NEC Corp. plans to separate much of its high-speed communications components work into a new company to enable it to better focus and keep up with the fast-expanding broadband and networking markets, it said Wednesday.
The new company that is to be formed in October, will comprise NEC’s optical semiconductor, microwave silicon and compound semiconductor operations. The new unit will include research, development and production of optical products, such as laser diodes and optical components for WDM (wavelength division multiplexing) high-speed telecommunications equipment, components for next-generation fiber to the home terminals and microwave communications components, such as those in wireless access systems.
Once separate from NEC, the new company will be able to better respond to the fast changing and quickly expanding broadband and communications market, said Aston Bridgman, a spokesman for the company. First-year sales alone are expected to be 120 billion yen (US$1.0 billion) and the company will have a staff of 500 people when it is formed.
The greater autonomy it will have from NEC is expected to enable it to make better use of resources and attract more engineers – a resource that is in short supply and vital to get if the company is to continue growing, said Bridgman. NEC said it expects the global market for such components and products to reach 2 trillion yen by 2005 and for its share of the market to hit 300 billion yen, or 15 per cent.
NEC also plans an initial public offering for the company within the next two years. This will supply the funds needed to pursue a mergers and acquisitions program for the new unit, said the spokesman.
In forming the new company, NEC will streamline research and development of the components. Currently spread over four centers, the next-generation research and development will be located at a facility in Kansai, western Japan, while fundamental device research and development will be conducted at NEC’s Tsukuba Laboratories in Tsukuba City, Ibaraki Prefecture.
Today’s announcement is part of an ongoing restructuring process that began on April 1, 2000, the beginning of the current financial year, and is intended to help the company better focus on its core competencies. That process saw NEC divided into three partially autonomous units, NEC Solutions, NEC Networks and NEC Electron Devices.
NEC, in Tokyo, can be contacted at http://www.nec-global.com/.