Sony Smartphone Facing Difficulties In Japan (NYSE:SNE)

Sony is banking on smartphones to revive its electronics business, which is struggling. According to estimates, Sony’s Xperia Z smartphone has already sold almost a million units. Even though the phone just recently made its United States debut, the phone is already old news in Japan. Japan’s largest mobile carrier, NTT DoCoMo, will soon stop selling the devices.

DoCoMo has turned its attention to a new phone, the Sony Xperia A. DoCoMo started selling Sony’s Xperia Z in Japan as part of the carrier’s spring 2013 collection in February, replacing the Xperia AX of the winter 2012 collection. DoCoMo announced its summer collection of 11 new phones a month later, with the Xperia Z replaced by the Xperia A. DoCoMo representative Mai Kariya, said, “It’s time for a new model. We’re finished with the Xperia Z, and now focusing on the Xperia A.”

Japan’s powerful cellphone carriers remain obsessed with constant model updates. Japan’s three largest mobile network companies expect phone makers to update their handsets every three or four months. This provides Japanese consumers with a wide array of newfangled phones and features each season.

At one point, phones with digital TV broadcast receivers were all the rage and phones without the feature wouldn’t sell. Then, the popular feature was thumbprint scans. Swiveling screens and electronic wallets were the next big thing. Yuichi Kogure, an associate professor in information technology policy at Aomori Public University, said, “This is the worst of Japanese companies’ excessive obsession with the new. But now the mobile phone makers are exhausted.”

In Japanese marketing, this type of fast-paced cycle is commonplace. Short runs of seasonal products create a buzz and then are gone. Nestle’s KitKat candy bar has released limited editions in numerous flavors, including green tea, pumpkin, strawberry cheesecake, wasabi and soybean. Pepsi Japan releases limited-edition drinks annually, such as Pepsi Ice Cucumber and Salty Watermelon Pepsi. The constant feature changes help companies lure customers away from rivals.

The constant demands from carriers for new high-end features and frequent handset renewals taxes the research and development resources of Japan’s phone makers. It is impossible for manufacturers to achieve the economies of scale necessary to justify the high development costs and the slim profit margins. Once stock runs out at retail stores across the country, the Xperia Z model will no longer be available in Japan. Mr. Kogure said, “I think more people here are starting to realize that the way its mobile phone industry works is unsustainable. And manufacturers like Sony have long realized that they can’t remain beholden to the whims of the Japanese market.”