Having grown weary of competing in the increasingly commoditized market for analog cellular telephones, Fujitsu Network Transmission Systems Inc. is retrenching and restructuring its phone division in hopes of making a comeback with digital.
The Richardson, Texas-based company will wind down the production of its analog phones by the end of March and has laid off some support staff.
The company emphasizes that it will honor all contracts to supply, repair and service its phones, and that the division is not closing down. Fujitsu currently produces seven different phone models.
Greg Wortman, director of marketing at Fujitsu Network, attributed the company’s decision to the difficulty it has in making a profit on analog phones when cellular carriers can shop from multiple suppliers and bargain down phone costs-and vendor profit margins.
While selling systems-level infrastructure equipment produces good margins, handsets are becoming a commodity, he added. The problem is aggravated when a vendor doesn’t supply both infrastructure and terminal products as is the case with Fujitsu, Wortman said.
Tom Ross, a consultant at Washington, D.C.-based Economic and Management Consultants International Inc. said, “The price of handsets is going down rapidly and it’s hurting everybody.”
“The top three or four handset manufacturers control the vast majority of the market,” he said.
According to EMCI research, handset vendors Motorola Inc., Ericsson Inc., Nokia Mobile Phones Inc. and Audiovox Cellular Communications have a combined market share of about 75 percent.
Fujitsu reportedly has less than 1 percent, making it difficult for the company to generate economies of scale or make up for a low margin per handset with a large volume of sales.
“Carriers want to buy in bulk at a discounted rate. It’s hard for smaller manufacturers to make that volume at a discount,” Ross said.
Fujitsu’s “intention is to refocus on R&D to develop digital phones and infrastructure,” Wortman said. “We want to return with a critical mass.”
But Fujitsu has not decided which digital technology it will re-enter the arena with, according to Wortman. The company is experienced with Global System for Mobile communications and Time Division Multiple Access standards, he said, and has a license to manufacture Code Division Multiple Access technology as well.
“We’re watching the market very closely,” Wortman said. “We’ll come back with a product that closely matches the market.”
He said his company hopes to introduce a digital product in late 1997 or early 1998.
But EMCI’s Ross believes Fujitsu may have problems re-entering the market after such a long absence. “Their name recognition could all but wither away,” he said. Many digital subscribers will be upgrading from analog systems and they may not remember Fujitsu, he added.
