NEC, Hitachi, Casio in Cellphone Merger

Companies aiming to build a significant presence overseas

Japanese high-tech makers NEC, Hitachi and Casio Computer said on Sept. 14 that they had agreed to merge their mobile phone businesses to cope with a slump in domestic sales and expand overseas.

Together they would have the second biggest slice of the Japanese mobile telephone handset market, ahead of Panasonic Corp. but behind Sharp Corp., which has a one-quarter share. The joint venture will initially be owned two-thirds by NEC Corp., 17.3% by Casio Computer Co. and 16.7% by Hitachi Ltd.

They aim to merge the operations by April 2010 and pump extra capital into the firm, boosting the stake of NEC to 70.7 % and that of Casio to 20%. Hitachi's share will drop to 9.3%.

Together they plan to raise sales to 12 million handsets a year by early 2013 -- five million overseas. Currently just one quarter of their combined revenue comes from foreign markets.

"We aim to expand our revenue based on our technology since we are well aware that we can't compete in terms of price," said Otake.

"The merger is unavoidable at a time when the domestic market has nearly halved and faces an uncertain outlook."

They also aim to do something that Japanese cellphone makers have long struggled to achieve -- build a significant presence overseas. The tie-up will "strengthen our business, building a strong market position at home and expanding in the global marketplace," NEC Corp. executive vice president Akihito Otake told a news conference.

Most Japanese already own a mobile telephone and operators and handset manufacturers are facing growing challenges to boost revenue in a crowded market, particularly given the weak economy and shrinking population. Japanese mobile telephone producers have had limited success so far overseas. Japan's mobile telephone market has evolved in a different way to other markets and handsets made here are designed specifically to meet Japanese preferences.

Competition is also emerging from foreign handset makers such as Apple, whose iPhone was launched in Japan by number three operator Softbank last year.

NEC makes mobile phones for Japanese operators NTT DoCoMo and Softbank while Casio-Hitachi produce handsets for Japan's KDDI Corp and SoftBank, as well as Verizon Wireless of the U.S. and LG Telecom of South Korea.

Hitachi is restructuring after losing 787.3 billion yen (US$8.7 billion) in the year to March -- the biggest ever loss for a Japanese manufacturer. It tied up with Casio in mobile handsets in 2004, but the venture fell into the red during the current global economic downturn.

NEC Corp., which lost 296.6 billion yen in the year to March, is cutting 20,000 jobs worldwide and withdrawing from the personal computer business in North America and Europe.

Copyright Agence France-Presse, 2009

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