BUSINESSWEEK ONLINE : MAY 22, 2000 ISSUE
INTERNATIONAL -- COVER STORY Matsushita's Takashi Kawada: "All We Have Is a Little Time Advantage" Takashi Kawada, president of Matsushita Communication Industrial Co., Japan's largest manufacturer of mobile phones under the Panasonic brand, has high ambitions: To capture 15% of the global handset market and position his company as one of the top three in the industry by 2004. Last year, Matsushita Communication ranked No. 5 globally, having sold 15.6 million phones, according to Dataquest. To achieve this ambitious goal, Kawada, an engineer-turned-manager, has boosted spending on research and development, and expanded overseas operations to 30% of the total. He is now doubling the number of engineers to 5,000, spreading them through Asia, Europe, and the U.S. In a recent interview with Business Week Tokyo Correspondent Irene M. Kunii, Kawada talked about the wireless industry. Here are edited excerpts of their conversation: Q: Japan will become the first country to introduce a so-called third-generation (3G) cellular system next May. Will that be an advantage for Japanese companies like Matsushita Communication? A: We hope Japan will lead. But anyone can purchase hardware the same way they can buy key devices, so all we have is a little time advantage. While Japan may be ahead now, how long will that last? Applications like i-mode [Japan's popular mobile Internet access service] may be advanced, but the question is whether they can be used overseas. Matsushita Communication's strategy is to strengthen development and be first to the market with the best products. In terms of strength, our overseas competitors are of equal strength.... Moreover, Nokia and Ericsson are here in Japan doing research as well. Q: Wireless carriers here say that in terms of quality and designing the smallest, best-balanced handsets, it's hard to beat Japanese products. Is that true? A: Japan is leading in the development of small and well-designed products. But there's no guarantee we will be able to keep this lead in the future. Nokia and others have wonderful products in GSM [a different wireless standard]. So we'll need talented people, engineers and designers, to help pull us out ahead. Stock options and other incentives are things we'll offer to attract them. Q: Already in Japan, wireless phone subscriptions have exceeded those of fixed lines. Will wireless become the main mode of communication? A: The wireless market will grow, but as the number of users increases, we'll run out of bandwidth. Also, fixed lines will become broadband, so they won't become obsolete. Wireless has great advantages, and I think it'll become the everyday form of communication. But it's not much use for high-quality digital broadcast transmissions, for example. So I think we'll use fixed lines for the transmission of movies. That's why my company is investing in fiber to the home. We expect growth in satellite broadcasting and global position systems where fiber will play a role. Q: What do expect from 3G services? A: It'll be possible to send moving images. The transmission speed will be much faster, so it'll become broadband. For example, you'll be able to download and play games and do your e-mail while sitting in the rear of a car. Matsushita Communication has been preparing for this future, so this is where we have an advantage. Q: Japan's wireless market for consumer use is mature, considering that there are already 58 million subscribers [for both cellular and mobile phones]. What are your business plans? A: The growth rate in new cell-phone subscribers in Japan is slowing down, but at the same time there's a shift to higher quality. For example, people are buying i-mode [Net-ready] handsets. In 2000, we'll see the same growth rate. If we can keep putting out these value-added handsets, our business will be fine. The overseas market is changing in terms of both volume and quality. In 1999, global sales of handsets totaled nearly 300 million units, and in 2000 it's expected to reach 400 million. So this is growth market. Next year, we expect to see demand for higher quality handsets to emerge. This means more sales, and we plan to move in and grab a bigger market share. We're planning to step up sales in Europe, China, and Asia, while expanding into North and South America this year. Q: Isn't it tough to make a profit on value-added handsets? A: Compared to a simple handset, the profit margin on new-generation models is less. But in the case of i-mode phones, we've introduced more efficient operations to cut down on costs. We hope to reap the benefits of this later on. Q: What are Matsushita Communication's strengths and weaknesses? A: First of all, we can draw upon the resources of Matsushita Group. It has many key devices, such as image and transmission technology that we can use. It's a consumer-orientated company and has a large overseas market, so it helps us with product development. And as handset development becomes more application-orientated, this group connection will prove beneficial. At the same time, we have areas we need to develop. We must strengthen our global R&D base in Britain, the U.S., and other countries. Our plan is to hire more engineers. We do have technicians in the U.K., the U.S., and China, but we need to increase the number of software engineers. Q: Do you have plans for strategic tie-ups? A: We've already joined Nokia and others in investing in Symbian [a British company that has developed an operating system for handheld devices]. We're cooperating with Nokia in areas that benefit us both, and we may find others areas where we can work together. For example, with the 3G cell-phone system, if you want to move into the market you'll need to invest a lot in infrastructure and the production of many handsets. It's possible that we'll work with competitors in third countries to develop a 3G market. Q: Will you be doing any mergers and acquisitions? A: Before we buy a company, we have to think why we would want to. If it's for the company's engineers, then there's the possibility they'll quit if their company is acquired. So I think alliances are the best route to go. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Wireless in Cyberspace (int'l edition) INT'L COVER IMAGE: Wireless in Cyberspace TABLE: The Clash of the Wireless Titans Begins CHART: Across the Globe, Demand for Digital Cell Phones Is Soaring Japan's Cutting Edge (int'l edition) CHART: Japanese Internet, Cellular, and Wireless Net Users Goliath vs. Goliath (int'l edition) CHART: Western European Internet, Cellular, and Wireless Net Users Sprint's a Web Evangelist (int'l edition) CHART: Total Internet, Cellular, and Wireless Net Users in North America China Surfing (int'l edition) CHART: Asia-Pacific Internet, Cellular, and Wireless Net Users Commentary: Yes, It Really Is the Next Big Thing (int'l edition) ONLINE ORIGINAL: IBM's Mark Bregman: "The Immediacy of Data" Will Change How We Work ONLINE ORIGINAL: Let a Million WAP Users Bloom ONLINE ORIGINAL: Matsushita's Takashi Kawada: "All We Have Is a Little Time Advantage" BW E.BIZ: "Martin Cooper: A Wireless Prophet Who's Pushing 'Smart Antennas'" INTERACT E-Mail to Business Week Online

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