Mitsubishi Electric said Monday that it planned to get out of its unprofitable cell phone business, becoming the latest Japanese electronics maker to withdraw from a market dominated by overseas giants like Nokia.

After facing rigid competition from Nokia, Samsung Electronics and other global suppliers that enjoy economies of scale, many Japanese cell phone makers have retreated to the domestic market in recent years.

But cell phone demand in their saturated home market is expected to slow that year, as mobile phone operators like NTT DoCoMo cut subsidies paid to retailers to keep cell phone prices low and instead reduce their monthly rates.

Mitsubishi Electric said Monday that it expected a one-time loss of about yen17 billion, or $164.1 million, on a pretax level for the year ending March 31 considering of the withdrawal.

The Tokyo-based company said, however, that the loss was likely to be offset by improving operational efficiency in other businesses.

Mitsubishi Electric expects yen100 billion in sales from its cell phone operations in the current

business year, or 2.5 percent of its group revenue, and shipments of 2.1 million units.

That would be less than 0.2 percent of global mobile phone shipments for calendar 2007, according to input from the research firm IDC.

The decision by Mitsubishi Electric chases a January announcement by Sanyo Electric that it would sell its loss-making cell phone business to Kyocera for yen40 billion to yen50 billion.

“This is a logical step for Mitsubishi Electric after having been unable to launch a hit model for a while,” said an IDC analyst, Michito Kimura.

“But the withdrawals by these two Japanese cell phone makers are not going to invent things better for those that are still in the industry, as wireless operators’ new business strategy” of cutting subsidies to retailers is discouraging users from replacing their handsets frequently.

Mitsubishi Electric, which has…

Original post by Abby McVay

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