Counterpoint Research is attending Japan Mobility Show from 25th to 28th October 2023
Our Senior Analyst, Soumen Mandal will be attending the Japan Mobility Show 2023 at Tokyo Big Sight, Tokyo, Japan. You can schedule a meeting with him to discuss the latest trends in the technology, media and telecommunication sector and understand how our leading research and services can help your business.
When: 25th to 28th October 2023
Where: Tokyo Big Sight, Tokyo, Japan
About the Japan Mobility Show:
The inaugural edition of Japan Mobility Show will feature the participation not only of the automotive industry but also of established companies and startups from multiple other industries whose activities extend beyond mobility. A total of 475 enterprises will be participating, far exceeding the 192 companies that took part in the final edition of the Tokyo Motor Show in 2019.
Japan Mobility Show aims to serve as a unique venue for collaboration—a show where exhibitors and visitors can discuss and envision, together, what the future will look like.
Click here (or send us an email at contact@counterpointresearch.com) to schedule a meeting with them.
Volkswagen Group led in connected car sales, closely followed by Toyota Group.
4G cars captured more than 95% of connected car sales in 2022.
Tesla broke into the top-10 connected car sales rankings for the first time.
New Delhi,London, San Diego, Buenos Aires, Hong Kong, Beijing, Seoul – April 24, 2023
Global connected car sales* grew 12% YoY in 2022 with the share of connected cars in the overall car sales exceeding 50%, according to the latest research from Counterpoint’s Smart Automotive Service. The US remained the strongest market for connected cars followed by China and Europe. These three markets accounted for nearly 80% of the total connected car sales globally in 2022. Despite having a relatively small share of connected car sales, Japan experienced the highest growth in connected car penetration.
Commenting on the market dynamics, Research Analyst Abhilash Gupta said, “The penetration of connectivity in cars improved during 2022 after struggling in 2020 and 2021. In 2022, new facelift versions of older models like the Honda Civic, Toyota Corolla, Ford Escape and Chevrolet Equinox were introduced with upgraded 4G connectivity and new features. Some prominent features include remote lock/unlock, remote engine start/stop, climate control, vehicle status, location tracking, geofencing, emergency assistance, in-cabin music, video streaming, and over-the-air updates. Next-generation vehicles are being introduced with various connected and autonomous features that require high-speed internet access available through 5G. However, as of now, 5G remains a niche, available only in premium cars like the Ford F-150 Lightning, Cadillac LYRIQ, Mercedes-Benz EQS, Audi e-tron GT, BMW iX and GWM Haval HG.”
Gupta added, “With consumers’ focus shifting to connectivity in the car, non-connected car shipments are steadily declining. The top five automotive groups accounted for nearly half of the connected cars sold in 2022. Volkswagen Group led the charts in terms of connected car sales volume, closely followed by Toyota Group. Tesla broke into the top 10 for the first time.”
Commenting on the market outlook, Senior Analyst Soumen Mandal said, “The shift towards digitization in cars is increasing at a rapid pace and is visible in the consistent rise of connected car penetration globally. Currently, 4G dominates the connected car market with almost 95% share. But as the automotive market is transitioning towards electrification, software-defined vehicles and autonomy, the need for seamless and faster in-vehicle connectivity will be fulfilled through 5G. By 2030, more than 90% of connected cars sold will have embedded 5G connectivity. Connected car sales are expected to grow at a CAGR of 13% between 2022 and 2030.”
*Sales here refer to wholesale figures, i.e. deliveries out of factories by respective brands, and consider only passenger cars with embedded connectivity.
The comprehensive and in-depth ‘Global Connected Car Tracker,Q1 2019-Q4 2022’ and ‘Global Connected Car Forecast, 2019-2030F’ are now available for purchase at report.counterpointresearch.com.
Feel free to reach us at press@counterpointresearch.com for questions regarding our latest research and insights.
Background
Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media, and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects, and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.
Joining the US-led effort to restrict chipmaking equipment exports to China, Japan has put in place restrictions that are more draconian than that of the US and where the Japanese state has effectively taken control of the country’s semiconductor capital equipment market.
Japan is imposing export restrictions on 23 types of equipment used to make semiconductors. But instead of limiting the restrictions just to China, it has flipped the entire industry on its head.
Instead of being able to ship to anyone unless told not to, now the Japanese companies can’t ship to anyone unless they are allowed to.
