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Despite a not-so-stellar third quarter for Apple (AAPL 5.98%), Japan was a bright spot for the iPhone maker. Apple now commands a record 34% market share in the country once dominated by domestic brands. It's the first time a smartphone brand has surpassed 30% market share in Japan in a decade, and Apple is poised to grab even more.
A clear winner
Japan's smartphone market has typically been dominated by domestic companies including Sony and Sharp, and until this past quarter Apple didn't hold much sway in the country.
Judging by the Counterpoint Research graph below, it's easy to see that Apple has dramatically changed its position.
Source: Counterpoint Research.
Apple skyrocketed from third place in Japan's mobile handset market to the top spot in part because the iPhone finally launched on NTT DoCoMo (NYSE: DCM), the island nation's largest wireless carrier. The move allowed Apple's iPhone 5s to become the best-selling smartphone in Japan in September, with about half a million in sales.
But it wasn't just the 5s that tipped the scales for Apple. To compete with DoCoMo, other Japanese carriers offered massive discounts and incentives on the iPhone 5, grabbing consumers who didn't want to endure the two-week wait for the 5s.
Apple is expected to maintain its new lead in Japan, and a Gartner analyst told Reuters he thinks the company could grab as much as 50% of smartphone market share in the country.
iPhone 5s. Source: Apple.
Japan represented about 10% of Apple's global revenues in the third quarter, so its new position in Japan isn't going to change things in any major way for the company. Still, Japan was Apple's fastest-growing geographical segment last quarter, sequentially and year over year.
As supply for the 5s increases, investors should see more sales on DoCoMo's network. The carrier has more than 60 million mobile subscribers, with about 20 million of them using Android devices. Considering the carrier hasn't officially sold an iPhone on its network since the phone debuted in the country in 2008, there should be some pent-up demand from customers looking to switch from the green droid.
DoCoMo CEO Kaoru Kato said in an earnings call that the "iPhone effect is clearly working," and customer turnover has fallen by 30% from last year. The company will likely continue pushing the device to customers to keep that trend going, which will obviously benefit iPhone sales in the current quarter. Though Japan isn't a large market for Apple, investors should be happy to see the company can make large gains in markets previously dominated by domestic brands. Apple may want to take note of its own strategy in Japan and try to apply it to China and other markets where domestic brands still reign.
