In Japan, PCs are becoming sooo version 1.0

updated 9:49 a.m. ET Nov. 5, 2007

TOKYO - Masaya Igarashi wants $200 headphones for his new iPod Touch, and he’s torn between Nintendo Co.’s Wii and Sony’s PlayStation 3 game consoles. When he has saved up again, he plans to splurge on a digital camera or flat-screen TV.

There’s one conspicuous omission from the college student’s shopping list: a new computer.

The PC’s role in Japanese homes is diminishing, as its once-awesome monopoly on processing power is encroached by gadgets such as smart phones that act like pocket-size computers, advanced Internet-connected game consoles, and digital video recorders with terabytes of memory.

“A new PC just isn’t high on my priority list right now,” said Igarashi, who was shopping at a Bic Camera electronics shop in central Tokyo and said his three-year-old desktop was “good for now.”

“For the cost, I’d rather buy something else,” he said.

Japan’s PC market is already shrinking, leading analysts to wonder whether Japan will become the first major market to see a decline in personal computer use some 25 years after it revolutionized household electronics — and whether this could be the picture of things to come in other countries.

“The household PC market is losing momentum to other electronics like flat-panel TVs and mobile phones,” said Masahiro Katayama, research group head at market survey firm IDC.

Overall PC shipments in Japan have fallen for five consecutive quarters, the first drawn-out decline in PC sales in a key market, according to IDC. The trend shows no signs of letting up: In the second quarter of 2007, desktops fell 4.8 percent and laptops 3.1 percent.

NEC’s and Sony’s sales have been falling since 2006 in Japan. Hitachi Ltd. said Oct. 22 it will pull out of the household computer business entirely in an effort to refocus its sprawling operations.

“Consumers aren’t impressed anymore with bigger hard drives or faster processors. That’s not as exciting as a bigger TV,” Katayama said. “And in Japan, kids now grow up using mobile phones, not PCs. The future of PCs isn’t bright.”

PC makers beg to differ, and they’re aggressively marketing their products in the countries where they’re seeing the most sales growth — places where residents have never had a PC. The industry is responding in two other ways: reminding detractors that computers are still essential in linking the digital universe and releasing several laptops priced below $300 this holiday shopping season.

And, though sales in the U.S. are slowing too, booming demand in the industrializing world is expected to buoy worldwide PC shipments 11 percent to an all-time high of 286 million in 2007. And, outside Japan, Asia is a key growth area, with second-quarter sales jumping 21.9 percent this year.

Hitachi had already stopped making PCs for individual consumers since releasing this year’s summer models, although the Tokyo-based manufacturer will keep making some computers for corporate clients. Personal computers already accounted for less than 1 percent of Hitachi’s annual sales.

It’s clear why consumers are shunning PCs.

Millions download music directly to their mobiles, and many more use their handsets for online shopping and to play games. Digital cameras connect directly to printers and high-definition TVs for viewing photos, bypassing PCs altogether. Movies now download straight to TVs.

More than 50 percent of Japanese send e-mail and browse the Internet from their mobile phones, according to a 2006 survey by the Ministry of Internal Affairs. The same survey found that 30 percent of people with e-mail on their phones used PC-based e-mail less, including 4 percent who said they had stopped sending e-mails from PCs completely.

The fastest growing social networking site here, Mobagay Town, is designed exclusively for cell phones. Other networking sites like mixi, Facebook and MySpace can all be accessed and updated from handsets, as can the video-sharing site YouTube.

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