Toshiyuki Ueyama, Director of Chiba University of Commerce Research Center for Economics

When people ask me to take photos at tourist spots, I am often given a smartphone instead of a digital camera. Also, when I think someone is listening to music on a music player on the train, it turns out to be a smartphone.

Many people are probably aware that smartphone-related companies are entering various markets. There are markets where businesses that have continued to operate up until now are under threat from new entrants, smartphone-related companies, without even needing to bring up Michael Porter's Five Forces. In particular, unexpected new entrants can cause companies operating in the market to be slow to respond. A well-known example is the entry of mobile phone and smartphone-related companies into the music player business mentioned above.

On the other hand, Apple, which already had a best-selling product, the iPod music player, launched the iPhone into the same market, and at first it seemed like a cannibalistic business strategy. Looking back, it seems like that was the best choice.

Currently, the penetration rate of smartphones is increasing worldwide. Even within Japan, the transition from older mobile phone terminals is progressing. The 2012 Information and Communications White Paper even goes so far as to use the word "complete" to describe the development of Japan's ubiquitous network environment due to the spread of smartphones. It also states that the proportion of smartphones in the number of mobile phone units sold in the global market is expected to exceed 50% by 2015.

It can be said that this tiny smartphone has incredible potential. It can be said that it has made a computer palm-sized and portable. Before smartphones were released, there were occasional students who would send in their reports as a last resort by writing them on their mobile phones. However, as expected, the reports were extremely short and, naturally, of low quality. However, things are different now. With a smartphone, it is possible to write reports and even check graduation theses. It is said that tablets are encroaching on the PC market, and the data clearly shows this, but it can be inferred that smartphones are encroaching on the PC market along with tablets.

Smartphones are not only likely to erode the markets for portable music players and personal computers, but they may also take over other product markets, and new entrants may suddenly appear. As mentioned at the beginning, digital camera manufacturers are being influenced by smartphones at the same time as the wave of lower prices. Although the quality of smartphones is not as high as that of popular compact digital cameras, smartphones can be used to take photos that can be posted on social media or blogs without any problems. Digital camera manufacturers have also belatedly begun to shift their focus to luxury compact digital cameras.

It is still fresh in our memory that smartphones have completely changed the gaming industry. The spread of games using smartphones has caused a significant drop in sales of game consoles and their content, regardless of whether they are home or portable. As a result, there has been a large migration of game content creators for home and portable game consoles to companies that make games for mobile phones and smartphones.

Similarly, the car navigation industry was also famously shaken by a major shock. They must have been surprised by the new entrant that appeared from an unexpected place. Companies offering car navigation systems are developing products with the hope of surviving by linking car navigation systems with smartphones. Furthermore, although the market is not large, smartphones can also replace voice recorders. Other well-known industries and products that entered the market include watches, notebooks, pedometers, wallets, commuter passes, tickets, and dictionaries.

As we have seen, smartphones have the attributes of computers, so they are like chameleons that can transform into various things just by downloading and installing applications. The range of uses for smartphones is expanding, such as turning them into safety alarms to protect women and children, or as monitoring tools for children and the elderly.

In the business world, smartphones can become competitors to traditional business tools. Not only can they be used as general-purpose terminals in place of PCs, but there are also cases where they are used for specific tasks. For example, because they can read barcodes and QR codes, employees on the sales floor can use them to check inventory, and by connecting peripheral devices to the smartphone, it can be turned into a POS register or a credit card payment device. Companies need to be even more vigilant about the threat of unexpected new entrants.

In the global smartphone hardware market, Japan's share is extremely small, pushed aside by the two largest players. Therefore, Japanese smartphone manufacturers are at risk of being "put on the back burner" by smartphone parts suppliers, which has actually led to delays in parts procurement, which in turn has led to delays in manufacturing and, as a result, delays in launches.

Smartphones are expected to continue to reign as an important device that makes up ubiquitous networks for the time being, but what strategies could Japanese smartphone manufacturers adopt? It is not acceptable for smartphones to suffer the same fate as mobile phones, which were called "galakei." However, there are signs that smartphones will continue to be sold at high prices, just like PCs with unnecessary software installed.

In areas or layers such as smartphone hardware, operating systems, applications, communication services, and content, vertical integration has been centered on carriers, and it appears that influence is concentrated there, but there are companies like Apple that have a strong voice backed by the appeal of their unique products. In such an environment, what kind of long-term vision will Japan's smartphone-related companies have for the future? Do they have the leeway to adopt strategies like those featured in "The Innovator's Dilemma" or "Reverse Innovation," or strategies that are conscious of such things? Japan's information and communications industry is starting to fall behind the global trend, and the environment is changing rapidly, but for individual smartphone-related companies, now may actually be an opportunity.