewer handsets in 2008 and expect to ship even fewer in 2009. The industry remains fragmented, with eight cellphone makers vying for part of a market that will be less than 30 million units this year.
Several Japanese companies are now considering a push into overseas markets, including NEC, which pulled the plug on its money-losing international cellphone efforts in 2006. Panasonic, Sharp, Toshiba and Fujitsu are said to be planning similar moves.
Japanese cellphone makers need to either look overseas, or exit the business, said Kenshi Tazaki, a managing vice president at the consulting firm Gartner Japan.
At a recent meeting of Mr. Natsunos group, 20 men and one woman crowded around a big conference table in a skyscraper in central Tokyo, examining market data, delivering diatribes and frequently shaking their heads.
The discussion then turned to the cellphones themselves. Despite their advanced hardware, handsets here often have primitive, clunky interfaces, some participants said. Most handsets have no way to easily synchronize data with PCs as the iPhone and other smartphones do.
Because each handset model is designed with a customized user interface, development is time-consuming and expensive, said Tetsuzo Matsumoto, senior executive vice president at Softbank Mobile, a leading carrier. Japans phones are all handmade from scratch, he said. Thats reaching the limit.
Then there are the peculiarities of the Japanese market, like the almost universal clamshell design, which is not as popular overseas. Recent hardware innovations, like solar-powered batteries or waterproofing, have been incremental rather than groundbreaking.
The emphasis on hardware makes even the newest phones here surprisingly bulky. Some analysts say cellphone carriers stifle innovation by demanding so many peripheral hardware functions for phones.
The Sharp 912SH for Softbank, for example, comes with an LCD screen that swivels 90 degrees, GPS tracking, a bar-code reader, digital TV, credit card functions, video conferencing and a camera and is unlocked by face recognition.
Meanwhile, Japanese developers are jealous of the runaway global popularity of the Apple iPhone and App Store, which have pushed the American and European cellphone industry away from its obsession with hardware specifications to software. This is the kind of phone I wanted to make, Mr. Natsuno said, playing with his own iPhone 3G.
The conflict between Japans advanced hardware and its primitive software has contributed to some confusion over whether the Japanese find the iPhone cutting edge or boring. One analyst said they just arent used to handsets that connect to a computer.
The forum Mr. Natsuno convened to address Galápagos syndrome has come up with a series of recommendations: Japans handset makers must focus more on software and must be more aggressive in hiring foreign talent, and the countrys cellphone carriers must also set their sights overseas.
Its not too late for Japans cellphone industry to look overseas, said Tetsuro Tsusaka, a telecom analyst at Barclays Capital Japan. Besides, most phones outside the Galápagos are just so basic.
, one last question. Are international texts included in the unlimited texting plan or is there a surcharge for each one
