NEC considering handset joint venture

NEC may follow the route of its fellow Japanese electronics maker Sony in terms of its mobile phone business, teaming up with an international partner to revamp its ailing handset lines, NEC officials said today.

Faced with a 78% drop in operating profit from the first half of the fiscal year, NEC is looking to revamp its two biggest loss-making units, the mobile phone and semiconductor divisions, Reuters reported today. The handset division will get particular attention with NEC making a decision whether to consolidate its operations with another handset manufacturer in the next 6 months, an NEC spokesman told Reuters.

NEC did not name any potential partners, but it probably won't have to look very far. Many vendors' mobile phone businesses are suffering in the crowded marketplace. Siemens recently sold its mobile phone unit to BenQ in Taiwan, and other former phone giants have either left the business entirely or consolidated their operations with other firms. Ericsson was formerly the second largest manufacturer of mobile phones behind Nokia, but after several years of lackluster sales and falling market share it consolidated its operations with Sony, rebuilding its market share slowly under the Sony Ericsson brand.

NEC does not manufacture handsets for the U.S. market. In fact, few Japanese companies have penetrated deeply into the U.S. Matsushita manufactured phones under the Panasonic brand for the U.S. only to discontinue the line several years ago. Before the Ericsson joint venture, Sony's phone strategy in the U.S. waxed and waned. The only Japanese companies with any significant presence in the U.S. are Kyocera and Sanyo, which sell primarily to CDMA carriers.