Before the iPhone arrived in Japan last month, there was enough speculation about its prospects to keep a roomful of bookies busy. The only thing you could say for sure was that there was no consensus. At one extreme were the skeptics: The iPhone would be a disappointment because Japanese handsets already let users browse the Internet, pull up maps, and play music and videos, they said. At the other end were the Mac-philes. They predicted that the iPhone would drive Japanese phone makers back to the drawing board to come up with their own touch-panel screens and downloadable software.

They were both wrong.

For sure, the iPhone doesn't represent a quantum leap in technology. I've spoken with users here who complain that the iPhone is incompatible with the features of many Japanese Web sites because it lacks Adobe's Flash animation software. They also point out that Japanese sites come in two versions—one for large PC screens and one that's been stripped down for tiny cell phones. The iPhone has a screen that's somewhere in between. At times, the gizmo is also slow at pulling up Web pages, and Softbank's unreliable network has been known to cut off in the middle of an e-commerce transaction.

But the iPhone offers something no other Japanese handset has figured out how to do: It's fun to play with. That alone could help it reach an audience far broader than the tech geeks who lined up to be the first to buy the iPhone last month. Many Japanese handset makers don't see how a "feature" such as this might attract self-described technophobes. They tend to either make devices that have so many features they're hard to use, or so few (think of traditional landline phones from the 1980s) for tech-illiterate middle-aged and elderly consumers.

So then are Japanese tech companies rushing to copy the iPhone? Not exactly. One senior mobile telco executive told me that none of the top brass at Japan's leading wirless operator, NTT DoCoMo, personally owns or uses an iPhone. That says a lot because in Japan the carriers tell handset manufacturers like Panasonic, NEC, Sharp or Kyocera what features to install in phones. "Most of the top execs of the manufacturers are over 50 and don't know what their own products do," said the exec, who asked not to be identified.

No doubt DoCoMo has engineers dissecting the iPhone; but hardware engineers are likely to conclude that the iPhone is an inferior piece of electronics. And inside a company like DoCoMo, which has a massive R&D budget, the aversion to anything "not invented here" is strong.

Softbank's Tetsuzo "Ted" Matsumoto would agree. Before becoming a senior executive vice president at Japan's No.3 wireless operator he dealt with the carriers and handset makers as Qualcomm's Japan chief. He saw how the carriers wasted money on R&D and ordered tech manufacturers to develop cutting-edge phones with no worries about cost. To keep carriers happy, manufacturers got used to saying yes. "So they stopped thinking about how to make phones more cost effective," says Matsumoto.

With such deep pockets at their disposal why haven't Japanese manufacturers made an iPhone? Because it's not just about money. "There's no Steve Jobs in this country," says Matsumoto. "He has the power to unite the marketing and technology and business groups. Unfortunately, Japanese companies aren't structured that way."

You could argue that it's too early to be talking about the iPhone's impact. After all, it only launched a month ago. (The iPhone 3G is the first version to sell in Japan.) Apple doesn't release country-by-country sales figures and prohibits Softbank from disclosing the numbers. But Gerhard Fasol, co-founder of Eurotechnology Japan, estimates the two have sold between 75,000 and 125,000 iPhones in the past month and could sell as many as 1 million before the end of 2008.

Those are numbers that would make everyone in Japan's mobile industry pay attention. The fact that Softbank was willing to sell the iPhone suggests that Softbank wants to be an agent for change. "I hope the iPhone's introduction leads to a sense of crisis at Japanese handset makers," says Matsumoto. "They have been coddled in this market. The iPhone could be the trigger that forces them to make changes."

Source:businessweek