Mitsubishi to quit mobile phone market

Mitsubishi Electric, one of the historic names in mobile phone manufacturing has announced plans to quit the industry today amid growing competition and falling margins.

The company, which is best known in the UK mobile phone market for its Trium line and for being one of the first WAP phone producers, has been losing money in the phone market for some time, as consumers and business customers opt for European and North American brands such as Nokia, Motorola and RIM.

In the face of tough competition many Japanese mobile phone makers have withdrawn to the domestic market in recent years. Sanyo said in January that it would sell its loss-making phone business to Kyocera.

"This is a logical step for Mitsubishi Electric after having been unable to launch a hit model for a while," IDC analyst Michito Kimura said. "But the withdrawal of these two Japanese phone makers is not going to make things better for those still in the industry."

With mobile phone demand stagnant at home, more Japanese makers are likely to pull out or merge, analysts said.

Mobile phone service operators such as NTT DoCoMo are cutting subsidies to retailers to keep handset prices low and are instead reducing their monthly rates, discouraging handset users from replacing their handsets frequently.

Mitsubishi Electric said on Monday it expected a one-off loss of about 17 billion yen ($164 million) on a pretax level for the year ending on 31 March 31 due to the withdrawal. It forecast mobile phone shipments of 2.1 million units for the year. That would be less than 0.2 per cent of global mobile phone shipments for calendar 2007, according to data from IDC.

"Companies like Nokia are selling hundreds of millions of mobile phones, while Japanese companies are fighting each other in a market with annual demand of 45 million units or so," Daiwa Institute of Research analyst Kazuharu Miura said.

"No [Japanese] companies are well positioned for survival."

(Additional reporting by IT PRO)