European mobile market faces Japanese challenge

NEC, cleared the decks late last week by selling its mobile phone production division in the UK and preparing to get rid of its other overseas manufacturing divisions. The company will then concentrate on research and development. NEC said when it announced the sale that it is aiming to get 15 per cent of the international mobile market.

Matsushita, which trades here under Panasonic and other names, quickly followed with the announcement that it, too, is aiming at 15 per cent of the international market.

Both companies aim to pull off the traditional Japanese success in consumer products. They currently hold 30 per cent each of the booming Japanese 3G i-mode market.

Mat Hanrahan, analyst with Bloor Research, said: "Japanese handsets, you've got to watch them. Getting out of manufacture and concentrating on the design and functionality is a good idea.

"When the bandwidth becomes available towards the end of next year, no one really knows how the 3G phones will be used or what applications will be popular - so if you're flexible, fast, and not tied to a particular model in the factory, you've more chance of success," he added.

Robin Duke-Woolley, analyst at telecoms research company Schema, agreed. "Once the 3G market is established the Japanese will rip it up. They're very strong competitors and will be the biggest threat to European suppliers."

He added that Japanese telco DoCoMo had a strong interest in expansion into Europe and the US. This point was echoed by Takashi Kawada, president of Matsushita's mobile phone division, who said that DoCoMo's expansion, the spread of i-mode and the launch of W-CDMA, will provide a significant business opportunity.

NEC has sold its manufacturing facility in Telford to Celestica, the electronics outsourcing manufacturer, which will take over the 400-plus work force. NEC will retain its two UK R&D facilities in the M4 corridor.