Thu, 28 Sep 2000, 8:54am EDT
Mitsubishi Electric Plans to Double Mobile Phone Production Within 2 Years
By Keiko Kambara and Kyoko Suzuki
Tokyo, Sept. 28 (Bloomberg) -- Mitsubishi Electric Corp. plans to more than double mobile phone
production within two years to boost its share of the rapidly growing market.
The Japanese electronics company, now the 10th biggest maker of mobile phones with 3.2
percent of industry sales, wants to climb to No. 5 in about five years, Michio Nakanishi, a
Mitsubishi Electric managing director, said in an interview.
``For that, we need to boost our market share to 12 to 13 percent,'' he said. In pursuit of that
goal, the company plans to make 27 million handsets this fiscal year, about 42 million next year
and 58.5 million the year after.
``We've got to build our presence in the mobile phone market because it's one of the
fastest-growing,'' Nakanishi said. Shipments by handset makers worldwide, estimated at 400
million to 410 million this year, are likely to rise to 500 million next year and 600 million the
following year, he said.
Mitsubishi Electric faces stiff competition. Finland's Nokia Oyj, Motorola Inc. of the U.S. and
Sweden's Ericsson AB combined now sell more than half the world's mobile phones, according
to Dataquest Inc., a market researcher.
Rivals Expanding Too
Mitsubishi Electric also has formidable Japanese rivals including Matsushita Communication
Industrial Co., Japan's market leader, and NEC Corp. and Kyocera Corp.
Competitors have big expansion plans as well. Matsushita Communication, for example, is
seeking to triple its share to 15 percent by 2004.
``Everyone is working to increase its share,'' said Kenshi Tazaki, a Dataquest director. ``It's hard
to foresee anyone leaving this expanding market in the next three to four years. It would be hard
(for Mitsubishi Electric) to get a 10 percent share.''
Mitsubishi Electric expects mobile phone sales of about 530 billion yen ($4.9 billion) in the year
ending March 31, Nakanishi said. The company hasn't disclosed what those sales were last
year, but it produced just 1.1 million handsets last year, a fraction of this year's planned
production.
The surge in mobile phones should help the company derive about a third of its group sales from
communications products by 2005, Nakanishi said. This year, about 20 percent of its projected
4.2 trillion yen in group sales will come from communications- related business.
Intel Alliance
Mitsubishi Electric acknowledges achieving its market share goal by March 31, 2005, as it hopes,
will be difficult. It will consider alliances with other communications equipment makers and
telecommunications carriers to help reach its goal, Nakanishi said.
Mitsubishi Electric has already teamed with Intel Corp., the world's largest maker of computer
chips, to be ready for increased handset production. The companies announced in May they will
develop a chipset for the next generation of cellular phones, which can send videos and browse
the Internet.
The alliance ``is to secure key parts needed to make mobile phones in years to come,'' said
Nakanishi. Intel's ability to supply several millions of chips per month to a customer is attractive,
he said.
As part of the expansion plan, Mitsubishi Electric is boosting investment in its communications
systems business to 18 billion yen next fiscal year from 13 billion yen this year to help reorganize
its domestic handset production base and to set up a distribution center in France.
Mondo's Coming
In Asia, the company plans to expand production in China after its plant begins full operation next
month. It will also begin outsourcing to manufacturers in South Korea next fiscal year, Nakanishi
said.
In the U.S., it will start to develop handsets using the technology called cdma2000, a standard
developed by Qualcomm Inc. for high-speed mobile access to the Internet. Mitsubishi Electric is
also developing handsets using a rival standard called wideband code division multiple access,
or W-CDMA, in Japan and Europe.
In Europe, where Mitsubishi Electric sells handsets under the Trium brand, its first handset
equipped with organizer functions will be on sale from next month. The hybrid called Mondo
features so-called General Packet Radio Service technology, which moves information faster by
bundling data into packets.
Mondo uses the Windows CE operating system of Microsoft Corp. Mitsubishi Electric plans
monthly production of 100,000 units from October and hopes to sell 600,000 to 700,000 units in
six months, Nakanishi said.
While Mitsubishi Electric plans to promote cooperation with Microsoft in developing more models
combining the mobile phone and electronic organizer functions, it will also consider using the
operating system of Palm Inc., the world's biggest electronic organizer maker, Nakanishi said.
Similarly, the company has been working with Sharp Corp., maker of the Zaurus handheld
computer, to develop a handset with a combination of mobile phone and organizer functions for
sale in Europe next year. The handset will run on the Windows CE operating system, according
to Nakanishi.
Mitsubishi Electric shares fell 4 yen, or 0.5 percent, to 886 yen. The shares have gained 34
percent this year, while the Nikkei 225 average has dropped 17 percent.
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