NEC Corporation (日本電気株式会社 Nippon Denki Kabushiki Gaisha, TYO: 6701, NASDAQ: NIPNY) is a Japanese multinational IT company headquartered in Minato-ku, Tokyo, Japan. NEC, part of the Sumitomo Group, provides information technology (IT) and network solutions to business enterprises, communications services providers and government.
The company was formerly known as Nippon Electric Company, Limited, before it was renamed in 1983. It still goes by the full name in Japan. As a chip maker, NEC Semiconductors is among the Worldwide Top 20 Semiconductor Sales Leaders.
Early development
Company formation
Nippon Electric Limited Partnership was established in August 31, 1898 by Kunihiko Iwadare and Takeshiro Maeda using facilities that they had bought from Miyoshi Electrical Manufacturing Company. Iwadare was the representative partner. Maeda handled company sales. Western Electric, who had an interest in the Japanese phone market, was represented by Walter Tenney Carleton. Carleton was also responsible for the renovation of the Miyoshi facilities. It was agreed that the partnership would be reorganized as a joint-stock company when treaty would allow it. On July 17, 1899 the revised treaty between Japan and the United States went into effect. Nippon Electric Company, Limited was organized the same day with Western Electric Company to become the first Japanese joint venture with foreign capital. Iwadare was named managing director. Ernest Clement and Carleton were named as directors. Maeda and Mototeru Fujii were assigned to be auditors. The overall management was handled by Iwadare, Maeda and Carleton.
Early production
They started with the production, sales and maintenance of telephones and switches. NEC modernized the production facilities with the construction of the Mita Plant in 1901 at Mita Shikokumachi. It was completed in December 1902.
The Ministry of Communications also adopted a new technology in 1903. It was the common battery switchboard supplied by NEC. The common battery switchboards powered the subscriber phone, eliminating the need for a permanent magnet generator in each subscriber's phone. The switchboards were initially imported, but were manufactured locally by 1909.
NEC started exporting telephone sets to China in 1904.
Changes in management
In 1905, Iwadare set out to change the plant management policy. He visited Western Electric to see their management and production control. On his return to Japan he discontinued the "oyakata" system of sub contracting. It was replaced by a new system where managers and employees were all direct employees of the company. Inefficiency was also removed from the production process. The company paid higher salaries with incentives for efficiency. New accounting and cost controls were put in place. Time clocks were installed.
Expansion of the Japanese telephone service
Between 1899 and 1907, the number of telephone subscribers in Japan rose from 35,000 to 95,000. NEC entered the China market in 1908 with the implementation of the telegraph treaty between Japan and China. They also entered the Korean market, setting up an office in Seoul in January 1908. During the period of 1907 to 1912 sales rose from 1.6 million yen to 2 million yen. The expansion of the Japanese phone service had been a key part of NEC's success during this period. This expansion was about to take a pause.
The Ministry of Communications delayed a third expansion plan of the phone service in March, 1913. This was despite there being 120,000 potential telephone subscribers waiting for phone installations. NEC Sales fell sixty percent between 1912 and 1915. During the interim, Iwadare started importing appliances including electric fans, kitchen appliances, washing machines and vacuum cleaners. Electric fans had never been seen in Japan before. The imports were intended to prop up company sales. In 1916, the government resumed the delayed telephone expansion plan, adding 75,000 subscribers and 32,6000 kilometers of new toll lines. Thanks to this third expansion plan, NEC expanded at a time when the rest of Japanese industry was mostly in decline.
Association with Sumitomo
In 1919, NEC started its first association with Sumitomo. Sumitomo Densen Seizosho was engaged to manufacture cables. As part of the venture, NEC provided cable manufacturing equipment to Sumitomo Densen. Rights to Western Electrics duplex cable patents were also transferred to Sumitomo Densen.
