NEC CORP TARGETS HOME ELECTRONICS BUSINESS
The president of Japan's biggest high
technology firm, NEC Corp <NIPN.T>, is anything but worried,
despite growing anti-Japanese protectionism, a soaring yen, and
a stagnant world electronics market.
    "The company's structure was developed by looking ahead,"
Tadahiro Sekimoto told Reuters in an interview.
    "We assumed the era of a strong yen, trade friction and
globalisation would arrive, and we moved ahead on that basis.
There's no need to change our strategy now."
    However, the world's largest manufacturer of microchips,
the tiny silicon wafers which are the brains of most high
technology products, knows it must keep looking ahead if it is
to survive.
    Hoping to build on existing strengths, NEC is now turning
its focus on home electronics, an area of past weakness,
Sekimoto said.
    NEC wants to follow its corporate slogan "C and C" (Computers
and Communications) to create high level home electronics that
go beyond mere televisions and video tape recorders, Sekimoto
said.
    Home electronics accounted for only eight pct of NEC's
total 2,334.67 billion yen sales on a consolidated basis in the
year ended March 31, 1986.
    Industry analysts say NEC is wise to target what will be a
major growth market in the future, but some warn the company
faces some stiff competition.
    "This is where the market is going to be for a long time --
in products that combine personal computers, video display and
telecommunications networks," said Salomon Brothers (Asia) Ltd
analyst Carole Ryavec. "But Matsushita (Electric Industrial Co
Ltd) may be there first."
    But Sekimoto argues that NEC's overall strengths will carry
the day.
    "Many companies are in the top 10 in computers or microchips
or telecommunications, but none is in the top 10 in all three.
NEC is unique in that respect," he said.
    To help its already high rankings, NEC will further
increase the high level of offshore production which makes it
one of the most multinational of Japan's electronics firms.
    The company will increase offshore output of all goods it
sells overseas to 50 pct from a current 25 pct over the next
several years, Sekimoto said.
    But the firm plans to go it alone in expanding overseas,
despite moving last year to become joint owner, along with
France's Cie des Machines Bull <BULP.P>, of U.S. Firm Honeywell
Inc's <HON> Information Systems unit.
    "We hope to increase our share in the U.S. Market through
the Honeywell tie-up. But our basic strategy is to take an
independent and autonomous route," said Sekimoto.
    The company also plans to maintain its independent line by
continuing to make computers which are not compatible with
those of International Business Machines Corp <IBM>, he said.
    "Among the Japanese competitors, only NEC hasn't been caught
in software copyright disputes with IBM and our profits and
market share have gradually expanded," Sekimoto said.
    Once new ways of linking non-compatible computers are
perfected, IBM compatibility will be irrelevant. "What will
matter is the best hardware, the best software and the best
ability to meet customers needs," Sekimoto said.
    In fact, NEC, which has over half of Japan's personal
computer market, may go to court to stop competitors selling
cheaper machines which can run NEC software but infringe
copyright on its operating system, an NEC spokesman said.
    While industry analysts give NEC high marks for looking
ahead, they note that it failed in forecasting microchip
demand. Like other Japanese chipmakers, the firm was left with
serious excess capacity when lean years followed the boom
times.
    But after two years of cutbacks in capital investment in
the sector, Sekimoto thinks the time has come to boost spending
again, if only slightly.
    "We're not going to increase production. But we are going to
invest in new product development and upgrade existing plant,"
he said.
    Despite NEC's admitted strengths, analysts note the company
faces tough times due to stagnant markets.
    "NEC has excellent worldwide capacity and technology, but
they are caught in a downturn which may last a long time," said
Salamon's Ryavec.
    The company forecasts such troubles will slash parent net
profits to 30 billion yen in the year ending March 31, 1987,
down 43 pct from the previous year, although sales are expected
to rise eight pct to 2,130 billion yen.
    Profits will improve only slightly next year, rising to 38
billion yen on sales of 2,350 billion, it said.
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