NEC to Promote Broadband and Mobile Network Device Business by Divesting Optical & Microwave Semiconductor Operations
TOKYO, Japan. NEC today announced that it is to divest its optical semiconductor as well as its microwave silicon and compound semiconductor operations to a new company it will form in October 2001. The devices are key enablers of broadband and mobile networking equipment, and the move is aimed at reinforcing NEC s position as global leader in this area while maximizing the overall corporate value of the NEC Group.
The new company, with paid-in capital of 12 billion Yen, is expected to generate first year sales of 120 billion Yen and will be staffed by approximately 500 people. Preparations for the establishment of the company will begin from April when Japan s Revised Business Law comes into effect. While NEC will have 100% ownership of the new firm, it intends to take the company to an initial public offering within two years.
Research and development for these and other next-generation devices will be located at a Kansai device R&D facility to be based within the NEC Kansai plant in western Japan, and related fundamental device R&D will be established at NEC s Tsukuba Laboratories in Tsukuba City, Ibaraki Prefecture.
By divesting these operations and focusing optical and microwave semiconductor R&D in a Kansai device R&D facility, NEC expects the new company to achieve a highly integrated research, development and production organization closely attuned to market trends. NEC believes this will treble sales of optical and microwave devices from 100 billion Yen in fiscal year 2000 to 300 billion Yen by 2005, compared to a forecasted doubling of market size to two trillion Yen in the same period.
NEC is the only manufacturer worldwide to hold the main technologies for optical as well as silicon and gallium-based compound microwave devices. The devices are used at the heart of extremely high-capacity optical communications, such as wavelength division multiplexing (WDM), and include laser diodes as well as optical detectors in which NEC enjoys a large market share.
In mobile and satellite communications, which utilize high frequency devices, NEC s gallium arsenide devices (hetero junction devices) enjoy a market share of over 60% while its silicon products have an approximate 35% market share, making NEC the top manufacturer in this field. NEC s optical and microwave devices employ its highly advanced technologies to differentiate them and to apply better to meet customer needs, and are highly regarded in the market.
The increasing penetration of broadband and mobile networks, particularly in Europe and North America is forecast to return high growth rates. To take advantage of this situation, the new company aims to move rapidly and focus its resources, especially on securing world-leading engineers through incentive programs as well as through mergers and acquisitions. The new company s independence of NEC is expected to promote the effectiveness of these programs.
By establishing a unique personnel system with the offer of incentives such as stock options, to secure these superior engineers and establish its corporate value, an IPO is expected to provide the capital for the new firm to also pursue an M&A program to acquire necessary resources and ensure its successful growth.
To provide the extra flexibility to meet changing customer needs, NEC will consider additional investment in California Eastern Laboratories (CEL) that has been responsible for sales, marketing and customer engineering solutions in the North American market. The new semiconductor firm will also select foundry partners in Japan and Taiwan and investigate opportunities with high-end optical semiconductor companies, as well as leading-edge venture firms for capital participation, M&A and other relationships. With this positive approach to expanding its resources, the new semiconductor firm is expected to see a significant presence and growth in the broadband and mobile networking areas.
About NEC Corporation
NEC Corporation is a leading provider of Internet solutions, dedicated to meeting the specialized needs of its customers in the key computer, network and electron device fields through its three market-focused in-house companies: NEC Solutions, NEC Networks and NEC Electron Devices. NEC Corporation, with its in-house companies, employs more than 150,000 people worldwide and saw net sales of 4,991 billion Yen (approx. US$48 billion) in fiscal year 1999-2000. For further information, please visit the NEC home page at: http://www.nec-global.com.
CONTACT: NEC USA, Inc. Kazuko Andersen, 212/326-2502 Kazuko.Andersen@necusa.com or NEC Corporation Aston Bridgman, 81-3-3798-6511 a-bridgman@ak.jp.nec.com
NEC USA, Inc.
Kazuko Andersen, 212/326-2502
Kazuko.Andersen@necusa.com
or
NEC Corporation
Aston Bridgman, 81-3-3798-6511
a-bridgman@ak.jp.nec.com
E-mail: a-bridgman@ak.jp.nec.com
Web site: http://www.nec-global.com
