NEC

The company was incorporated in Tokyo in 1899, its foreign partner was the Western Electric Company of Illinois. In the first years of operation, NEC was engaged in the production of telephone equipment. However, starting in the 1920s, the company began working in almost all areas in the field of communications.

Structure

As of May 2015, the NEC business structure includes four main divisions:

• Public (systems integration, outsourcing and support services, as well as delivery of systems equipment to government agencies; social infrastructure segment);
• Enterprise (system integration, outsourcing and support services in the corporate market);
• Telecom Carrier (femtocots, transport networks and other telecommunications products);
• System Platform (servers, disk storage, IP phones and other hardware, as well as services and software).

History

2021: Fine for participation in the cartel

On September 29, 2021, NEC and four other Japanese electronic component manufacturers lost a lawsuit against an EU fine of €254 million for participating in the cartel for more than ten years.

The European Commission in its 2018 decision stated that Elna, Hitachi Chemical, Holy Stone, Matsuo, NEC, Tokin, Nichicon, Nippon Chemi-Con and Rubycon had set fixed prices for the supply of aluminum and tantalum electrolytic capacitors. It follows from the decision that the cartel operated from 1998 to 2012, and although meetings between the participants took place in Japan, operations were carried out on a global scale and during this period the conspirators coordinated their work on setting prices and sales volumes, thus suppliers entered into a large number of contracts with local manufacturers.

Cartel involving NEC and Hitachi fined €254 million

NEC, Nichicon Corp, Tokin, Rubycon and Nippon Chemi-Con subsequently challenged the fine of the EU antitrust agency in the Luxembourg Court of General Jurisdiction, the second most important in Europe, but the judges supported the EU decision.

The General Court upholds the fines imposed by the European Commission on several companies in connection with their participation in the cartel in the market of aluminum electrolytic capacitors and tantalum electrolytic capacitors, the Luxembourg Court of General Jurisdiction said.

Capacitors are used in electronic products such as smartphones, home appliances, electronic car systems and wind turbines. Capacitors, along with resistors, are one of the most common elements in radio and electronic devices. First of all, capacitors are used as filters in rectifiers and voltage stabilizers, they allow you to create the time intervals of the necessary temperature and frequency in analog circuits of various generators.

In Europe, cartels are considered the most serious type of violation of antitrust laws, the most severe liability is established for them. Sanyo Electric and Panasonic avoided a fine as they warned the EU antitrust authority about the cartel.^[1]

2020

Finalize joint venture deal with Sharp

On November 2, 2020, Sharp Corporation (Sharp) and NEC Corporation (NEC) announced the completion of an earlier announced joint venture deal by acquiring Sharp 66% of NEC Display Solutions Ltd. (NDS), a subsidiary of NEC. This became known on November 2, 2020. More details here.

Purchase of Avaloq Financial Transactions Software Developer

On October 5, 2020, Japanese telecommunications corporation NEC announced the acquisition of the Swiss software developer for financial operations Avaloq. The deal is estimated at 2.05 billion Swiss francs ($2.2 billion). More details here.

NEC Energy Solutions Announces Exit from Energy Storage Business

NEC Energy Solutions, which develops and manufactures energy storage systems, has announced plans to end operations. This decision is due not only to fierce competition in the industry, but also to the fact that due to the coronavirus pandemic, the company's attempts to sell its business profitably failed.

The Massachusetts company has long tried to start making a profit, but now customers have been announced the start of an "orderly curl" of operations. At the same time, NEC intends to complete the development of the projects begun, but it will not take up the creation of something new. Japanese conglomerate NEC Corp., the parent of NEC Energy Solutions, tried to sell the business, but the economic turmoil that followed the coronavirus pandemic made it difficult to find a buyer.

NEC was one of the relatively small companies in the battery industry, which nevertheless had global coverage. A spokesman for NEC Corp. said the energy storage development and manufacturing division has been unprofitable since it was founded in 2014. He also noted that the battery market has shown steady growth in recent years, but there is fierce price competition inside it, which was one of the reasons that influenced the decision of NEC to leave the market.