This effectively gives the Japanese trade ministry life and death power over semiconductor equipment, which may prove to be detrimental to the local industry’s health in the long run.
Unlike the US Department of Commerce, where the presumption is denial of a license, it seems the Japanese Ministry of Trade will operate under the presumption of granting licenses.
Any other mode of operation would be highly detrimental to its own industry.
This represents a bigger step than what many analysts were expecting from Japan. It will really hinder China’s ability to manufacture chips at non-leading edge nodes below 20nm.
This was the weakness of the new measures announced by the US last October, as at 20nm-10nm, it is possible to build a fab using non-US equipment.
However, when you add Japan into the mix, this then becomes virtually impossible and there will be no point in buying machines from ASML, meaning that the combination of the US and Japan represents an effective embargo.
This means that China will now have to rely on domestically produced capital equipment which is going to be a real problem.
Although Huawei claims to be able to manufacture at 14nm, it did not say whether it could do so at volume with good yields which is what is required for Huawei to be able to use these chips economically in its products.
The net result is that Japan’s actions make the US actions far more effective and deal a blow to any workarounds that the Chinese may have found to build fabs without US equipment.
This reinforces the view that China is in real trouble when it comes to semiconductors, which will hamper and slow its rise as a technological superpower.
That being said, there will be a likely bounce in the Chinese economy in H2 2023, although the lack of action on stimulating the economy remains a cause for concern.
If it comes, the rising tide will lift all boats and especially the beleaguered technology sector.
Micron: A display of weakness
China’s review of Micron on “national security” grounds is a tit-for-tat retaliation that shows just how weak its hand is in the game of semiconductor brinksmanship.
The Cyberspace Administration of China (CAC) has said it would review Micron’s imports into China to ensure that using its products would not compromise the security of its information infrastructure.
It seems that this move has nothing to do with national security but is instead an attempt to damage US interests in China without compromising its own technological ambitions.
If China was really concerned about “national security”, it would be reviewing many other companies. But a blockade on the import of products from many of these companies would hurt China just as much as the US, if not more.
In the case of Micron, China can still buy the same products from South Korea or Japan with no ill effects on its development of technology.
This is precisely why Micron has been targeted. It is unlikely that other companies that export chips to China will be targeted as it would do more harm than good.
The move is also unlikely to give China much in the way of negotiating leverage and so this will prove to be an isolated incident that is pretty irrelevant to the overall technological and ideological struggle.
(This is a version of a blog that first appeared on Radio Free Mobile. All views expressed are Richard’s own.)
For an automotive market like Japan, which is the base of global giants like Toyota, Honda, Nissan and Mazda, and saw early entry of hydrogen-fuel vehicles, it is easy to assume that the country would be a big market for new energy vehicle (NEV) makers. But the numbers tell a different story. According to the latest Counterpoint Research Global Passenger Vehicle Trackers, the NEV penetration in Japan is around 1% compared to around 15% in China.
The total NEV sales in Japan from 2018 to 2021 were just 4% of the total sales in China in 2021. It is easy to conclude that Japan is not an attractive market for EV makers. But opportunities can be found when taking an in-depth look into the market. In fact, the Japanese government is now actively pushing EVs by providing subsidies to set up EV charging stations.
FCEV vs BEV: What will be the future trend?
The debate on fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs) has been going on for years now. Many in countries like Japan and South Korea still believe that hydrogen fuel will be the future, while China has been pushing BEVs. Leading NEV maker Tesla has also bet on BEVs and made it to the top of the China NEV market by achieving almost 50% share in H1 2022.
The FCEV has many advantages but the BEV can be scaled up in a shorter time due to a more favorable infrastructure construction cost for the government and enterprises. Moreover, the BEV beats the FCEV both in terms of unit price and cost of use. Given the current macroeconomic headwinds, any plan to set up FCEV infrastructure will find few takers in the government or industry in the near future.
The Nissan Leaf BEV was the best-selling NEV model in Japan in 2021, with more than twice the sales as the second-placed Mitsubishi Eclipse Cross, a plug-in hybrid electric vehicle (PHEV).
Why BYD decided to enter Japan electric car market?
China’s BYD recently launched three electric car models in Japan – Seal, Atto 3 and Dolphin. As discussed above, Japan’s NEV market is comparatively small. So, what are the factors driving BYD’s Japan electric car market entry? We discuss them below:
Not a newbie in Japan’s vehicle market: BYD is already selling its electric buses in Japan. Furthermore, through tie-ups with Japanese companies including Toyota, Kansai Electric Power Company and Keihan Bus Company, BYD has a better understanding of the country’s consumption patterns.