The Great Kanto Earthquake
Japan was struck by the Great Kanto Earthquake in 1923. 140,000 people were killed and 3.4 million were left homeless. Four of NEC's factories were destroyed, killing 105 of NEC's engineers and workers. Thirteen of Tokyo's telephone offices were destroyed by fire. Telephone and telegraph service was interrupted by damage to telephone cables. In response, the Ministry of Communications accelerated major programs to install automatic telephone switching systems and enter radio broadcasting. The first automatic switching systems were the Strowger-type model made by Automatic Telephone Manufacturing Co. (ATM) in the United Kingdom. NEC participated in the installation of the automatic switching systems, ultimately becoming the general sales agent for ATM. NEC developed its own Strowger-type automatic switching system in 1924, a first in Japan. One of the plants almost leveled during the Kanto Earthquake, the Mita Plant, was chosen to support expanding production. A new three-story steel-reinforced concrete building was built, starting in 1925. It was modeled after the Western Electric Hawthorne Works.
Stable growth
Radio broadcast
NEC started their radio communications business in 1924. Japan's first radio broadcaster, Radio Tokyo was founded in 1924 and started broadcasting in 1925. NEC imported the broadcasting equipment from Western Electric. The expansion of radio broadcasting into Osaka and Nagoya marked the emergence of radio as an Industry. NEC established a radio research unit 1924. NEC started developing electron tubes in 1925. By 1930, they were manufacturing their first 500 W radio transmitter. They provided the Chinese Xinjing station with a 100 kW radio broadcasting system in 1934.
Photo-telegraphic equipment
Photo-telegraphic equipment was developed by NEC that was used to transmit photos of the accession ceremony of Emperor Hirohito. The ceremony was held in Kyoto in 1928. The Newspapers Asahi Shimbun and Mainichi Shimbun were competing to cover the ceremony. The Asahi Shimbun was using a Siemens device. The Mainichi was planning to use French photo-telegraphic equipment. In the end, both papers acquired and used the NEC product, due to its faster transmission rate and higher picture quality.
Carrier transmission equipment
In 1929 Nippon Electric provided Japan's Ministry of Communications with the A-type switching system. It was the first of these systems to be developed in Japan. Nippon supplied Japan's Ministry of Communications with nonloaded line carrier equipment for long distance telephone channels in 1937.
Microwave research
In 1939, Nippon Electric established a research laboratory in the Tamagawa plant. They became the first Japanese company to successfully test microwave multiplex communications.
World War II
World War II has been described as being the company's blackest days (NEC 1984, p. 31). In 1938 the Mita and Tamagawa plants were placed under military control, with direct supervision by military officers. On December 22, 1941, the enemy property control law was passed. NEC shares owned by International Standard Electric Corporation (ISE), an ITT subsidiary and Western Electric affiliate were seized. Capital and technical relations were abruptly severed. The "Munitions Company Law" was passed in October 1943, placing overall control of NEC plants under military jurisdiction. The Ueno plant was leveled by military attack in March 1945. Fire bombings in April and May heavily damaged the Tamagawa Plant, reducing its capacity by forty percent. The Okayama Plant was totally destroyed by a bombing attack in June of the same year. At the end of the war, NEC’s production had been substantially reduced by damage to its facilities, and by material and personnel shortages. After the war, production was slowly returned to civilian use. NEC re-opened its major plants by the end of January 1946.
Domestic growth
NEC began transistor research and development in 1950. They started exporting radio broadcast equipment to Korea under the first major postwar contract in 1951. NEC received the Deming prize for excellence in quality control in 1952. Computer research and development began in 1954. NEC produced the first crossbar switching system in Japan. It was installed at Nippon Telegraph and Telephone (NTT) in 1956. NEC began joint research and development with NTT of electronic switching systems the same year. NEC established Taiwan Telecommunication Company as their first postwar overseas joint venture in 1958. They completed the NEAC-1101 and NEAC-1102 computers the same year. In 1959 NEC demonstrated their first transistorized computer, the NEAC-2201. They demonstrated it at the UNESCO AUTOMATH show in Paris. The company began integrated circuit research and development in 1960. In 1963 NEC started trading as American Depositary Receipts, ten million being sold in the United States. Nippon Electric New York (now NEC America Inc.) was incorporated in the same year.
