Sony and Ericsson have finalized the terms of their SEMC mobile handsets joint venture.
Swedish telecoms equipment firm Ericsson and Japanese electronics group Sony have agreed the terms under which they will merge their mobile handset businesses. The deal, preliminarily announced in April, will create a 50-50 joint venture to come into operation on October 1, 2001. Sony Ericsson Mobile Communications (SEMC) will be capitalized at $500 million and headquartered in London. It will employ 3,500 staff.
The deal certainly looks like a good move for both companies. It offers Sony a foothold in the European mobile market as well as Ericsson’s considerable expertise in mobile technology. Meanwhile, Ericsson, which has been falling behind in the handset market by making phones that don’t really appeal to fashion-conscious buyers, gains Sony’s strong consumer marketing skills.
Ericsson will also benefit from the Japanese firm’s experience in making miniaturized computer products such as laptop PCs. This will be important given that converged 3G handsets are likely to have as much in common with computers as current mobile phones.
However, since the venture was announced, other developments have created yet stronger competition. In particular, the recent tie-up between NEC and Matsushita will create another strong competitor for SEMC. It will combine the technological know-how of Japan’s two biggest mobile players with Matsushita’s experience of marketing consumer products in Europe (under the Panasonic and Technics brands).
Writing off SEMC would be a major mistake. The enormous global success of Sony’s PlayStation demonstrates the company’s ability to penetrate new markets rapidly. Ericsson’s dominant position in 3G infrastructure, meanwhile, will also certainly help. Nonetheless, SEMC doesn’t look as far ahead of the pack as it did in April and it will be a struggle to achieve meeting its stated aim of being the number one handset supplier in the world.
The emergence of joint ventures of this type, however, could still prove to be the most serious threat yet to Nokia’s dominance of the global handset market.
