NEC, Matsushita ink cellular handset alliance

NEC Corp., Matsushita Electric Industrial Co. Ltd. and its telecommunication subsidiary Matsushita Communication Industrial Co. Ltd. have signed a broad alliance to work together on design and development of advanced cellular handsets and terminals.

The deal, which ties Japan's number one and number two manufacturers of cellular telephones, follows similar deals between rivals and underlines the growing complexity and cost involved in producing cellular handsets.

Under the terms of the deal, which was announced Tuesday, the three companies will cooperate in designing a common architecture and specifications for their 3G (third-generation) handsets, jointly develop handset software and work together on designing new mobile multimedia terminals. The companies will also consider using each other to supply, on an OEM (original equipment manufacturer) basis, certain products, including 2.5G GSM (global system for mobile communications), GPRS (general packet radio service) and 3G handsets.

Between them, the two companies lead Japan's cellular handset market with a series of popular telephones produced for NTT DoCoMo Inc., the largest cellular carrier in Japan. NEC cellular handsets have held the number one position for every week of 2001 to date, bar one in early January, while handsets from the two companies have held the top three positions in the sales ranking for every week of the year bar two weeks in May, according to point-of-sale data collected by Nikkei BP/GfK Sales Week 3200.

The two carriers are also leading the 3G field at present, supplying the only two handsets being used in NTT DoCoMo Inc.'s current 3G service trials.

But the growing complexity of cellular handsets, which now boast the ability to access the Internet, send and receive e-mail, download audio, execute Java code and, in the case of 3G, play video, has meant higher development costs and led to a series of embarrassing faults and recalls that has hit both companies.

Of the two companies, Matsushita Communication in particular has been hit. NTT DoCoMo has twice withdrawn its P503i handset from sale because of bugs -- one that caused all data in the handset to be lost and one that meant users could not receive calls. The cost of the recalls, combined with falling sales of new handsets, led the company to predict it will report an operating loss for the first half of this year of 32.9 billion yen (US$275 million). Kuriko Miyake, Tokyo Correspondent, contributed to this story.

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