Global expansion
NEC supplied KDD with submarine cable systems to be laid in the Pacific Ocean in 1964. They supplied short haul 24 channel PCM carrier transmission equipment to NTT in 1965. NEC de Mexico, S. A. de C. V., NEC do Brasil, S. A., NEC Australia Pty. Ltd. were established between 1968 and 1969. NEC supplied Comsat Corporation with the SPADE satellite communications system in 1971. In 1972, Switzerland ordered a NEC satellite communications earth station. The same year, a small transportable satellite communications earth station was set up in China. Shares of NEC common stock were listed on the Amsterdam Stock Exchange in 1973. NEC also designed an automated broadcasting system for the Japan Broadcasting Corporation the same year. NEC Electronics (Europe) GmbH was also established. In 1974, the ACOS series computer was introduced. The New Central Research Laboratories were completed in 1975. In 1977, Japan's National Space Development Agency launched the NEC geostationary meteorological satellite, named Himawari.
C&C era begins
During this period NEC introduced the concept of C&C, the integration of Computers and Communications. NEC America Inc. opened a plant in Dallas, Texas to manufacture PABX and telephone systems in 1978. They also acquired Electronic Arrays, Inc. of California the same year to start semiconductor chip production in the United States. In 1980, NEC created the first digital signal processor, the NEC µPD7710. NEC Semiconductors (UK) Ltd. was established in 1981, producing VLSIs and LSIs. NEC introduced the 16-bit PC-9800 series personal computer in 1982. In 1983 NEC stock was listed on the Basel, Geneva and Zurich, Switzerland exchanges. NEC changed its English company name to NEC Corporation the same year. NEC Information Systems, Inc. started manufacturing computers and related products in the United States in 1984. NEC also released the V-series processor the same year. In 1986, NEC delivered its SX-2 super computer to the Houston Advanced Research Center. In the same year, the NEAX61 digital switching system went in to service. In 1987, NEC Technologies (UK) Ltd. was established in the United Kingdom to manufacture VCRs, printers and color TVs for Europe. Also that year, NEC licensed technology from Hudson Soft, a video game manufacturer, to create a video game console called the PC-Engine (later released in 1989 as the TurboGrafx-16 in the North American market). Its successor, the PC-FX, was produced in 1994. NEC USA, Inc. was established in 1989 as a holding company for North American operations.
C&C for human potential
In 1990, the new head office building known as the "Super Tower" was completed. Additionally, joint venture agreements were established to manufacture and market digital electronic switching systems and LSIs in China. In 1993 NEC's asynchronous transfer mode (ATM) switching system, the NEAX61 (Nippon Electronic Automatic Exchange) ATM Service Node, went into service in the United States. NEC Europe, Ltd. was established as a holding company for European operations the same year. The NEC C&C Research Laboratories, NEC Europe, Ltd. were opened in Germany in 1994. NEC (China) Co, Ltd. was established as a holding company for Chinese operations in 1996. In 1997 NEC developed 4Gbit DRAM, and their semiconductor group was honored with one of the first Japan Quality Awards. In 1998, NEC opened the world's most advanced semiconductor R&D facility.
A new century
NEC celebrated their 100th anniversary in 1999. NEC Electronics Corporation was separated from NEC in 2002 as a new semiconductor company. NEC Laboratories America, Inc. (NEC Labs) was created in November, 2002 as a merger of NEC Research Institute (NECI) and NEC USA’s Computer and Communications Research Laboratory (CCRL). NEC built the Earth Simulator Computer (ESC), the fastest supercomputer in the world from 2002 to 2004, and since produced the NEC N343i in 2006.
In 2007, NEC and Nissan Co. Corp. are considering a joint venture to produce lithium ion batteries for hybrid cars
Company structure
NEC's business is divided into the three principal segments: IT Solutions, Network Solutions and Electronic Devices.
The IT Solutions business delivers computing solutions to business enterprises, government and individual customers in the form of software, hardware and related services.
The Network Solutions business designs and provides broadband network systems, mobile and wireless communications network systems, mobile handsets, broadcast and other systems.
NEC's Electronic Devices business includes semiconductors, displays and other electronic components. NEC produces Versa notebooks for the international market and the Lavie series for Japanese market.
