2009 MCPC Smartphone Whitepaper

The Japanese Smartphone Market and Case Studies
Yoshinari Shiraishi

Chairman, MCPC Smartphone Committee

June 22, 2009http://twitter.com/SmartphoneMCPCThe term “smartphone” has become an increasingly common part of our vocabulary. Still, there is nocommon industry‐wide definition of the term; a smartphone is mainly dubbed such when the device fills
the usage gap between a mobile phone and a PC.
On March 16 of this year, the MCPC (Mobile Computing Promotion Consortium) announced the“Smartphone Market Medium‐Term Forecast.” The objective of this report is to gather an understandingof the current situation in the Japanese smartphone market, as well as to make intelligent projections of
the future of the market. In fiscal 2008, 13 different models were introduced to the Japanesesmartphone market, including the much‐talked‐about iPhone. We estimate that there was a 55% growthin the market, from 860,000 units shipped in the previous year to 1.33 million units (1.02 million
individual purchases; 310,000 corporate purchases). We believe this increase is due to a decrease in real
charges based on the transition to a two‐tier fixed pricing system for fixed priced packet fees.
With President Obama of the United States claiming to be a fan of smartphones, and other increasing
opportunities for media coverage in newspapers and magazines, this has truly been a year to remember
for the worldwide smartphone market.
Established in 1997, the goal of the MCPC is to promote the expansion of mobile computing. Theorganization is engaged in efforts for standardization (terminal interface guidelines, Bluetooth devices,etc.), to publish guidelines for security measures, to sponsor awards and technology fairs in the mobilesolutions segment, and to conduct mobile systems certifications and mobile phone qualification
certifications. Through these activities, we intend to contribute to the development and market
expansion in the mobile computing industry. As of May 2009, we have 168 member firms.

The MCPC approaches the promotion of mobile solutions adoption and support among small‐ and mid‐sized companies from a position of neutrality beyond the framework of any particular corporate interest,

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2009 MCPC Smartphone Whitepaper

uncovering best practices to publish through booklets and web pages. We have also set up a mobile
solutions consulting desk for IT coordinators as another way to strengthen ties with other cooperativeorganizations.
Five days prior to the MCPC announcement of our medium‐term forecast, Gartner, Inc. of the UnitedStates published their 2008 global smartphone market survey. The survey led to some negative
conclusions due to the short supply of appealing new products (other than the iPhone), as well as theeffects of the global economic recession.
However, the survey did not provide a picture of the growth in the Japanese market. For example,
where global smartphone shipments have experienced a year‐on‐year increase of 14%, North America
experienced 69% growth, while growth in Asia/Pacific (including Japan) was only 2%. Even so, the survey
only proposes the position that the smartphone market is growing as compared to the mobile phonemarket as a whole, which experienced a 9% decrease.
The MCPC believes that there is a difference in smartphone usage patterns between Japan andEurope/North America. Smartphones in the West have become popular as a device for email and othercommunications as compared to the voice‐centric nature of regular mobile phones. In Japan, mobilephones have been designed with advanced functionality, including i‐mode, picture mail, official websites,
etc. Accordingly, the smartphone in Japan is viewed as more of a mini‐computer, used for Web
searching, data processing, etc. As such, we see two distinct markets in Japan: the “advanced‐function
mobile phone” market and the “smartphone” market.
If the smartphone in Japan expands in innovative and diverse formats aspersonal/governmental/corporate communications and entertainment, we will see a phase of “agilecomputing,” where we can expect new information technologies that contribute to greater economic,social and cultural activity.

Overview of Medium‐Term Market Forecasts
Looking back, we can identify the 2004 introduction of Vodafone’s “702NK” as the first smartphonemarketed in Japan. The market expanded the following year when Willcom released its “W‐ZERO3.”
Continuing the trend from 2008, the smartphone market for fiscal 2009 is projected to grow by about
50%. The continued growth of broadband communications, the expanded availability of applications andCopyright © Mobile Computing Promotion Consortium. Smart Phone Promotion Committee .All rights reserved.

2009 MCPC Smartphone Whitepaper

services in the open‐source environment, and the growing adoption in various industries and businesses
based on cost‐benefit considerations will all be factors driving market growth. We estimate that thenumber of units shipped for fiscal 2012 will grow to 2.6 million units for individual users, and 700,000
units for corporate/business users. The total number of net contracts is projected to reach 7.6 million
for individuals, and two million for corporate/business users in fiscal 2012, as compared to 2.5 million
total in fiscal 2008. (See Tables 1, 2)
Table 1 Medium-Term Marker Forecast (sorce MCPC)

1000900
800700600unit(10k) 500
400
3002001000

number of net
contracts(total)
number of shippedunits(total)

2005 2006 2007 2008 2009 2010 2011 2012

Table 2 Medium-Term Marker Forecast Detail (sorce MCPC)
number of netcontracts(individual)
number of netcontracts(corporate)
number of shippedunits(individual)
number of shippedunits(corporate)

800700600500unit (10k) 4003002001000
2005 2006 2007 2008 2009 2010 2011 2012

The MCPC medium‐term forecast includes projections for both individual and corporate markets. We
have gone to considerable effort to accurately reflect the actual market situation.
We conducted online surveys to both individual and corporate users. After a preparatory survey ofindividuals between the ages of 15 and 69, as well as corporate information technology staff, weCopyright © Mobile Computing Promotion Consortium. Smart Phone Promotion Committee .All rights reserved.

