| Press Release
*****For immediate use July 31, 2001
NEC Announces Mid-term Management Strategies
-Overcoming the IT Downturn and Steps Towards Next Growth Stage-
NEC announced today its mid-term management strategies. NEC is steadily implementing
and will continue to strive to further its "Global No.1" business strategy,
focusing on broadband and mobile applications, which was established last year.
The IT downturn, which began in the U.S., has had an effect on the global
markets. NEC, in response to this IT downturn, has set its mid-term management
strategies to continue to develop business strategies for global growth while
strengthening a business base for profit and reorganizing its electron devices business.
NEC aims to maximize its corporate value through the steady implementation of these
. Restructuring of the Electron Devices
Strengthening of Business Base for Profit and Accelerating Global Growth
- Converting to a Business Structure Centered on to System LSI
With regard to the DRAM business, for the time being NEC will continue to supply
DRAM produced mainly at NEC Hiroshima, Ltd. for Elpida Memory, Inc. (Elpida).
However, NEC will transfer this business to Elpida and will withdraw from this
business except as a shareholder of Elpida around 2004.
NEC will establish NEC Compound Semiconductor Devices, Ltd. in October 2001, to
concentrate on its optical and microwave semiconductor business, which are key
devices for the broadband and mobile businesses. The new company is planning to
list its securities in the future after its operations are strengthened.
NEC has been working with Thomson Multimedia S.A. on establishing a joint venture
in the area of color plasma displays. NEC is also looking for other possible partners
to form alliances with in order to aggressively reorganize the electronic components
and color liquid crystal displays businesses with the aim to take a top market
share in the future in the world market.
Through these activities, NEC Electron Devices will reinforce its business focus
on system LSIs and establish a business structure organization and corporate culture
which promotes the system LSI business. NEC will implement the restructuring measures
described below in order to transform its operational structure.
- Restructuring to Transform Operational Structure
NEC is seeking to improve its production capabilities through
concentrated restructuring, such as the consolidation of overseas DRAM
production, closing down older domestic fabrication lines, and reorganizing and
consolidating domestic assemble sites.
The specific plan calls for the following:
- At NEC Semiconductors (UK) Limited, Livingston, Scotland, there will be a
reduction of monthly production capacity for the 8-inch fabrication line from
28,000 to 15,000 wafers within the second half of this fiscal year. There will
also be a reduction of employees from a current 1,600 to less than 1,000 employees.
- At NEC's Sagamihara Plant, the 6-inch trial fabrication line will be closed
and R&D/testing fabrication will be conducted at its 8-inch fabrication
line of the UC facility. In addition, other domestic 6-inch fabrication lines,
mainly in the plants that have both 8-inch and 6-inch lines, will be closed
- Three semiconductor assembling companies - NEC Fukuoka, Ltd., NEC
Oita, Ltd. and NEC Kumamoto, Ltd. - will be reorganized and
consolidated into NEC Semiconductors Kyushu, Ltd., which will be
established in October 2001.
- NEC Yamagata, Ltd.'s two assembly plants, Yamagata Plant and
Takahata Plant, will be merged into one location within the second half of
this fiscal year.
NEC will freeze its planned investment of 20 billion yen to increase
production capacity of 8-inch wafer from a monthly production of 20,000 to
25,000 at Shanghai Hua Hong NEC Electronics Company, Limited.
In addition, there will be other reductions of investment at both domestic
and overseas production facilities. NEC Electron Devices aims to cut its
investments by an approximately 50% for this fiscal year in comparison with last
year to 120 billion yen, 50 billion yen less than originally planned.
Through the above structural reforms, a total of approximately 4,000
employees will be reduced worldwide, including a reduction of approximately
2,200 contracted employees.
By fiscal year ending March 31, 2003, NEC Electron Devices will seek to
reduce its total fixed costs by 7%, in comparison with fiscal year ended March 31,
2001. NEC Electron Devices also aims to reduce its break-even amount by
approximately 100 billion yen.
- Enhancement of System LSI Business
In order to enhance its system LSI business, NEC Electron Devices will
establish a new management structure which takes into account the different
management styles necessary for the growth driving businesses, centering on
high-end system LSIs and stable income businesses such as microcomputers and
In the growth driving businesses, resources will be concentrated on seven
areas: broadband, workstation/server, video game, mobile phone, digital AV,
automobile electronics, and optical storage products. NEC Electron Devices will
establish long-term relationships with top venders in each field to improve its
In particular, as an IDM (Integrated Device Manufacturer) armed with a
technological base ranging from circuit design to process and device design and
packaging, NEC aims to provide devices which through vertically integrated
technology will have unique capabilities and attributes.
- NEC Solutions
Domestic IT investment is continuing its expansion due to the
restructuring of corporate and government/public sectors. NEC Solutions aims
to expand and grow its business in broadband and mobile applications by securing
stable profit from domestic systems integration (SI) business and also through
synergy between each business.
- Enhancement of SI Business as Core
Based on stable customer base in Japan and advanced technologies such
as open mission critical solutions, NEC Solutions will focus on the areas
of e-government/local government solutions and e-business solutions and
enhance its business with the goal of significantly improving profitability.
- Expansion in Stock Service Business
Through various solutions based on the BIGLOBE business model,
BIGLOBE will shift to value added service business.
- Enhancement of Platform Business
Aiming to be a world technology leader in this field, NEC Solutions will
seek to enhance its server and storage product business through alliances
with other companies such as Hewlett-Packard, Intel and Veritas.
