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*****For immediate use May 16th, 2002

NEC Announces Business Reorganization of the New NEC Group

-Management Reforms - Phase 2-


NEC Corporation (NEC) today announced its plan to execute further NEC Group restructuring, concentrating on the separation of its semiconductor business operations. NEC has earnestly advanced its management reforms, and now, will progress with the next phase of business reorganization to create a new NEC Group. Objectives of this new phase of business reorganization include: (1) separation of NEC's business domain into two large areas and concentration of respective management resources; (2) enabling flexible financing and optimal allocation aligned with characteristics of the semiconductor business; and (3) unlocking and realizing of corporate value and strengthening of overall financial position. Through the new phase of management reforms, NEC is aiming to maximize corporate value of not only the semiconductor business, but also the entire NEC group.

I. Business Strategy for Semiconductor Business Separation and Beyond

  1. Separation Scheme and Strategy for Semiconductor Business

    NEC will separate its semiconductor business under a scheme of "kaisha-bunkatsu" or separation of business and establish a new subsidiary company in November 2002. The new company's business domains are system LSIs, IC & discrete devices and compound semiconductor devices (the compound semiconductor device business was transferred to NEC Compound Semiconductor Devices, Ltd. in October 2001). Elpida Memory, Inc. which is responsible for DRAM business will be in operation under the control of NEC after separation of semiconductor business.

    The new company is expected to have sales in the region of 700 billion yen, a workforce of 25,000 employees and will become a specialist semiconductor solutions company that focuses on high-end system LSIs. At the time of business separation, NEC will hold 100% ownership of the new company. However, it is planned that the new company will conduct initial public offering (IPO) as soon as possible. At the time of the IPO, NEC plans to hold approximately 70% of the new company's stock. The new company will act as a strategic partner with NEC cultivating synergies between the two business domains and technologies.

    The new company will aim to become a semiconductor solution provider by reinforcing its differentiating technology for its customers' systems needs that focus on system LSIs, and strive to expand as a logic semiconductor specialist company, by building a strong balance sheet and financing capability suitable to the characteristics of a highly volatile semiconductor business.

  2. Structural Reforms of Other Business in NEC Electron Devices

    Other NEC Electron Devices' businesses that fall outside the new company's business domains will advance reforms by proactively utilizing the capital market and third party investment, with NEC planning to eventually become the minority shareholder.

    Based on this strategy, NEC plans to separate both the color TFT (thin film transistor) LCD (liquid crystal display) and color PDP (plasma display panel) display businesses around October 2002. Please refer to attachment for further detail.

    Business Areas and Strategies:

    1. DRAM Business
    Continue and expand the present joint venture structure with Hitachi.

    2. Electronic Component Business
    Established a new company by integrating with Tokin Corporation in April 2002.

    3. TFT LCD Business
    Separate the business and establish a joint venture company with SVA Group, Ltd. (NEC: 25%) Separate the domestic business and establish a 100% subsidiary in October 2002.

    4. PDP Business
    Establish a 100% subsidiary in October 2002 and proactively seek third party investment.

    5. Printed Wiring Board Business
    Establish a joint venture company with Toppan Printing Co., Ltd. (NEC: 49%).

    6. Automotive Electronics Business
    Establish a joint venture company with Honda Motor Group in Autumn 2002, with NEC planning to own approximately 1/3 of the shares of the Honda Group's automotive electronics business subsidiary.

    7. Microwave Tube Business
    Separate the business and establish a 100% subsidiary in October 2002. It will be positioned as part of NEC defense system business of NEC Networks.

II NEC's Strategy after Separation of its Semiconductor Business

  1. Repositioning of Business Domains and Strengthening Core Technology

    After the separation of its semiconductor business, NEC, composed of NEC Solutions and NEC Networks, will position its business focus on "providing integrated solutions (including services) for mission critical systems in open environments" and concentrate further on IT and networking integration solution business.

    As broadband & mobile Internet penetrates further into society, highly reliable systems to support this development are being urgently required. So much in fact, that it is certainly no exaggeration to say that demand for open mission critical systems has no limit. In this environment, NEC will reinforce its in the business area where NEC can demonstrate strengths and one where NEC should focus. NEC's open mission critical system was developed from the result of many strong business achievements in construction of backbone data networks and large-scale open information systems as well as through NEC's abundant know-how in this area.

    In particular, to strengthen the business, NEC will reinforce the development of key core technologies required for open mission critical system solutions, such as advanced and accumulated middleware technology, high-end systems applying advanced computing technology (supercomputer technology) as well as highly advanced optical networking and third-generation mobile communication technology.

  2. Enhancement of Integrated Solutions

    In the networking area, the rapid migration to IP networks has been changing the network structure and the evolution of enterprise IT applications has been bringing increasing demand for integrated solutions. In this environment, based on NEC's concept to " provide integrated solutions (including services) for mission critical systems in open environments", NEC will advance integration of technologies and businesses between NEC Solutions and NEC Networks.

    NEC will leverage both in-house companies' strengths to promote the following: integration of hardware and software business domains including middleware, integration of network and system solutions, and the consolidation of system solution business and services business.

***



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 and 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 and exchange rates, particularly the rate between the yen and the U.S. dollar in which NEC makes significant sales.

In case where the information contained in this material falls within the definition of "Material Information" under Paragraph 2 of Article 166 of the Securities and Exchange Law of Japan, if you (and directors or employees of your company if the content of this material comes to their knowledge in connection with their duty) read this material before the time of "Publication" (which is defined under the Securities and Exchange Law of Japan and its Enforcement Ordinance as twelve hours after its release; i.e., approximately 3:30 a.m. on May 17, 2002 (JST)), you (and directors or employees of your company if the content of this press release comes to their knowledge in connection with their duty) may be prohibited from purchasing, selling, or making other transactions of shares of stock or other securities of NEC before the time of Publication.

This press release is intended as general information regarding NEC's management reform plan and shall not be considered an offering of securities in any country including Japan and the United States.


Contact:-

Daniel Mathieson / Chris Shimizu 
NEC Corporation
TEL:81-3-3798-6511
FAX:81-3-3457-7249
d-mathieson@bu.jp.nec.com / yc-shimizu@cb.jp.nec.com
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