NEC Explains Growth Strategy

NEC targets growth by expanding globally and supporting the advent of the ubiquitous networked society

October 30, 2003

5 Min Read

TOKYO -- NEC Corporation today announced that having shifted from an in-house company system to a business line-based system on April 1, 2003, it has now established a new mid-term growth strategy.

In Japan, driven by consumer demand, the development of the mobile and broadband market is progressing ahead of the rest of the world, and as a result the Japanese IT/network market is growing. It is expected that this development will spread from Japan to the rest of the world. With this in mind, NEC Corporation aims to secure growth opportunities, building on its already established track record in the Open architecture Mission Critical Systems (OMCS) portion of the systems integration ("SI") business, and in the systems and equipment communications sector. In order to seek further growth NEC Corporation aims to expand its business globally by leveraging its advanced capabilities in Japan, as well as to create and secure new growth opportunities with the advent of the ubiquitous networked society.

NEC Corporation aims to achieve operating income margins of 7 percent, ROE of 15 percent, and a D/E ratio (gross) of 1.0 in the mid-term, through the implementation of the following measures.

1. Securing Reliable Profits and Stable Growth in the Japanese Market.

  • (1) Securing a reliable profit foundation based on SI services.

    • We will not only expand our SI businesses by fulfilling the new needs of NEC's over 100,000 existing customers, but will also seek new large corporate customers by strengthening our consulting capabilities. We will also aim to strengthen the outsourcing business related to the SI business and to expand the size of our outsourcing business.

    • At the same time, we will reduce development costs by fundamentally improving our development efficiency by such measures as the standardization of the SI process through the utilization of our CMMI level 5 expertise across the board. In addition, we intend to expand the scale of our overseas development.

    (2) Expanding Network Solutions Business through Integration with IT Business.

    • We will shift the focus of our broadband business, which to date has been a challenging business, from a business based mainly on legacy communications products to an open solutions business based on value-added software and services. In particular, with the integration with IT business, we attempt to focus on areas such as IP telephony, wide-area Ethernet, local government networking, and network outsourcing. In these areas, we aim to increase the annual growth in turnover.

    • In addition, we aim to integrate broadcasting and communications technologies and products, and plan on expanding next-generation integrated solutions, based on our large share in the market of constructing backbone infrastructure of digital terrestrial broadcasting.

    (3) Revitalizing Product Business.

    • In order to create high value-added products that are resilient against the downward pressure on prices, we aim to continually cut costs by advancing cost reduction activities throughout the whole value chain based on the three pillars of "reform of the development process," "pursuit of global supply chain management," and "concentration on customer service and quality."

    • In the domestic mobile handset business, we aim to increase the annual domestic growth rate. To this end, we intend to strengthen the No. 1 position we have already achieved in both the PDC handsets and 3G markets, through strengthening product development and software development capabilities and reforming the manufacturing processes.

    • In order to strengthen the broadband communications business, we plan to reduce the number of NEC-developed product models from 27 to 10, and focus on Ethernetwork (from core metro access to intra office networks) and IP telephony related areas. Through promotion of a common platform for development, we will improve development efficiency.

2. Capturing New Growth Opportunities.

  • (1) Global Business Expansion

    • We will actively expand our business globally by taking advantage of Japan's advanced market. We are aiming to increase our overseas business sales and the proportion of overseas sales compared to domestic sales.

    • We will expand our mobile businesses in Europe and the Greater China area by taking advantage of Japan's advanced position in the mobile phone market. We are aiming at an increase in mobile handset shipment volume for the overseas markets by strengthening our collaboration with operators and other business partners in the value chain. In addition, we will strive for maximum progress at a minimum risk. In particular, we will position China as a global development base for NEC's 3G products and increase the number of staff devoted to mobile related R&D to approximately 1,000 in China.

    • We will develop solutions business in the Southeast Asia and Greater China markets based on advanced applications in the Japanese market. We aim to expand solutions that support global development of the manufacturing and distribution industries and VoIP (Voice over Internet Protocol) solutions, etc.

    (2) Strengthening Measures to Prepare for the Ubiquitous Networked Society in Japan

    • We intend to create a wide range of solutions for the ubiquitous networked society by concentrating NEC's technology and capabilities, in such areas as security, verification/billing, and mission critical systems, which will support the realization of new services offered by national/local governments, telecom carriers, and enterprises.

    • We possess the capability and expertise to link relevant services to customers. Utilizing such capability and expertise, and strengthening alliances with home appliance manufacturers, automobile manufacturers, and homebuilders, as well as other companies, we aim to seize new market opportunities.

    (3) Combining NEC Group Core Competencies to Support Growth.

    • With regard to our core businesses such as integrated IT/network solutions and semiconductor solutions, we aim to maximize our corporate value by combining our various core competencies, including human resources, software development capabilities, intellectual assets, and research and development capabilities.

    • Various needs are arising, in particular for software development relating to products ranging from electron devices to handsets to network infrastructure. As demand for software development increases, the key factor for product differentiation is the value added by the software. We will enhance the competitive edge of our products by taking advantage of the software development resources that total approximately 20,000 personnel across the NEC Group.

    • Regarding highly volatile and under funded projects that we are pursuing, we have promoted policies to inject external capital for new growth. We will continue to enhance such activities and pursue further growth.

NEC Corp.

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