2009 MCPC Smartphone Whitepaper

collected 1,000 valid responses from each category. We then conducted a weighted‐back projection (amethod for summarizing survey data considering the composition of the population) by sex and age forindividuals, and by number of employees and industry type for corporations. We believe this method
provides a realistic model for our investigations. An important characteristic of our survey is that wefurther categorized individuals as sole proprietor, corporate officer, corporate employee, civil service
employee, self‐employed, student, etc., projecting the difference in usage characteristics according tooccupation.
Our estimate of the fiscal 2008 market is the number of smartphone owners as of October 2008 (basedon survey responses) to which we added the number of planned purchasers through March 2009. We
adjusted the latter figure to reflect the rapidly deteriorating economic situation.
Our forecasts beyond fiscal 2009 include the effect of the general mobile phone model change cycle forthose individuals who will likely purchase a smartphone, but have not decided when they will do so.
When assuming the need for a technological solution, we reflected technologies predicted to exist in2011—LTE (also called 3.9G; a high‐speed data communications specification for mobile phones), next‐
gen PHS, WiMAX (one standard for fixed wireless communications; has been revised to allow
communications with terminals not in visible range), femtocell (a radio wave range facilitated byextremely small‐scale mobile phone base stations; expected to improve communications within homes,
across an office floor, etc.), etc.—in the number of units shipped and number of contracts.
The MCPC surveyed corporations about intended smartphone adoption based on different solutions
scenarios. We expect usage figures for fiscal 2011 to approximately double those of fiscal 2008. Given
this growth factor, we then projected the number of contracts (according to a fitted curve model) for
each intervening fiscal year, and then further incorporated the model change cycle for smartphones toforecast the number of units shipped.

Issues related to Usage Characteristics and Market Growth
The smartphone, as defined by the MCPC, is a mobile phone or PHS that incorporates a public general‐purpose operating system, to which users can freely add applications, extend functionality, or customize.
Specifically, we mean those devices that incorporate Windows Mobile, OSX (iPhone), Blackberry OS,Symbian or Android.

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2009 MCPC Smartphone Whitepaper

More than 70% of both individual and corporate smartphone users in Japan use Windows Mobile
devices—a markedly high rate compared with the 12% share that Windows Mobile holds in the global
market (Gartner, Inc. survey).
Individuals primarily use smartphones for email and Web browsing. Corporate officers, the self‐
employed, and men ages between 20 and 59 mainly use smartphones for work‐related email andcalendaring. Students and women aged between 20 and 39 also tend to use smartphones for online
shopping. The overwhelming majority of corporate users use smartphones for sales/external
communications, regardless of the size of the company in terms of the number of employees.
Smartphone usage among corporate management for reporting and intra‐company communications (asseen commonly in the West) is high among major Japanese companies, but still only represents one‐
third of the overall total compared to use for sales/external communications. (See Figures 3, 4)

Figure3 Usage Characteristics of Individual (source MCPC)

Usage Characteristics (plural answer %)Mobile Mail and Web Mail
Web Browsing
Net Shopping
Mail , Schedule and PIM for business
Net Auction
Music Download
Blog and SNS
Video Sharing
Document Search and application for business
Online Trade and Online Banking
Gameother0

10

2030

40

50

60

70

80

As we stated earlier, the Japanese market for mobile phones consists of “advanced‐function mobilephones” and “smartphones.” However, smartphone usage and awareness are still in the early stages.

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2009 MCPC Smartphone Whitepaper

Where individuals access the Internet outside their homes, 64% use mobile “full browser” and 52% use
notebook computers. In comparison, only 8% use smartphones. At only 7%, the corporate smartphone
adoption rate is quite low, even when considering the fact that companies are not providing
smartphones to their employees in high numbers.

Figure4 Usage Characteristics of Corporate (source MCPC)
Usage Characteristics (plural answer %)Sales and external Communications
Intra-company Communications
Corporate management for reporting
Store and Stock Management
Delivery and Transport Operation
Medical and Welfare Operation
Research Operation
Information Syatem Maintenance Operation
Maintenance Operation
Construction Managementoher010203040506070

The major issue is the lack of awareness among both individuals and corporations. Almost 70% of
combined individual and corporate users responded that they had either never heard of a smartphoneor had at least heard the term “smartphone.” Smartphone suppliers obviously need to offer an easily
understood explanation of smartphones to potential users.
Our questionnaire sought to discover answers related to usage incentives/disincentives (why do you
want to use a smartphone; under what circumstances would you want to use a smartphone; why will
you continue to use a smartphone; why will you stop using a smartphone).
Individuals cited “reduced packet fees” as an incentive, surpassing the numbers that cited “battery life”
as a disincentive, indicating the greater need for flexible fee plans. Corporate users cited greater
functionality than mobile phones, the ability to freely combine applications, and form factor (cheaperand lighter than PCs) as incentives, indicating an advanced understanding of, and expectations for, thebenefits of smartphone computing.