NEC Energy Solutions has battery maintenance contracts that will be effective until 2030. The source also notes that many employees will be able to continue to work long enough, since the company intends to complete all projects that have begun.

Sharp Joint Venture Agreement with Sharp-NEC

On March 25, 2020, TAdviser learned that NEC and Sharp had agreed to create a joint venture that would combine NEC Display Solutions (NDS), a division of NEC, and Sharp. More details here.

Kyocera bought Showa Optronics from NEC

At the end of March 2020, Kyocera announced the acquisition of Showa Optronics from NEC Corporation. Under the terms of the deal, Kyocera buys all shares of the optical component manufacturer from NEC and becomes the owner of a 93.53 percent stake. More details here.

2018

Reduction of 3,000 jobs

On January 30, 2018, NEC announced a new round of cuts, in which the Japanese manufacturer is going to lay off 3,000 employees from its staff in Japan, numbering 80 thousand people.

Early retirement will be offered to employees of nine Japanese NEC enterprises and personnel of support units. The upcoming cuts are part of a three-year plan for the period until fiscal year 2020 developed by the company. With its help, NEC expects to reduce its labor costs by 30 billion yen ($275 million) by the end of the specified period, Nikkei reports with reference to the medium-term development program published by NEC (Mid-term Management Plan 2020).^[2]

NEC chief Takashi Niino

Over the past 17 years, since 2001, NEC has already carried out three large-scale staff reductions, as a result of which a total of 11,300 people were dismissed. The NEC management promised that there are no plans to further reduce the size of the company. NEC President and Chief Executive Officer Takashi Niino called the decision "difficult and painful."

We took this step out of concern that if we do not do this now, we will no longer be able to keep up with the modern electronic industry, "the head of NEC said about the upcoming layoffs.[3]

Previous restructuring measures and the sale of financially difficult assets, including the semiconductor division and the smartphone business, proved insufficient to correct NEC's affairs.

According to the company, trade costs, general and administrative costs, with the exception of research and development costs, take about 22% of NEC revenue. The Japanese manufacturer believes that in order for the company to survive in a modern highly competitive market, this ratio must be reduced to 20% or even less.

Purchase of the largest Danish IT company KMD for $1.2 billion

On December 27, 2018, Japanese corporation NEC announced the acquisition of the largest Danish IT company KMD Holding for 136 billion yen (about $1.2 billion at the time of the announcement of the transaction) as part of a plan to expand business in Europe and globally. More details here.

2017

Fall in revenue due to telecom

In fiscal year 2017, NEC revenue decreased by 5.7% largely due to the fall in the telecommunications business. The company's profit has more than halved.

During the reporting 12-month period, which ended on March 31, 2017, NEC sales were measured at 2.67 trillion yen ($24.3 billion) against 2.83 trillion yen a year earlier. Net profit decreased from 81.2 to 35.2 billion yen ($319.8 million), which blames the increase in the tax burden.

NEC American Office Building

Among NEC units, the largest decline was experienced by telecommunications: revenue here decreased by 12.3% year on year, amounting to 611.6 billion yen ($5.6 billion). The manufacturer explains this regression by the influence of the strong yen and the limited capital expenditures of Japanese and foreign telecom operators.

In the Public division responsible for the contracts of state institutions and the social infrastructure segment, turnover decreased by 4.6% to 736 billion yen ($6.7 billion). Speaking about the reasons for this decline, the NEC pointed to a drop in demand for digital solutions in the field of fire safety and emergency radio communications in the public sector.

The decline is also recorded in the System Platform structure (servers, disk storage, IP phones and other equipment, as well as services and software). Here, revenue decreased by 1.2% to 719.8 billion yen ($6.5 billion) largely due to weak sales of network solutions.

