This week, unconfirmed rumors resurfaced that Lenovo of China may be interested in merging its smartphone division with NEC Casio of Japan in H2 2013. Lenovo has been running a separate venture with NEC in the PC business since 2011.
According to our Country Share Tracker (CST) service, NEC Casio performed well in the Japanese mobile phone market during the early-2000s, but it has drifted into the mid-table rankings this year in both local handset and smartphone market share due to mixed products, slow rollouts and suboptimal distribution.
By contrast, Lenovo is putting in the utmost efforts trying to increase its market presence in smartphones, based partly on its market penetration of the PC industry, which resulted in Lenovo taking 6th place in our global smartphone rankings during Q1 2013. Lenovo is doing particularly well in its home smartphone market of China, where it is an established top-5 player.
The creation of a joint venture with NEC Casio could give Lenovo a greater foothold in the Japanese smartphone market. Lenovo will be targeting Japan because it will be the world's 4th biggest country by volume in 2014. If Lenovo could gain better traction in Japan through a JV with NEC Casio, it would pose a competitive threat to Fujitsu, Sharp, Sony, Kyocera, Apple, Samsung and others. Combining Lenovo's hunger for growth with NEC's high-end product experience could prove a solid combination.
However, it remains to be seen whether Japanese consumers or operators would warm to such an ambitious Chinese entrant -- especially given ongoing political tensions between the two countries. For these reasons, we believe a Lenovo-NEC-Casio merger, full or partial, if it happened, would be achievable, but any JV would probably struggle to move beyond niche status at home in Japan.