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2009 MCPC Smartphone Whitepaper

A “clear investment effect” was cited as an issue that rivaled packet fees and battery life in importance.
In particular, individuals involved in the real estate, education and learning, food and agriculture,
forestry and fishery industries indicated that investment effect planning was a key for adoption. The
MCPC and industry consultants have a demonstrated need to offer advice in terms of both management
and workplace smartphone use.
As with the introduction of the PC to the market, innovative business models, improved work efficiency,
and the creation of intra‐company, vendor and customer communications channels are just a few areasin which we are expecting to see progress.

Expectations for the Introduction of New Services
The MCPC has established short‐term and medium‐term outlooks for smartphone penetration based on
the results of our questionnaire.
For example, one way that MCPC has worked to increase smartphone awareness among individuals andcorporations is the addition of the “Smartphone” category for the MCPC Awards, presented tocorporations, groups or municipalities that demonstrated the benefits of adopting mobile computing.
The MCPC also sponsors booths at various events, explaining smartphones in easy‐to‐understand terms.
In addition to these educational activities, improved communications environments throughfaster/multi‐networking, advanced functionality through OS evolution, and increasing numbers ofapplications are all factors that will drive greater market expansion.
The advent of application stores (“App Store,” “Windows Marketplace,” “Android Market,” “BlackBerryApp World,” etc.) and cloud computing services (services provided as necessary through the Internet
and other networks; e.g. “Mobile Me,” “My Phone,” etc.) will have the added effect of making
smartphones both more popular and easier to understand.
We believe that these factors will help create an environment of “agile computing,” accelerating theusage of smartphone applications that differ from the “content” available through mobile phones.
Just considering domestic living, health, education and hobbies, we see a literally unlimited number ofservices possible in the future tailored to everyday life.

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2009 MCPC Smartphone WhitepaperMusic is a familiar example. A person can use the “Genius” function in “iTunes” to create a playlist ofcompatible music from among all of the songs throughout the world, which the user can then quickly
purchase on the spot. The iPhone and iPod have become indispensable tools because the accumulationof visual memories (use with a PC, user interface, etc.) has coalesced into a favorable user experience.
As for businesses, the smartphone as a reliable, easy‐to‐use device that offers an application integration
platform facilitating company‐specific customization, as well as collaborative filtering to recommend
applications compatible with both internal and external systems, is likely to offer great potential for new
integration business opportunities.
This will be an amazing chance for small IT services firms and IT venture firms that combine creativity
and sharp technological insight with speed.

A Growing Number of Customer Case Studies
The MCPC publishes a website called “Here’s How Far We’ve Come! Here’s How It’s Used!” that
introduces case studies of mobile computing adoption for corporate users. Of the 50 recent case studies,nine involve smartphone adoption.
The first and foremost among these case studies was the business adoption of smartphones in a long‐established sushi restaurant. The head chef and manager began using a smartphone for daily reportmanagement, reducing the time required to collect information from each branch, and allowing him tosee customer traffic by time, daily ingredient costs, and hours worked by part‐time and temporary
employees—all at a single glance.
As a result, the manager was able to check sales, costs and profit figures directly from the restaurant
floor. The company also created smoother communications among store managers by using PHS as aninternal extension between the restaurant locations.
The convenience of smartphones that combine this kind of rapid data processing with mobile phonefunctions originated in “epiphanies” at the work floor. The use of smartphones is spreading across awide variety of industries, including women’s apparel outlet staff members, salespeople for household
delivery drugs, printing equipment service technicians, IT solutions salespeople, construction site
foremen and construction managers, pharmaceutical wholesaler marketing specialists, on‐site video

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2009 MCPC Smartphone Whitepaper

producers, and more. Tennis school coaches and members—even elementary school teachers andstudents—are starting to use smartphones.
Recently, we have seen a pharmaceuticals wholesaler who is using smartphones with pharmacies,
offering a simple, convenient way to manage orders. The smartphone is easy for older pharmacy staff
members to use, and helps hold down operating costs. In the future, providing more and better
information may be a way to breathe life back to the industry as a whole, including those pharmacies
currently struggling to stay in business.
The common thread throughout these case studies is that the implementation was dictated by theneeds at the location where services are provided to the customer—a smart model for which theJapanese have come to be known.
(end)

For more about the MCPC (Mobile Computing Promotion Consortium), see
http://www.mcpc‐jp.org/
office@mcpc‐jp.org

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