|*****For immediate use September 28, 2001
NEC Announces Additional Structural Reforms of Semiconductor Business
NEC announced today its additional structural reform of its semiconductor business
to accelerate its mid-term management strategies announced in July and implement
and execute following additional measures immediately in response to drastically
revised financial results forecast due to further deterioration in the semiconductor
market. Through these measures NEC is aiming for a quick recovery in the next
. Reformation of Cost Structure by Further
Fixed Cost Reduction
NEC originally planned to lower the break-even point of NEC Electron Devices,
one of the three in-house companies of NEC, to 100 billion yen in July and will
now lower an additional 100 billion yen to 200 billion yen. Through this additional
cost reduction, fixed cost will be reduced by 14% in comparison from last fiscal
Elaborate measures to reduce fixed is as follows:-
- Adjusting Production Lines
- Reduction of Wafer Processing Capacity
In addition to a 50% reduction in production capacity at NEC Semiconductors (UK)
Limited and the closure of old test fabrication lines at NEC's Sagamihara Plant,
NEC will shutdown the seventh fabrication line at NEC Kyushu, Ltd. (production
capacity: 30,000/month, 6-inch wafer) within this fiscal year ending March 2002.
Also NEC will reduce fabrication capability at NEC Electronics, Inc. Roseville
plant from a monthly production of 25,000 (6-inch level) to14, 000 with in this
This will result in reducing 15% of wafer processing capacity by the end of this
fiscal year in comparison from last fiscal year and ultimately improve NEC's wafer
processing capacity utilization.
- Reorganization of Semiconductor Assembly Plants
In order to strengthen cost competitiveness in production, NEC will enhance semiconductor
assembly in Asia particularly positioning production plants in Singapore, Malaysia
and Indonesia as main assembly and testing plants, and withdrawing from testing
and assembly in United Kingdom and the United States. Concurrently, NEC will consolidate
semiconductor production plants in Japan into three groups, namely Kyushu, Yamagata,
and Kansai where NEC positions Kyushu and Yamagata as key production plants for
system LSIs and Kansai as key production plant for general purpose ICs and discrete
- Improve Efficiency and Flow of Personnel
Reduction of 4,000 personnel due to restructuring of production plants announced
in July is underway. At the same time, NEC Electron Devices will implement various
measures to promote flow of personnel such as transfer of personnel to other in-house
companies to enhance further reduction of fixed costs.
- Further Reduction of Equipment Investment
NEC will reduce equipment investment by 60% in comparison to last fiscal year,
which will eventually reduce future depreciation expenses.
||Actual results for Fiscal
||2001 (ended March 31, 2001)
|NEC Electron Device
In order to accomplish these measures, NEC will appropriate 100 billion yen for
extraordinary loss as a restructuring cost.
. Strengthen Business Centered on System
- Strengthen Software/SI Capability to Respond Customer Needs
- NEC Micro Systems, Ltd, responsible for hardware design of LSI, and NEC Microcomputer
Technologies, Ltd., responsible for fundamental and applied software design, will
be consolidated in January 2002. NEC Electron Devices will strengthen its software
development structure to a more customer oriented structure through cooperation
between hardware design/development and software development for system LSIs.
- In order to enhance of customer correspondence, increase the number of sales
engineers from current 150 to 400 through integration of product oriented engineering
divisions into sales engineering divisions as of October 1.
- Enforcement of Device Solution Capabilities in the US and Europe
- NEC established Technology Incubation Group, within NEC Electronics, Inc in
August 2001 with responsibility to excavate/develop new technology through strategic
investment and alliances, and to acquire of advanced IP core in Silicon Valley.
This group has already invested in Jubilant Communications, Inc., a fables semiconductor
company that designs/develops and delivers chipsets for next generation high-speed
access and home networks and will continue to search for further partnership opportunities
with competitive venture companies.
- NEC will construct a new structure where device solutions will be provided
to advanced customers through consolidation of five sales companies in Europe
on April 2002, in order to transform to application-oriented structure for the
- Enhancement of Cutting-edge Technology Capability corresponding to Customer
Many technology challenges arises as the design rule becomes smaller in feature,
while at the same time various requirements for diversified devices solutions
arise such as requirement for larger capacity, higher integration, higher reliability,
and lower power. In order to meet these demands, NEC will accumulate analog technology
and build a design infrastructure, to realize maximum device performance. Also
NEC will shorten TAT by concentrating pilot production lines and mass production
lines to one production facility as well as concentrate on differentiating process
technology such as process for logic LSI embedded with DRAM.
. Restructuring of DRAM Business
In response to the deterioration in DRAM market today, Elpida Memory, Ltd., a
joint venture between NEC and Hitachi, has decided to postpone equipment installation
for 300 mm production line at NEC Hiroshima's premises in addition to the withdrawal
from DRAM production in North America and United Kingdom announced in July. (See
. Reorganization of NEC Electron Device
NEC Electron Devices will conduct an extensive reorganization to concentrate its
business into system LSI on October 1. Main measures for the reorganization are
||Establishment of Structural Reforms Promotion Division
(General Manager: Tomio Nakano)
||Cut down Staff-function personnel (Reduce to approx. 2/3 of present total)
||Increase engineering resources of System LSI Operations Unit
||Establishment of NEC Compound Semiconductor Devices, Ltd. as well as discontinuation
of IC & Discrete Operations Unit and establishment of General-purpose Devices
||Discontinuation of LSI Memory Operations Unit
Through above stated additional measures and steady business expansion at other
in-house companies, NEC aims to record prominent results for the next fiscal year.
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.
In case where the information contained in this supplement falls within the definition
of "Material Information" under the Securities and Exchange Law, Article
166, Paragraph 2, if you read this supplement before the time of "Publication"
(which is defined under the Securities and Exchange Law and its Enforcement Ordinance
as twelve hours after its release; i.e., approximately 4:00 am on September 29,
2001 (JST)), you and the persons listed below* may be prohibited from purchasing,
selling, or making other transactions of shares of stock or other securities of
NEC Corporation before the time of Publication.
||Other directors or employees of your company if the content of this press
release comes to their knowledge in connection with their duty