Japan's Netbook Effect.(International Edition; TECHTONIC SHIFTS)

Byline: Akiko Kashiwagi

The most disturbing lesson of the netbook phenomenon is that Japanese consumers are much like everybody else.

Japan has long been a country of notebooks--the lightest laptop computers, bristling with speed, memory and features. For years the conventional wisdom had it that the salaryman will pay a premium for the most powerful notebooks, as long as they're Japanese brands. In the past six months, however, this trend has been turned on its head. The Japanese are still buying laptops, but they seem to have ended their love affair with pricey, high-end products. Instead, they're opting for netbook PCs--inexpensive machines with pared-down features that rely on the Internet for many tasks.

The turnabout has come with shocking suddenness. Even as the financial storm engulfed the globe in the fourth quarter of last year, driving PC sales in Japan down by 4 percent over the previous quarter, sales of netbooks shot up by 43 percent, according to International Data Corp., a market-research firm in Framingham, Massachusetts. Whereas netbooks accounted for only 7 percent of notebook PC sales in Japan in February 2008, a year later they had soared to 30 percent of the market, says Tokyo research firm BCN. This year, despite the economic gloom, Japanese consumers are on track to push netbook sales up by 113 percent, says IDC.

What's going on? The recession, of course, would explain why people are more sensitive to price. Much of the new volume has to do with a promotion by telecom firm Emobile, which is offering steep discounts on the laptops in return for two-year subscription contracts. But the most remarkable aspect of the netbook boom--and what has analysts scratching their heads--is that it obliterates a long-held stereotype of Japanese PC consumers as power users who want the best technology no matter the cost. Instead, many Japanese seem to be interested in sending e-mail and watching YouTube. The worry is that this apparent change in consumer psychology is part of a broader shift in Japan's consumer-electronics market.

For now, Japan's PC makers are feeling the pinch. The arrival of attractive $500 PCs has forced them to drop prices steeply across the board--the average price of notebooks in Japan fell by 30 percent in the past year, according to BCN. That's boosted unit sales, despite the recession, but trimmed already thin profit margins.

The biggest beneficiaries are Taiwanese PC makers Acer and Asus. Neither had much of a presence in the Japanese PC market a year ago, but by the fourth quarter of 2008 they had snatched up 62 percent of the Japanese netbook market, according to IDC. In 2008, Acer and Asus displaced Hitachi and Panasonic on IDC's list of Japan's 10 biggest PC makers.