Nokia, Sanyo Team To Topple Samsung In CDMA

TOKYO — Sanyo Electric Co. Ltd. and Nokia Corp. announced Tuesday (Feb. 16) that they have reached a preliminary joint-venture agreement to merge their respective CDMA mobile-phone businesses in a bid to unseat CDMA market leader Samsung.

“The target is to become the top CDMA company in the world,” said Takenori Ugari, president of Sanyo Telecom Co.'s Personal Electronics Group. Sanyo first sounded out Nokia about the possibility of the joint venture last summer.

The move would spin out and merge the companies' cdma2000-related operations but keep their GSM and W-CDMA operations internal. The joint venture would comprise Nokia's CDMA business in San Diego and Sanyo's CDMA-related operations bases in Osaka and Tottori, Japan. The partners intend to sign the definitive final agreement in the second quarter, with the new business beginning operations in the third quarter.

“This is a preliminary agreement of our partnership in a new company. The details are being finalized. But the new entity will be operated in the spirit of equal partnership,” said Timo Ihamuotila, senior vice president in charge of the CDMA business unit of Nokia's mobile-phone division.

“The exact branding strategy is still under discussion, but we won't go for a new brand," Ihamuotila added.Sanyo and Nokia have complementary strengths and products. Sanyo focuses on mid- to high-end models, while Nokia is strong in high-volume units. According to Sanyo's estimation, Nokia ranked third, with a 13.3 percent share, in the global CDMA phone market on a unit basis in the first half of 2005, while Sanyo was sixth, with 7.3 percent. Combining those shares would yield 20.6 percent, high enough to rival Samsung.

The joint venture would target shipments of 35 million units or more in its first year and would increase shipments to 50 million units as soon as possible after that, said Ugari.

Japanese companies have struggled to find a workable business model for mobile phones, and aside from Sharp and Sanyo, few have been able to make a profit. “The number of product shipments by Japanese companies is far below top-ranking suppliers' figures,” Ugari said.

Second-tier suppliers currently ship 50 million units per year, but Sanyo's total yearly shipment, profitable as it is, is a little more than 12 million units. “Japanese companies' production cannot stay as it is. This agreement is a restart for us,” Ugari said.

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