Cost competitiveness: Within the same price segment, BYD can offer better vehicles in terms of mileage and other performance parameters.
Investment in charging infrastructure: Either by itself or together with the government, BYD has to increase the number of charging stations and charging points. The difference between China and Japan here is that there is a higher proportion of private charging points in China. But in Japan, more public charging points are needed due to the higher cost of land and parking slots. That is why the Japanese government is providing subsidies to set up EV charging stations.
Localization: The Japanese market has a unique taste in consumer electronics, such as the consumers here prefer to buy the iPhone SE while their counterparts elsewhere are likely to favor bigger-screen smartphones. The same is true for vehicles. The Kei car category, created by the Japanese government for the smallest permissible cars, is popular among local car users. Of the three models launched by BYD, the Dolphin is very similar to a Kei car. The key reasons why Kei cars are welcome in Japan include:
Streets are narrow in Japan, especially in major cities.
There are many mountain roads in Japan.
Parking space is scarce.
China EV makers going overseas: Challenges and opportunities
Unlike the traditional internal combustion engine (ICE) vehicle era, China’s vehicle makers are big players in the NEV arena. Core NEV technologies like battery, motor and electronic control systems are all now being developed in China also. It is undeniable that China’s NEVs now dominate the market volumes globally. China’s NEV companies and even traditional car companies consider it strategically important to enter overseas markets.
Besides China, Europe and US are the other major markets with good EV penetration and growth. The rest of the markets are still in an educational phase. Therefore, some caution is needed for the NEV makers planning to enter markets like Japan.
The acceptance of the NEV: Although the safety levels of BEVs, PHEVs and FCEVs have improved and reached that of ICEVs, it still needs time for a large number of consumers to trust NEVs, especially in the markets dominated by ICEV manufacturers. But the situation is gradually improving with more and more friends, relatives or other known people using NEVs.
Cost: Many times it is the cost that triggers a purchase or replacement decision. For Chinese NEV makers, cost control is important as still many key parts are made only by a few players.
Better products: Besides the core technologies for the car’s hardware, new applications such as smart cockpit, driving assistant and driverless option are being introduced on the software side to improve the car user experience. Vehicle makers must continue to focus on removing key pain points of target consumers.
Brand power and market competitiveness: Car consumers are more willing to pay a premium for a known brand name. At the same time, many are looking for more bang for their buck. Therefore, it is important for car makers to study consumer behavior and composition of the market they are planning to enter.
Investment and policies: The NEV ecosystem in many markets is still not mature. Huge investments are required to develop this ecosystem, whether it is manufacturing units, service centers, points of sales or charging stations. With the goal of “zero carbon” in mind, many countries provide incentives to NEV makers and consumers, though the risk of policy change always remains.
Japan’s smartphone market showed clear signs of recovery in Q3 2020 after the COVID-induced low point in the previous quarter, according to Counterpoint’s Japan handset tracker. Smartphone sales plummeted 24% YoY in Q2 2020 but went up 10% YoY in the following quarter.
Japan reported an average of 600 daily new cases during the first wave of COVID-19 in March, but these surged to above 1,000 per day during the second wave in August. Despite this, the smartphone market managed to rebound and return to the pre-virus levels. This rapid recovery was driven by the latest iPhone SE and many other mid-and low-end smartphones aimed at increasingly cost-sensitive consumers. Moreover, the country’s overall consumer sentiment started to improve slowly in Q3 2020 as the Japanese government avoided strict measures that would have impacted the economy.
Exhibit 1: Japan Smartphone Unit Sales
Source: Counterpoint Japan handset tracker
Apple lost share due to delayed launch of new iPhone
Apple, the top smartphone player in Japan, saw its market share decline to 45% in Q3 2020 from 50% a year ago due to the delayed iPhone 12 launch. Samsung fared well, with its market share increasing from 5% in Q3 2019 to 8% in Q3 2020, driven by the Galaxy A20 and other A-series models. OPPO was another brand that saw a gradual expansion, with its market share increasing from 2% in Q3 2019 to 5% in Q3 2020.
Apple’s iPhone sales were driven by the iPhone SE 2020, which solely captured 26% of the total market in Q3 2020. The iPhone SE 2020 offers compact design — appealing to the iPhone users who prefer small displays with new hardware — at low prices. The combination of these attractive features led to remarkable results in the wake of the pandemic.
