The decision by Japan’s three mobile operators to move away from handset subsidies is putting pressure on the country’s handset suppliers and could lead to consolidation amongst the smaller players, reports the Financial Times (FT) today. The report says that Japanese handset sales have fallen sharply since Softbank launched its ‘White Plan’ tariff in January 2007. The tariff eschewed handset subsidies in favour of a low monthly subscription and the strategy was quickly copied by Softbank’s two larger rivals, NTT DoCoMo and KDDI. According to figures from Jeita, Japan’s electronics industry association, handset sales dropped 29.3 percent in the year to July 2008, while the average lifespan of a Japanese handset is now over three years. Market-leader NTT DoCoMo cited a reduction in handset subsidy costs as partly responsible for a 41 percent jump in profit in its most recent financial quarter.

The FT notes that with the exception of Sharp – Japan’s handset market-leader – vendors may be looking to merge in order to cope with the slowdown. Other vendors in the market include Panasonic, Fujitsu, NEC and Toshiba, and recent reports suggest that even Apple’s iPhone is suffering a slowdown in sales in Japan. Some consolidation in the market has already occurred: Kyocera bought Sanyo’s mobile business in January this year. The FT report adds that the vendors are also looking to cope with the downturn by expanding into overseas markets. Sharp entered China this summer and is targeting sales of 13 million in the country by 2010.