Enterprise remained the only growing business - system integration, outsourcing and support services in the corporate market. Revenues of this division rose by 2% and reached 306.3 billion yen ($2.8 billion) due to strong orders from enterprises in the production sector.

Meanwhile, NEC worsened its revenue forecast for fiscal year 2018. The company expects revenue in the region of 2.66 trillion yen ($24.1 billion), which is 15 billion yen less than previously predicted. The forecast for net profit was reduced by 7% to 27 billion yen ($245 million).^[4]

Selling Battery Business

On August 3, 2017, it became known that NEC was leaving the battery business. This direction began to require too much investment, so it became unprofitable for the company to develop it, Nikkei reports.

This is a division of NEC Energy Devices, which was created in 2010 to develop and manufacture lithium-ion batteries. By early August 2017, this structure focuses on creating electrodes for batteries used in vehicles, bicycles, uninterrupted power supplies, satellites, robots and building power supply systems. Particular emphasis is placed on cooperation with auto giant Nissan, which buys battery cells from NEC for its Leaf electric cars.

NEC Leaves Battery Market

NEC Energy Devices absorbs Chinese investment GSR for 15 billion yen (about $135 million; approximately corresponds to the annual revenue of the division).

In addition, it was agreed that GSR will buy a 49 percent stake in Automotive Energy Supply, a joint venture between NEC and Nissan for the production of batteries. The financial party to this agreement is not disclosed. Nissan is also going to sell its part of this business.

Even before the deal with GSR, NEC began to purchase battery systems from third-party manufacturers, including for wind power generators. Leaving the battery business completely transfers the Japanese vendor to the products of other companies.

As for Nissan, to ensure the uninterrupted supply of batteries for its electric vehicles and reduce production costs, the company will turn to manufacturers, and will continue its own research and development in this area.

Nikkei attributes the sale of NEC Energy Devices to the capital intensity of the business and the lack of synergy with other assets of the company.^[5]

2015: 70% Profit Growth

At the end of April 2015, NEC released its annual financial report. The net profit of the Japanese company increased by 70%, which was facilitated by growing orders from government customers and the transformation of mobile business.

According to the results of the reporting period (April 2014 - March 2015), NEC net profit amounted to 57.3 billion yen ($478 million) against 33.7 billion yen ($281 million) a year earlier. Operating profit during this time increased by 20.6%, reaching 128.1 billion yen ($1.1 billion). Revenue fell 3.5% - from 3 trillion yen ($25 billion) in the fiscal year closed March 31, 2014, to 2.94 trillion yen ($24.5 billion) a year later.

NEC's revenue growth was facilitated by successful sales of social infrastructure solutions and the transformation of mobile business

One of the reasons for the rise in NEC revenue was the weakening of the yen, which makes the goods and services of Japanese companies more accessible to foreign buyers and increases the profits of exporters when they repatriate their foreign income home.

Government contracts also helped NEC. Public received revenue of 821.9 billion yen ($6.9 billion) and operating profit of 74.8 billion yen ($624 million) for the reporting year ended March 31, 2015, which increased by 11.3% and 16.2%, respectively.

Another positive factor for NEC was the departure from the smartphone market, which occurred back in 2013. The company began this business in 2010, teaming up with compatriots Casio and Hitachi (NEC Casio Mobile Communications was created together), but it was not possible to achieve success here due to strong competition. NEC's mobile business was reformed, as a result of which the company retained only the production of ordinary phones and tablets.

It follows from the NEC report that its Enterprise division ended the fiscal year with a 0.7% drop in revenue to 270.5 billion yen ($2.3 billion). Telecom Carrier increased sales by 2% to 740.2 billion yen ($6.2 billion). The business volume of system platforms (a division of System Platform) decreased by 6.6%, amounting to 728.9 billion yen ($6.1 billion).^[6]

1997: NEC Market Share Dynamics

Leaders in mobile phone and smartphone sales from 1992 to 2018 in the animation below.

Notes