In 1998 the first video call ever over a cordless phone was demoed in a trade show in Japan. Almost a decade before the technology became widespread outside of the country.
In 2000 Sharp launched the world’s first mass-market camera phone 2001. The Matsushita P2101 version became the world’s first proper 3G phone.
Just a few years later, phones like the Sharp 912 became commonplace in Japan, supporting contactless mobile payments, cameras with three or more megapixels, digital tv streaming, and more.
Well, before the iPhone or Android were ever launched it’s a little hard to comprehend that how technologically advanced Japanese phone makers suddenly disappeared.
This kind of baffling headline especially caught my attention.
A few weeks ago Sony’s Xperia business has finally stopped shrinking.
That’s true I guess but another way to look at that phrase would be to say that the company has yet again managed to sell six hundred thousand smartphones in the last quarter.
Less than companies like Samsung sell in a single day or to say that phones make up less than four percent of its revenues.
There’s just not much more shrinking Sony can do at this point.
Even in its home market of Japan they barely made it to the top five, beaten handily by first-place Apple and second place Sharp a company that is now owned by Taiwanese.
In fact, the three remaining Japanese smartphone brands collectively own less than 30 percent of the Japanese market these days and do almost no business outside of the country.
All of which is to say Japanese smartphones are as good as gone.
Here we will explore both their meteoric rise and their catastrophic fall.
The Japan of the late 90s and early 2000s was the perfect breeding ground for the emergence of incredible phones for three main reasons.
The first decades of rapid post-war industrialization turned Japanese conglomerates into veritable giants by 1989.
Japanese companies like Sony, Panasonic, Toshiba made up 32 of the world’s top 50 companies by market capitalization.
Almost all of them were technology companies at the bleeding edge of consumer electronics.
In short, Japan had the ability to create new technologies like no other country.
Second, with over a hundred million citizens Japan had lots of consumers who had plenty of disposable income from their earlier economic miracle and a popular obsession with technology.
That is probably best exemplified by the technology fuel of the animes or their early love for robotics.
There was just an insatiable hunger for new tech in the country and a willingness to pay for it.
Third, Japan’s three large mobile carriers managed to pull something off that their foreign counterparts could only dream of.
They built their own proprietary internet and services ecosystem, people actually wanted to use it in the late 90s.
They replaced standard SMS protocols with their own proprietary email service that they customized to work on phones for texting.
They rolled out custom services for weather stocks, sports, and more.
In 1999 they popularized their own custom mobile internet technologies like Imode.
It was essentially a separate mobile-focused internet using proprietary technologies like CHTML and payments as well as advertising handled by the carriers.
Around 2004, they even started rolling out their Mobile Wallets powered by a custom version of NFC.
It allowed for the widespread adoption of contactless payments in the country, at a time when I was just happy for my Nokia phone could play mp3 files.
In other words, Japanese carriers weren’t just pipes that allowed data to flow between users and the services.
They wanted to use the carriers themselves built and owned.
Most of the popular services controlled the ones that they didn’t own and were generally in charge of driving innovation.
They forced domestic phone makers to include a physical Imode button for example to push their internet subscription service to the masses.
They got them to include their custom NFC chips required for their mobile wallets and so on.
Creating a literal island of hyper-advanced proprietary technologies that were completely removed from the rest of the world.
Fun fact: this evolution away from the rest of the world is called the Galapagos syndrome.
It is a common occurrence with other industries in Japan as well.
Anyway, this incredible combination of consumers could create all those technologies, the carriers, the structure, and the systems that connected them all and brought them all together.
This was what catapulted Japan. Ahead of their competition and the rest of the world until 2008 when it all suddenly started collapsing.
iOS and android came to Japan and both were fundamentally incompatible with the Japanese model specialized carrier-made services for checking the weather or stocks or sending texts with their own.
Custom infrastructure was no longer needed as apps requiring anything but a standard data plan.
It replaced all of them and for the first time the web was not some weird custom Imode version of the web but the real internet in its full HTML glory became usable on phones.
Almost overnight, the entire decades-long custom services model that Japanese carriers have pioneered became outdated.
All the control over innovation together with all the profits that came with it, started to move over to Apple and Google.
Slowly turning carriers into just pipes carrying somebody else’s data instead of end-to-end service providers.
Not only that, but this new form factor also meant trouble for the manufacturers.
But when all phones just became big touchscreens using standard components and a standard operating system, the differentiation potential decreased sharply.
Competition from lower-cost countries like China, Taiwan, and Korea increased sharply and profitability became almost impossible.
To make things worse in 2008, Softbank the nation’s third and smallest mobile carrier decided to go for iPhones in a bid to differentiate itself from its rivals, launching an unprecedented promotional campaign across the country.
That same year, the global financial crisis also reached Japan.
The Japanese economy was already in tatters before the crisis from a decade of economic stagnation chronic debt issues, and declining wages across the country known as the lost decade of Japan.
These conglomerates were shadows of their former cells and each had many other business units to protect.
So many decided that they had better uses for their money than investing billions into this new category of smartphones.
Mitsubishi electric exited the market in 2008 that same year Sanyo sold its phone business to Kyocera, Hitachi and Casio merged with the last Casio branded phone being released in 2013.
Then both got absorbed into NEC which itself got dissolved in 2016.
Toshiba launched its last phone in 2014.
Sharp sold 66 of its shares to Taiwanese Foxconn in 2016.
Panasonic hasn’t released a new phone since it’s a luga i7 in 2019.
Only Kyocera has pivoted exclusively to making rugged phones for business customers.
Fujitsu making the Aero line phones exclusively in Japan, Sharp selling its Aqua’s phones domestically although under Taiwanese ownership.
Of course, Sony is the only company on this list that even tried building a globally relevant consumer-facing smartphone business, and while it’s a little hard to point to a single reason why it didn’t work for Sony either.
I’d argue that they too eventually just found out that there are other businesses like making highly lucrative image sensors or the PlayStations.
They could own both the hardware and the software distribution and have decent margins to be better investments long term than making mass-market android phones.
The mobile wallet system pioneered in 2004 is still popular in the country.
Imode which by the way peaked in 2008 with a pretty insane 80 million subscribers, is still on the screen.
Over two-thirds of the population is still around with NTT DOCOMO announcing that they’d only phase it out in 2026 as feature phones just refused to die in Japan.
You can learn more about the NTT DOCOMO products here.
Though the writing is pretty much on the wall even with a small comeback from Sony in the last generation, Japan will likely never fully recover its once glorious position. I think is quite sad.
You can get the best iOS app store AppValley for custom apps and tweaks.
You may also like to learn about the newer OS called HarmonyOS by a Chinese phone manufacturer Huawei.