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Japanese PC market declines

Sales have been slowing because of reduced consumer demand.

Sales of personal computers in Japan have been declining because of reduced consumer demand, the Nikkei Watcher on IT Business reported yesterday in JapanBizTech, an online news service.

According to statistics released by the Nippon Electric Big Store Association (NEBA), a group of volume sellers of electronic appliances, PC sales shrank for four consecutive months from April through July, after peaking in March 1997. Sales to corporate users remain strong, but consumer sales have been flagging due to Japan's overall economic contraction and also consumer disinterest, the Nikkei Watcher said.

Separately, NEC Computer (NIPNY) and Fujitsu (FJTSY) both downwardly revised their targets for PC shipments to the Japanese market in fiscal 1997. Both anticipate reduced growth because of sluggish sales consumer sales, Nikkei Personal Computing reported in JapanBizTech.

Monthly PC sales showed steep growth throughout 1996 and through the first three months of 1997, according to NEBA data, topping 30 percent in comparison with year-ago figures every month from January through October 1996. December 1996 and January 1997 dipped below the ten-percent mark, before a spike of more than 40 percent growth in March 1997 that owed to anticipation of April's rise in the consumption tax rate.

The tax hike contributed to the Japanese economy's astonishing contraction of 11 percent in the year's second quarter, compared to a year ago.

The economy's downturn encouraged consumers to be cautious in purchasing PCs, according to Nikkei Watcher, which also cited a price markup by manufacturers in the second half of 1996 and the postponed release of Windows 98 as factors contributing to the decline. "While waiting for the PC price to go down, [first-time buyers] came to realize that PCs are not so useful for them and decided not to buy them," Takahiko Umeyama, research vice president of International Data Corp. Japan, told Nikkei Watcher.

To stem the decline, manufacturers are likely to reduce prices, Nikkei Watcher reported.

In July, chipmaking giant Intel concluded the sales downturn owed to high PC prices, slashed its chip prices by up to 50 percent, and recommended that major PC makers ought to cut their prices to stimulate the market. Intel's advice has so far gone unheeded.

Taking a different approach, in September IBM Japan and major home electronics retail chain Kojima announced cooperation on a direct-order sales scheme for personal computers. (Dell and Gateway already employ a direct-sales scheme in Japan.) This month Compaq is set to embark on a build-to-order program. Direct sales and build-to-order schemes reduce prices by eliminating retail markup and cutting costs associated with inventory.

Meanwhile, retailers are hoping that the introduction of an equivalent of the sub-$1,000 PC will spur sales, that notebook PCs will catch on, and that small to medium-sized businesses will join large corporations in adopting PCs en masse, Nikkei Watcher said.

On a micro level, NEC said it anticipates PC shipments will grow only 5 percent in 1997, well off its initial expectation of 15 percent. Fujitsu has lowered its target growth rate to 15 percent from 30 percent, Nikkei Personal Computing reported.

According to NEC, the corporate market continues to grow by 10 percent compared to year-ago figures, but retail shipments will drop by around 10 percent. When added together, NEC's shipments will show a yearly decline of 9 percent. Fujitsu said that its shipments are up in both markets, but will not reach initial targets.