Toshiba to rethink position in China's cellphone market, executive says

Toshiba Corp, Japan's fourth-biggest cellphone maker, will write down as much as ?5 billion (US$48 million) in handset inventories in China because it cannot compete with price-cutting local rivals, a Toshiba executive said.

Toshiba's handset unit is losing money in China, the world's biggest mobile market, because low-cost phones are more popular, said the executive, who spoke on condition he would not be identified. Rivals in China include local makers such as Ningbo Bird Co (波導) and the world's biggest handset maker, Nokia Oyj. The US handset business is also unprofitable, the executive said.

Toshiba is losing customers even as technology market researcher Gartner Inc predicts handset unit sales will rise 12 percent this year. In January, Toshiba said its global cellphone sales in the business year ended March 31 may fall 11 percent to ?187 billion, with 5.4 million units shipped, down 18 percent. More than half of its cellphones shipped to Japan and most of the balance went to China and the US, the executive said.

A charge of ?5 billion would represent a fifth of the company's forecast earnings for the year ended March 31.

Toshiba holds 7.8 percent of the market share in Japan, making it the fourth-biggest cellphone maker in the domestic market after NEC Corp, Matsushita Electric Industrial Co, and Sharp Corp, according to researcher Gartner Japan.

Toshiba's share in China is now "negligible," said the official. Global market share is between 1 percent and 2 percent, the executive said.

"Japanese makers accounted for less than 6 percent of the 80 million handsets shipped in China last year," Michito Kimura, a research analyst at IDC Japan said.

"It's not just Toshiba that's struggling. All of the Japanese makers are challenged because they focus on high-end products shipped in low volume," and because cheaper alternative networks, such as Little Smart cordless phone services, are eroding demand growth for cell phones, Kimura said.

Toshiba will continue to focus on high-end products in China, the executive said.