| International Activities | |
| For NEC to succeed in today's competitive world market, NEC must continuously seek to deliver customer value by satisfying the specific needs of its customers worldwide. To better serve customers from diverse markets, NEC is localizing key areas of its development, production, and sales activities. Furthermore, to augment our overall global competence, NEC is advancing its "mesh globalization" strategy, which aims to fully leverage the product, service, and technical knowledge of its globally dispersed group. |
During fiscal 1997, overseas sales decreased 9 percent, to Y1,105.6 billion ($8,916 million), accounting for 22 percent of net sales. The decline was primarily due to plunging memory prices. Sales of computers were down, principally owing to the merger
of our overseas PC operations
with those of Packard Bell NEC, Inc. Sales rose in the area of communications systems and equipment, including switching systems, transmission systems, microwave communications systems, and cellular phone handsets.
In spite of declining semiconductor sales in the wake of deteriorating memory prices, a generally favorable economic climate and strong performance in communications infrastructure equipment nursed
a slight gain in overall sales in these regions. Sales of TFT color LCDs to PC manufacturers in Taiwan soared.
The trend toward privatization
in the Asian communications industry has expanded infrastructure investment. In Malaysia, which is accelerating the modernization of its communications network, NEC secured a long-term contract with Telecom Malaysia for the delivery of NEAX61 digital switching systems. From Indonesia and the Philippines, NEC received orders for PHS-based wireless local loop digital cordless telephone systems. We expect future demand for these systems
to be brisk, as they enable the quick, inexpensive construction
of a telephone network.
NEC's position as a leader in multimedia and its ability to harness its broad expertise in this field have led to success in winning a large contract from Hong Kong Telecom. NEC will deliver video servers with its HYPERMS video server software, ATM broadband access systems, and a substantial quantity of set-top boxes (STBs) for a commercial interactive TV service in Hong Kong that will offer video-on-demand (VOD), home banking, and home shopping. In addition, NEC received an order from Australia for equipment for use in a public multimedia service.
The market entry of NCCs in South Korea has favorably affected the electronics market. Sales of NEC's transmission systems and broadcast equipment grew. In addition, NEC received an order for postal automation systems.
In the potentially huge market of China, NEC has pursued business ranging from communications equipment, computers, and semiconductors. In fiscal 1997, NEC established NEC (China) Co., Ltd., to coordinate NEC's activities
in China.
In Indonesia, NEC commenced operations at its semiconductor assembly line, that country's first such facility.
Under its Universal Service
initiative, the government of Australia is investing heavily in
rural communications systems to provide seamless superregional service. As part of this effort,
NEC closed a long-term contract with Telstra Co., Ltd., the public Australian telephone company.
NEC will provide such wireless communications service equipment as digital radio multiple-access subscriber systems (DRMASS's) that will service the country's rural areas.
NEC secured a
contract from the Australian state of Victoria to construct a public multimedia service, called Electronic Service Delivery. This system will enable citizens to obtain public and administrative services via NEC Kiosk terminals located statewide.
In Singapore, NEC contracted for a LAN system to be installed in hotels. The system provides guests with multimedia services, including Internet and entertainment services on in-room PCs.
In the period under review, NEC began shipments to Hong Kong Telecom of STBs for use in the world's first commercial interactive TV
service. These STBs are manufactured by our Philippine subsidiary.
Although economic expansion in the United States has continued, NEC's sales in North America were down, due mainly to the price
erosion of memory devices and
the transfer of its PC operations
to Packard Bell NEC. However, ASICs and microcomputers recorded healthy sales. Sales of such communications equipment as PBXs and transmission systems also increased.
In communications infrastructure, NEC shipped ATOMNET/M20 ATM switching systems that deliver the world's largest switching capacity to Sprint Corporation. Sprint Corporation also selected NEC
as the primary supplier of ATM switches for its backbone network. In addition, NEC contracted with Frontier Corporation, another U.S. long-distance carrier, to deliver NEC's cutting-edge Synchronous Optical Network (SONET) FOTS's.
Furthermore, to accelerate NEC's assimilation of next-generation software and Internet technologies, we established venture companies in the United States.
In April 1997, NEC established a venture capital fund with Sumitomo Bank, Limited, to assist in the development of up-and-coming high-technology companies in the United States in such fields as multimedia. Through the fund, NEC also expects to develop relationships with the entrepreneurial ventures community.
NEC signed a
contract with ICO Global Communications (Operations) Ltd. to supply ground infrastructure equipment for a mobile satellite communications service.
Improving economies in Latin America have rejuvenated the
market for communications infrastructure. Demand has been high for easy-to-build PHS-based wireless local loop digital cordless telephone systems across the region. During fiscal 1997, NEC received an order from Uruguay for one such system.
Centered in the three metropolis cities of 
, Rio de Janeiro, and Bahia, NEC has secured a number of large-scale contracts to expand cellular phone infrastructure in Brazil, where NEC is the leading supplier of these systems. Furthermore, the efforts of NEC do Brasil S.A. have pushed the volume of orders for its NEAX61BR digital switching systems over the million-line-per-year mark.
As is the case in Japan, NEC is the leading supplier of cellular systems in Brazil. NEC has contributed to expanding that country's cellular phone networks.
Economic growth in Europe was stagnant during the period under review. Overall sales in this region were down, primarily due to the slumping memory market.
Demand in Russia was healthy
for corporate communications
networks that can cover vast areas. NEC received orders for very small aperture terminals (VSATs), used in such networks, from Russian companies. NEC also received orders
for its Pasolink digital microwave
communications equipment from 14 operators in nine countries,
primarily for use in GSM infrastructure. NEC's Pasolink enables the speedy and economical construction of a point-to-point microwave communications network capable of high-volume data transmission. Furthermore, a large-scale project to digitize the Republic of Uzbekistan's communications network included the installation of switching, transmission, and microwave communications systems.
In addition, NEC signed contracts to supply postal automation systems in Finland and Denmark.
In October 1996, NEC Semiconductors (UK) Limited commenced production at its new plant in Scotland. This leading-edge 8-inch wafer semiconductor fabrication line is an example of NEC's commitment to localization.
In June 1996,
the University
of Stuttgart in Germany
began the operation of its NEC SX-4 supercomputer.
Stabilizing oil prices in the Middle and Near East have spurred signs of economic recovery. In Africa, despite latent demand for the building of communications infrastructure, investment continued to be held in check by a lack of funding.
In this environment, NEC secured a contract from the Egyptian National Railway for digital microwave communications systems and other equipment spanning approximately 700 kilometers for the purpose of enhancing the railway's safe operation. In addition, NEC received
an order to supply DRMASS's in Morocco.