- Reformation of Personal Products Business
In furtherance of the reorganization announced this April, NEC Solutions
will aim for new growth in product and service in broadband and mobile
- NEC Networks
While seeking to overcome the current difficult business environment,
NEC Networks will concentrate its resources into the following four core
broadband and mobile applications areas in order to achieve global leading
- Optical Network System Business
Under the circumstances of the slow down in investment, particularly in
optical fiber backbone network systems in North America, NEC
Networks will provide its most advanced technologies established in the
North American market to other areas such as Asia and Central/South
America. NEC Networks will also provide global seamless
terrestrial/submarine network solutions by leveraging its global presence
in both worldwide terrestrial and submarine WDM systems market. Also
NEC Networks will seek to accelerate the business development based on
its optical technologies from backbone to metro edge access systems.
- IP Network System Business
By fully utilizing its technologies and R&D capabilities grown in the
business for communications carriers, NEC Networks aims to achieve a
leading position in the markets for IPv6 routers and highly-reliable
- Mobile Network System Business
By leveraging its premier presence in the Japanese market, NEC
Networks will accelerate its efforts to promote the business in the
third-generation (3G) mobile and mobile Internet areas.
- Mobile Terminal Business
Through its strong presence in providing i-mode terminals, NEC
Networks will seek to maintain and enhance domestic market share as
well as regain its presence in the overseas markets in 2.5G area and 3G
areas in which NEC takes leads.
. Measures by Corporate Headquarters
for Supporting New Growth
Corporate Headquarters will strongly support each in-house company in order to
accelerate the future growth of the Company in the broadband and mobile Internet area.
- Carrying Out of Structural Reform of Electron Devices' Business
Restraint of volatility and structural reform in the electron devices
business are pressing management issues for the Company. NEC will together
with each in-house company promote the shifting of resources to growth areas
and structural reform.
- Concentrating Company Resources to Growth Areas through the Creation of
Synergies among In-house Companies
- Shift and Gain of Resources for Enhancement of Software Development.
As the weight of software in the Company's strategic products increases,
NEC will reinforce its software development structure. The NEC Soft
Group has worked to transfer software development methods cultivated
for computers to communications equipment. NEC will further
strengthen its broadband and mobile product development system through
NEC Systems Technology Co., Ltd. to be established this October. NEC
will also enhance its development powers by accelerating and supporting
the expansion of overseas software development facilities.
- Strengthening of Mobile Related Business Strategy through Corporate-
wide Synergies (terminals, network systems, servers, systems integration,
BIGLOBE and electron devices)
NEC has established a mobile strategy committee (chaired by the
President) in order to enhance corporate-wide synergies in this growing
sector. NEC will strengthen its ability to provide total solutions in the
mobile Internet business by integrating its strengths, which are its strong
trusting relationship with its customers and the strengths in the following
key sectors; that is, total solution and network infrastructure technologies
offered by NEC Networks as well as its premier position in the domestic
mobile phone market, NEC Solutions' experience in servers, systems
integration services and BIGLOBE, and electron device technology of
NEC Electron Devices. Through these collaborations, NEC will
aggressively strive to capture new business opportunities in the mobile
Internet area, as seen in the server business through such projects as NTT
DoCoMo's gateway system or the convergence of PCs and PDAs.
- Acceleration of Growth by Reforming NEC's Business Model
- Reform of Company-wide Marketing Based on Customer Relations
Currently, 121ware.com is focused on promoting and strengthening
NEC's one-to-one relationship with customers primarily in the personal
computer sector. NEC will further develop this business model by
integrating its company-wide customer database and using web
technology to create a customer relations management (CRM) site. NEC
will realize a new style of marketing implementing information technology
- Using BIGLOBE Infrastructure to Create New "Place"
Based on its BIGLOBE infrastructure, NEC will create a new "place" where
both companies and organizations can meet and join in different ways. NEC has
already cultivated this area by providing an ASP service for corporate members
called, "Your ISP". By gaining the support of a collaboration of top-class
companies, we aim to further strengthen our position. As the Internet becomes
more advanced, NEC will support different kinds of connections between organizations
and individuals to promote new businesses.
- Steps for High Growth through Strategic Investments
- Breakthroughs by NEC Corporate Laboratories
NEC corporate laboratories will concentrate its resources on development
of next-generation and the post-next-generation technology, and will
focus on potential future breakthroughs for social and technological
problems. NEC will also construct a new intellectual property strategy.
- Strategic Investments Focusing on the North American Market
NEC has pushed ahead in investments in the venture capital business as
well as in other business sectors, but in order to perform strategic
investments without missing the timing of the IT market recovery, NEC
will further promote strategic investments, including mergers and
acquisitions of companies and divisions, mainly focusing on North
. Management's Targets
NEC will strive to attain the following mid-term management targets, through the
implementation of the measures described above:
|Net sales growth rate:
||6% per annum
|Operating income to net sales:
- CAUTIONARY STATEMENTS:
- The statements in this material with respect to NEC's plans, strategies, and
beliefs, as well as other statements that are not historical facts are
forward-looking statements involving risks and uncertainties. The important
factors that could cause actual results to differ materially from such statements
include, but are not limited to, general economic conditions in NEC's markets,
which are primarily Japan, North America, Asia and Europe; demand for, and
competitive pricing pressure on, NEC's products services in the marketplace;
NEC's ability to continue to win acceptance of its products services in these
highly competitive markets; and movements of currency exchange rates,
particularly the rate between the yen and the U.S. dollar in which NEC makes
significant sales. Among other factors, a continuing worsening of financial
conditions in the U.S., Japanese and/or European markets, and/or a worsening of
the ongoing downturn in the semiconductor and IT markets, would cause actual
results to differ from the forward-looking statements above.