Mitsubishi Electric said it plans to exit its loss-making mobile phone business, becoming the latest Japanese electronics maker to withdraw from a market dominated by overseas giants such as Nokia.
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Sanyo Electric said in January that it would sell its loss-making cell phone business to Kyocera.
"This is a logical step for Mitsubishi Electric after having been unable to launch a hit model for a while," IDC analyst Michito Kimura said. "But the withdrawal of these two Japanese cell phone makers is not going to make things better for those still in the industry."
With mobile phone demand stagnant at home, more Japanese makers are likely to pull out or merge, analysts said.
Mobile phone service operators such as NTT DoCoMo are cutting subsidies to retailers to keep cell phone prices low and are instead reducing their monthly rates, discouraging handset users from replacing their handsets frequently.
The company said Monday it expected a one-off loss of about $164 million (17 billion yen) on a pretax level for the year ending on March 31 due to the withdrawal. The Tokyo-based company said, however, that the loss is likely to be offset by improved operational efficiency in other businesses.
Mitsubishi Electric had forecast mobile phone shipments of 2.1 million units for the year. That would be less than 0.2 percent of global mobile phone shipments for calendar 2007, according to market researcher IDC.
"Companies like Nokia are selling hundreds of millions of mobile phones, while Japanese companies are fighting each other in a market with annual demand of 45 million units or so," Daiwa Institute of Research analyst Kazuharu Miura said.
"No (Japanese) companies are well positioned for survival."
Mitsubishi Electric, which has already withdrawn from overseas cell phone markets, plans to cease shipments to NTT DoCoMo, its sole mobile phone customer, by September.
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