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Business

Take responsibility for failures, NEC chief tells his executives

CEO Takashi Niino says lost tech company will no longer be cozy or lenient

NEC Chief Executive Takashi Niino promises to properly discipline any of the company's corporate officers who fail to fulfill their missions.

BANGKOK -- Japanese electronics maker NEC used to be a global chip power. It also used to be a major supplier of personal computers and cellphones to Japanese companies and consumers.

But its heyday was decades ago.

In late January, the company announced it was paring 3,000 jobs as part of a midterm business plan. The blueprint also calls for a partial withdrawal from the energy business, which it had earlier decided to grow into a core earner. The plan also calls for NEC to expand its security business overseas and turn it into a pillar of growth.

The restructuring announcement came even as the company's earnings appear to be bottoming out. The timing could leave observers thinking that NEC's past is still be acting as a drag on growth.

"We could survive just as we are currently," President and CEO Takashi Niino told The Nikkei in an interview during his visit to Thailand, "but restructuring would become difficult if we book losses." 

Q: Why did NEC retract the midterm plan worked out in the year ended March 2017 and announce a new one calling for 3,000 job cuts?

A: Why weren't we able to achieve the previous midterm plan? One of the reasons is that our existing businesses shrunk and we weren't able to make the investments that were necessary to do new things. We feared we might fail to move on to the next step of growth if this situation continued ... and be left in the dust.

In a meeting after we announced the midterm plan in January, the labor union said the job cuts were unacceptable. Restructuring is a last resort, but it will lead to the next step of our growth.

Q: How will you go about restructuring?

A: We are withdrawing, downsizing or divesting operations in areas where we don't expect to turn profits or see chances for growth. We're requiring all our operations to have operating margins of at least 5%. We can't let operations with margins of 1% to 2% drag down our overall performance.

Q: NEC has separated its businesses into areas like semiconductors, PCs and mobile phones, and has repeatedly downsized and withdrew from unprofitable areas.

A: We led these industries while they were still young, but our market control wasn't strong enough. When Chinese, South Korean and Taiwanese [rivals] started to challenge us with mass production, our sales dropped. This is a common issue for Japan's overall electronics industry.

Q: Critics also point to Japanese manufacturers' slow execution.

A: In Japan, regulations often act as a drag when we try to do new things. We have our business development departments in Singapore, India and North America. In the past, we've had some strong technologies but when we completed them, rivals had already put out similar products. We're going to introduce [new technologies], even in beta, and work on business development using external assistance.

Q: Why did you choose to insert the line, "Define management's responsibilities and authorities more clearly, and reinforce commitment to results" in the latest midterm management plan?

A: We have nearly 50 corporate officers, none of whom has been demoted or fired for failing to fulfill their missions. But they're going to have to take responsibility for failures. NEC still has cozy, lenient systems. It needs to become a much, much tougher company. It might be painful, but it has to start at the management level.

Q: What do you want NEC to look like in 2030?

A: We're going to place bets on areas where we have top-notch technologies, even if these areas are no more than market niches. And then we will perfect our technologies. We're looking at revenue of over 3 trillion yen ($27.9 billion), and bringing the share of overseas operations to 40% to 50%. I'm envisioning NEC becoming synonymous with reliability and safety around the world. The precision of our facial recognition technology is already becoming known as the best in the world.

Interviewed by Nikkei staff writer Marimi Kishimoto in Bangkok. Tatsuro Miyazumi in Tokyo contributed to this report

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