To: Eric L who wrote (18863 ) 3/13/2002 1:55:58 PM From: Ruffian Respond to of 34857 Toshiba, Mitsubishi Electric Forge 3G Mobile Phone Development Alliance By: Kanji Ishibashi Dow Jones Newswires TOKYO -- Toshiba Corp. and Mitsubishi Electric Corp. will join forces to develop third-generation mobile phones from April, in a move to cut investment costs and launch new products faster. The two Japanese electronics makers said they are considering forming a joint venture for the development of 3G handsets that can become their global standard. The alliance will bring the pair into direct competition with Japan 's two largest mobile phone makers -- NEC Corp. (NIPNY) and Matsushita Communication Industrial Co . -- which recently announced they had completed the design for their 3G handsets and hoped to license this technology to other handset markets. "Our main target is the NEC-Matsushita alliance," Mitsubishi Electric senior vice president Michio Nakanishi told a press briefing. "Globally, I expect three to five 3G platforms to come out, and we want to win among them." The move by Toshiba and Mitsubishi Electric also underscores the Japanese electronics industry's ambition to increase its now small share in the global mobile phone market with the new 3G handsets against giants like Nokia Corp. (NYSE: NOK - news) ( NOK) and Motorola Inc. (MOT). "Market shares from now is very important," said Toshiba executive vice president Tetsuya Mizoguchi. "A big chance has come for us with the arrival of 3G age." "We aim to become the `Wintel' of the 3G phone field," Mr. Mizoguchi said, referring to the strong pair of Microsoft Corp. (NasdaqNM: MSFT - news) (MSFT) and Intel Corp. (NasdaqNM: INTC - news) (INTC) in the personal computer market. NEC and the Matsushita group already produce 3G phones for Japan 's top mobile phone service operator, NTT DoCoMo Inc. (DCM), accumulating experience ahead of their global competitors. Toshiba and Mitsubishi Electric said the joint venture will help them shorten the development time of new products and reduce investment costs. The two plan to complete the development of a prototype handset by the end of 2003 and start commercial shipments in the spring of 2004. The two said they will welcome other firms to join the platform development project. Based on achievements of the joint project, Toshiba and Mitsubishi Electric will also study forging broader ties on a global level, such as launching products into Europe, China and other overseas markets, they said. In addition, Toshiba President Tadashi Okamura said the pair will also consider cooperating in production, but continue to market products with each of their brands. Their tie-up move looks a little slow, compared with their biggest rival of the NEC-Matsushita alliance and other global competitors. "We are not slow at all," Mitsubishi Electric president Ichiro Taniguchi said. "The 3G market has just started. And what we'll target is a global standard with handsets that can be used in the world." The 3G platform they will jointly develop is for multimedia-enabled dual-mode phones that can apply standards of UMTS (universal mobile telecommunications system), W-CDMA (wideband code division multiple access)/GSM (global system for mobile communication) and GPRS (general packet radio service). Still, industry observers say they will face a tough task in making the 3G platform competitive enough to make it a global standard, or persuade other possible license users to wait for it. NEC and Matsushita plan to release jointly-developed 3G handsets in the second half of the next fiscal year starting April. Hiroshi Yoshioka, president of Sony Ericsson Mobile Communications AB., a 50- 50 joint venture of Sony Corp. (SNE) and Telefon AB L.M. Ericsson (ERICY), said Wednesday he is interested in forming a license agreement to use the technical designs of 3G mobile handsets recently developed by NEC and Matsushita. Mr. Yoshioka said the possible agreement would prove the cheaper option for the company, instead of developing it within the Sony/Ericsson joint venture. For Mitsubishi Electric, this 3G deal with Toshiba means it has decided to seek alliances in mobile phone operations in two stages -- 3G and 2G/2.5G fields. Mitsubishi Electric has been long holding talks with several phone makers to establish a comprehensive phone alliance. "We have concluded that first we need a scenario to win in the 3G field," Mitsubishi Electric's Mr. Nakanishi said. He said the company is still in talks with other makers for a possible tie-up in the 2G and 2.5G field. "For that matter, we will also study a tie-up with Toshiba in that field," Mr. Nakanishi said. In addition to growing alliance moves by their rivals, Toshiba and Mitsubishi Electric had good reason to accelerate their search to find a partner for 3G. In December, Toshiba and Siemens AG (SI) of Germany canceled a comprehensive alliance agreement formed in November 2000 in the area of next-generation mobile phone operations. Toshiba attributed the cancellation to an unexpected delay in the launch of 3G phone services in Europe. Last month, Mitsubishi Electric drastically slashed its earnings forecasts for the current fiscal year ending March largely due to the slump in its phone handset operations. The company has decided to stop operations at its France - based manufacturing unit, Mitsubishi Electric Telecom Europe SA, by December. On the Tokyo Stock Exchange Wednesday, Toshiba's shares closed down 5.8% at 517 yen ($4), while Mitsubishi Electric's shares ended 2.5% lower at 505 yen amid profit-taking in the high-tech sector following comparatively larger gains in recent trading. The benchmark Nikkei 225 Stock Average lost 1.7% to 11415.31. -- Michele Yamada contributed to this article. Write to Kanji Ishibashi at kanji.ishibashi@dowjones.com Copyright (c) 2002 Dow Jones & Company, Inc. All Rights Reserved.