NEC shutters dismal smartphone operations

NEC Corp. is calling it quits in the smartphone business, according to a report by Nikkei. NEC's withdrawal goes against an unmistakable upward trend in the global smartphone market.

The Japanese company's withdrawal is a clear defeat for NEC and its place in the global mobile industry where the changing of the guards has been apparent, with Apple and Samsung taking over and a number of Chinese OEMs rising.

The Nikkei report claimed that NEC had been working on a deal with China's Lenovo since late last year to "rebuild the cell phone business under Lenovo's leadership." Their idea was to emulate the successful relationship the two companies have enjoyed in their collaboration in personal computers.

The story said that "NEC requested that Lenovo take a majority stake in development and production subsidiary NEC Casio Mobile Communications Ltd." But the two parties could not reach an agreement.

The Japanese company will apparently remain in the non-smartphone segment. Meanwhile, NEC will reassign the bulk of its NEC Casio employees to other groups, the report said.

While it's not clear whether any of NEC's intellectual properties in the mobile field might be valuable to others, the Nikkei article added that NEC will continue to consider selling off some cell phone-related patents and may revisit the possibility of a business merger if a potential partner is willing to take a majority interest.

With or without NEC, though, Lenovo, which only entered the cell phone market in 2010, has already done well among its Chinese peers in the local market—including Huawei, ZTE, and Coolpad.

In the quarter that ended March 31, Strategy Analytics' data shows that Samsung sold 12.5 million smartphones in China, garnering an 18.5 per cent market share, up 2.2 per cent from the previous quarter. Lenovo, on the other hand, sold 7.9 million smartphones and captured 11.7 per cent market share. Huawei edged Lenovo with a 12 per cent market share, making Lenovo as the second largest local smartphone vendor.

Lenovo wants to enter the US market

While Lenovo's current focus is on China, India, and other Southeast Asian countries, the company harbors an ambition to establish its brand in the US market. Some observers have even suggested Lenovo's potential interest in BlackBerry.

Obviously, for Lenovo, the partnership with NEC-which has little presence in the United States-couldn't be much help there.

Lenovo's ambition won't stop at being a smartphone OEM. EE Times, earlier this year, reported Lenovo's plan to get into the chip design business with a special focus on smartphones and tablets. Putting all these data points together, it's clear that neither NEC's previous prowess in SoC expertise (which now belongs to the ailing Renesas) nor the company's experience working with NTT Docomo for the Japanese market (but with no presence in the global market) is deemed important by Lenovo.

As smartphones in advanced countries begin to saturate the market, competition among handset vendors is only intensifying. NEC is losing its edge in Japan's domestic smartphone market and faces difficulties in making itself look attractive as a partner to anyone, including Lenovo.

- Junko Yoshida
??EE Times