NEC has decided not to join HTC, BlackBerry Ltd. (BBRY), Nokia Corp. (NOK) and smaller rivals in the uphill battle against Samsung and Apple Inc. (AAPL). It will leave the mobile handset business and watch others hopelessly scratch for third and fourth places. The announcement follows the disclosure by HTC that it will post its first loss in years during the next quarter.
NEC never created products that would allow it to compete with Apple's brand and Samsung's balance sheet and ingenuity. Apple was early enough into the sector that competitors all had to play catch-up. The second handset business was cheap phones, meant to a large extent for emerging markets, and downscale buyers in established ones. Nokia dominates that business, and margins in it are poor.
NEC Corporation (NEC; TSE: 6701) is reviewing the mobile phone handset business operated by NEC CASIO Mobile Communications, Ltd. in order to accelerate its growth strategy focused on the "Social Solutions Business," which provides advanced social infrastructure capitalizing on information and communications technologies (ICT) .
Specifically, as of today, NEC is ending the development, manufacturing and sale of smartphones, other than models already on the market. NEC will continue providing maintenance and support services for its existing smartphones. NEC will also continue developing and producing conventional mobile phone handsets. Furthermore, NEC will utilize NEC Saitama, Ltd. for its Social Solutions Business, as well as the production of conventional mobile phone handsets for the Japanese market. Moreover, NEC will continue operating its tablet business.
As the market for mobile phone handsets, including the rapid spread of smartphones, has dramatically changed, economies of scale have become increasingly important for the maintenance and strengthening of competitiveness. However, NEC's mobile phone handset shipments are following a downward trend and it is difficult to foresee improved performance in the future. In light of these circumstances, NEC reached this decision to review its mobile phone handset business following a comprehensive examination of the business' direction.