NEC Corporation

C&C Operations

Communications Systems and Equipment

NEC's shipments of digital cellular base stations increased greatly as a result of a rapid rise in the number of digital cellular phone subscribers and demand for expanding service areas.

In fiscal 1996, sales of communications systems and equipment increased 19 percent, to 1,227.0 billion yen ($11,467 million), and accounted for 28 percent of net sales. Major factors contributing to this increase were high growth in domestic sales of mobile communications systems, transmission systems, and microwave communications systems.

During the period under review, the Japanese market for mobile communications systems expanded dramatically. In the area of cellular phones, the number of subscribers surged, reflecting declines in handset prices, subscription charges, and call rates. In addition, the service areas for PHS's, which began operations in Japan in July 1995, were expanded rapidly to encourage growth in the number of subscriptions. In response to rapid market expansion, both cellular and PHS operators accelerated their investment in infrastructure equipment, including switching systems, base stations, and cell stations. NEC benefited from this market buoyancy, enjoying greatly increased sales of mobile communications systems and confirming its position as the top manufacturer of such equipment in Japan.

Developments by Product Line

Digital Switching Systems

NEC is moving forward aggressively with asynchronous transfer mode (ATM) switching systems, which are core products of multimedia communications networks. In fiscal 1996, NEC introduced the ATOMNET series for overseas markets. This series includes a backbone switch with switching capacity of up to 160Gbits per second, an edge switch, and a network management system. NEC has already delivered such systems to a U.S. carrier and has also received an order from a Finnish carrier. In Japan, NEC received significant orders from many universities for ATM switching systems for on-campus LANs.

Fiscal 1996 also saw the introduction of a digital cordless private branch exchange (PBX) and a wireless module (WLM), which can be added to existing PBXs, aimed at small and medium-sized businesses. In conformity with PHS technologies, digital cordless systems utilize the public PHS services that enable cordless phones to be used outside business facilities.

Fiber-Optic and Radio Transmission Systems

Reductions in charges for high-speed digital leased lines of Nippon Telegraph and Telephone Corporation (NTT) and the rapid growth in Internet use among businesses generated strong demand for NEC's transmission systems.

In the area of wireless communications, during the period under review NEC received orders from overseas for PHS-based wireless local loop digital cordless telephone systems (DCTS's). These systems use PHS technologies to link subscribers to local switching systems. Wireless local loop DCTS's provide high-quality transmissions and can be set up more quickly and economically than conventional cable-based systems. Healthy demand for PHS-based wireless local loops is anticipated from countries in Latin America and Asia, which are hurrying to establish or expand telephone networks. Such systems are ideal for establishing communications infrastructures in rural areas, where the laying of telephone cables is not cost-effective.

In Malaysia, an NEC 5Gbit-per-second fiber-optic submarine cable system was laid during the fiscal year. The first of its kind in Southeast Asia, this highly regarded system employs optical amplifying technology.

The Kingdom of Bhutan's digital radio multiple-access subscriber system (DRMASS) commenced operations in August 1995. An NEC DRMASS was added to the existing microwave communica-tions system, which had also been supplied by NEC, to expand its area of coverage.

Space Electronics

NEC has many years of experience in space systems development. In fiscal 1996, we received an order from the National Space Development Agency of Japan (NASDA) for an operations control system for the Japanese Experimental Module. As part of the Space Station project, the Japanese Experimental Module will carry out a variety of space-related experiments. NEC was designated by NASDA as the systems integrator for the Japanese Experimental Module's operations control system, which will play a pivotal role in what are to be Japan's first manned experiments in space. NEC is proud to be a part of a project that promises to make a major contribution to advancing humankind's presence in space in the 21st century.

Mobile Communications Systems

With the growing trend toward digital cellular systems in the Japanese market, NEC's sales of digital cellular phones rose during fiscal 1996. Responding to diversifying customer needs, we launched a new range of easy-to-use, high-performance digital cellular phones. We also commenced shipments of PHS handsets to coincide with the inauguration of PHS services in Japan. Overseas, we introduced the P8 series of cellular phones, which are smaller and lighter than their predecessors. Through its subsidiary in the United Kingdom, NEC developed a digital cellular phone that conforms to the GSM (Global System for Mobile Communications) standard.

Following the 1995 inauguration of PHS services in Japan, NEC accelerated its shipments of PHS handsets to systems operators and introduced its own-brand phone.

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