Stop speaking, start snapping: NEC's mission to make the world see in 3G

Europe and North America are behind the times, says Tsutomu Nakamura from NEC of Japan. "They still use the mobile phone as a phone. Based on what has happened in Japan, things are going to change rather quickly."

Europe and North America are behind the times, says Tsutomu Nakamura from NEC of Japan. "They still use the mobile phone as a phone. Based on what has happened in Japan, things are going to change rather quickly."

As senior vice-president of the group's mobile business unit, his task is "to make NEC one of the three most profitable mobile phone suppliers worldwide in three years". And getting people to use their phone for more than talking is the key.

It looks a tough call. In the financial year to the end of March, NEC delivered only 15.5 million handsets - a fraction of the 180.7 million posted by Nokia of Finland and far fewer than other top players such us Motorola (72.2 million), Samsung (54.5 million), Siemens (43.8 millions) and Sony-Ericsson (26.7 million). In its last financial year NEC went back into profit after two years of heavy losses and a deep restructuring throughout the corporation. NEC sees its mobile communication business as a big profit generator over the next few years.

"We are the market leader in 3G phones - those fitted with high-resolution camera and video devices," claims Mr Nakamura. "In the mid- to high-end segment, our market share is 50 per cent as we are undisputed leaders in Japan." From the observation lounge on the top floor of NEC's headquarters in Tokyo, executives have a good view of the HQs of two of their key customers - DoCoMo and the Japanese arm of Vodafone.

After its success at home, NEC expects its 3G phones to take on the world. Its plan to get to the top is based on being an early player in this market as well as on the stronghold it claims in one fast-growing economy. In mainland China, mobile technology is still at 2.5G level and NEC claims a 10 per cent market share, or around seven million handsets sold last year.

Mr Nakamura recognises that the 3G game will mostly be played in Europe, where some 15 months after early mover Hutchison Whampoa launched its "3" brand, all the big operators are entering the arena. NEC has a deal worth $2.8bn (£1.5bn) to supply six million handsets to 3 in the three years to 2006.

"Europe is not a uniform market: in the north, mainly the UK and Germany, it is still voice-driven, while in Italy and Spain the 3G development will be faster."

After suffering a handset shortage last year, NEC has restructured its supply chain, with two new contractors in China that now build half of the annual capacity of 25 million. "As volume rises, we'll rely more on contractors, retaining at our Japan factories only the start-up production of new models", says Mr Nakamura, who claims the problems that beset the NEC video phones delivered to 3 last year are over. "This is being totally overtaken as the 3G network improves in quality," adds NEC executive manager Susumu Otani.

While consumers still wonder whether to switch on 3G, the industry is taking the next step: the 3.5G phone will be rolled out in Japan in less than six months. "It allows more speed at a lower cost. By the end of 2005 we'll get up to 10 megabytes per second, making it possible to get terrestrial digital TV on the handsets," Mr Nakamura says.

Will this be enough to tempt consumers in their droves? In Mr Otani's view, maybe not: "The real growth will come when the flat-rate concept that has made fixed-line broadband successful is extended to mobile broadband."

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