Most companies would find it very unlikely to find growth in Japan’s struggling economy, but Apple – makers of the globally iconic iPhone – is finding positive growth in the area amid the country’s economic uncertainty. In the past two years, Japan has emerged as Apple’s fastest-growing region, outpacing growth in the United States and the booming economies of Greater China. Japan is also home to Apple’s biggest profit margins, and the only one of Apple’s five regions where operating profit grew in the past fiscal year.
How is this happening?
For one, owning an iPhone in Japan is not really about the features and specifications of the phone (although that helps) – it’s just about owning a brand name, and it seems that almost everybody wants an iPhone. Supported by strong marketing efforts and heavy subsidies from Japan’s main mobile carriers, Apple’s iPhone brand taps into Japan’s fervor for brand-name goods, similar to how Japanese shoppers once flocked to Louis Vuitton bags and Burberry scarves. “Apple’s brand is just overwhelming here,” said Eiji Mori, a Tokyo-based analyst at BCN Inc. “It’s not about specifications. It’s not about rationale. It’s about owning an iPhone.”
Apple sales are even due another boost, as NTT Docomo – Japan’s leading mobile carrier – began offering the iPhone for the first time to its 61.8 million customers this September. But even before that, the iPhone was already Japan’s best-selling smartphone, with a 37% market share in the six months ended Sept. 30, effectively beating the “feature phones” that used to be put out by Japanese manufacturers, and led the market for so long, before the iPhone topped them. “I had a Sharp Aquos feature phone, but I wanted to try out the iPhone once,” said Mika Kasai, 36, as she chose an iPhone at a Docomo shop in Tokyo last week. Kasai considered buying a Sony smartphone, but opted for a gold iPhone 5S despite a four-week wait.
Timothy Arcuri, a managing director at Cowen & Co., estimates that Apple will sell 11 to 12 million iPhones in Japan in 2013, roughly double from an estimated five to six million in 2012. He expects that number to grow to about 20 million iPhones next year. “They’re going to be close to 50% market share next year” in Japan, said Arcuri. Two factors in the iPhone’s Japanese success are most probably the relative wealth of the population and the degree to which its phone market resembles the U.S., a “postpaid” market where the phones are subsidized by carriers and sold with multiyear contracts. “The U.S. and Japan are unique in that sense,” says Sanford C. Bernstein & Co. analyst Toni Sacconaghi.
[via Wall Street Journal]