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Fujitsu putting mobile phone business on the block

Latest Japanese player to exit field as foreign rivals eat up market share

Fujitsu looks to stop making and developing mobile phones, as global leaders continue to make bigger strides into the Japanese market..

TOKYO -- Fujitsu is looking to offload its mobile phone operations, becoming the latest casualty of growing competition in the once highly lucrative market, where Japanese players are finding it increasingly difficult to keep up with global giants.

The information technology company's mobile phone operations have apparently drawn interest from investment funds such as Tokyo-based Polaris Capital Group and CVC Capital Partners of the U.K. Chinese personal computer maker Lenovo Group, smartphone heavyweight Huawei Technologies and Taiwan's Hon Hai Precision Industry, better known as Foxconn, are also thought to be contenders.

First-round bidding could open as soon as September. The unit will likely be sold for tens of billions of yen (hundreds of millions of dollars). Tokyo-based Fujitsu would cease developing and manufacturing mobile phones, but looks to retain a minority stake in the business and keep its mobile phone brand alive. The company is currently the No. 5 player in the Japanese market.

Fujitsu spun off its mobile phone operations into a separate company in February 2016, saying it would look for a partner for the noncore operations. The Fujitsu group's smartphone sales in the year ending March 2018 are expected to clock in at 3.1 million units -- less than half the peak of roughly 8 million units in fiscal 2011. Apple of the U.S., meanwhile, enjoys a greater than 40% share of the Japanese market. Getting mobile phones off its plate will let Fujitsu concentrate resources on its core IT services business.

Changing times

Nearly all of the Japanese manufacturers that once thrived in the cellphone business have bowed out in recent years. Of the 11 major Japanese companies in that field in the early 2000s, only three -- SonySharp (now a unit of Foxconn) and Kyocera -- will continue to make and develop the devices once Fujitsu departs. Mitsubishi Electric withdrew from the business in 2008, followed by Toshiba in 2012. IT company NEC and electronics maker Panasonic left the field in 2013.

These departures partly reflect the changing role of wireless service providers such as NTT Docomo, through which Fujitsu still makes many of its sales. Japanese mobile phone service providers formerly handled everything from creating technological standards to drawing up marketing strategies for phone makers, and encouraged the development of handsets uniquely suited to the Japanese market. But the launch of Apple's iPhone in 2007 ushered in a new era of the high-tech smartphone. Google's Android operating system has become the standard for other manufacturers.

Japanese phone makers have attempted to set themselves apart with features such as water resistance and compatibility with smartphone-based payment systems. But their earning power pales in comparison to global leaders such as Apple, South Korea's Samsung Electronics and Huawei, which has sold more than 100 million handsets annually in recent years. If the remaining Japanese players hope to stick around, they will need to compete on their own terms, turning out innovative technology and services rather than merely leaning on carriers for help.


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