Exhibit 2: Japan Smartphone Brand Share
Source: Counterpoint Japan handset tracker
Low and mid segments eye new growth opportunity
The Japanese smartphone market in Q3 2020 saw the premium segment contract, but the low and mid segments expanded. The sub-$150 price band jumped from 5% in Q3 2019 to 19% in Q3 2020, helped by the Samsung Galaxy A20 and Fujitsu Arrows Be4. In contrast, the $600 and above band plunged from 35% in Q3 2019 to 18% in Q3 2020. There were some favorable developments that took place in the low and mid segments, like Apple’s iPhone SE 2020 performing well and Samsung and OPPO introducing a wide range of devices. Premium smartphones have dominated Japan’s market for past several years. The pandemic offered a new opportunity for the low and mid segments to lead the overall market.
Exhibit 3: Japan Smartphone Price Band Share
Source: Counterpoint Japan handset tracker
Q4 outlook: Apple to drive Japan market with iPhone 12
We expect Q4 2020 to maintain momentum, led by the iPhone 12, which was released during this quarter. The iPhone 12’s initial sales have been strong, signaling its Q4 sales will outperform those of the iPhone 11. We see multiple factors in play for the potential success of the iPhone 12 – the first 5G iPhone, pent-up demand created by the pandemic, and a large number of iPhone users wanting to replace their devices.
Fujitsu to sell its handset business – will there be more to follow?
Rumors are spreading that Japan’s Fujitsu has decided to sell its subsidiary operating the mobile phone business. The bidding process may start next month. Fujitsu already categorized its mobile phone business as non-core and spun-off the division into a subsidiary in February 2016. Fujitsu has now decided to sell-off the entire handset business.
In early 2000, there were about 11 Japanese companies involved in the handset sector, including Fujitsu. Japanese handset makers grew to almost 20% of the global handset market at its peak. The domestic market was dominated by these local brands. Japanese brands ruled the local market with more than 80% for a long time. Since 2009, however, Japanese makers began to struggle due to the rapid growth of Apple. Japanese makers slowly exited the global market and their share declined. This happened even in the Japanese market to around 30%.
Japan Handset Market Share by OEM origin
Macroeconomic factors of the Japanese economy seem to have influenced the Japanese mobile phone companies to some extent. The aging of the Japanese society progressed rapidly and Japanese companies showed a tendency to avoid big changes. Japanese makers focused more on feature phones, despite the fact that smart phones were already attracting attention. And this tendency of Japanese companies continued until 2016.
2009 is the year the Japanese handset market had finally started to change from a feature phone market to smartphones. Yet Japanese companies did not respond actively. This phenomenon accelerated each year and now the share of smartphones sold among overall handsets has exceeded 90% for the first time during 2017. Of the original 11 Japanese mobile phone companies in early 2000, only five companies, remain including Sony and Kyocera.
External changes in the market are important but the response or internal strategies of a company are important factors determining success and failure as well. Japanese companies are building a product portfolio centered on mid- to low-end products, so operating margins are lower than previous generation products. Japanese makers have fallen into a vicious cycle in which they are forced to change their R & D investment more conservatively due to a drop in market share and a drop in sales margin. Considering the needs of customers, investing in the latest technology is an important factor to succeed in the mobile phone business.
According to our analysis on model sales, only Sony has a 50:50 ratio of premium and mid-tier phones, while Sharp and Kyocera focus on mid-tier products in the Japanese market. Currently Sharp and Kyocera’s earnings are not bad as demand for mid-end phones has soared since the transition from feature phones to smartphones has been rapid. However, in the a long-term, demand for premium phones may rise as first time smartphone users show a trade-up trend. If Japanese makers do not act accordingly, more may follow Fujitsu’s exit.
The Japanese handset market is changing – The proliferation of smartphones, Price diversification, and the exit of marginal players
Analysis of the handset market share in the Japanese market clearly shows that the market is changing. In 2016, Fujitsu’s market share in Japan was about 7%, ranking fourth, and Fujitsu’s main products were targeting the >$400 price band. Customers belonging to the >$400 price band will likely be absorbed by Apple, Sony and Samsung.
[2017 Q2 Japanese Smartphone Shipments]
Apple, the strongest player in Japanese market, is also targeting the mid-range market with its iPhone SE and iPhone 6. Failure to fully address all segments of the market will lead to remaining players getting squeezed out almost entirely.
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