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SCMP Reporter

NEC, Japan's largest personal-computer (PC) supplier, plans to shift 70 per cent of production for the Japan market to China within the next fiscal year, according to a spokesman.

The move, expected to deliver a 30 per cent cost saving to its loss-making PC arm, also responds to expected relaxation of Taiwanese curbs on investment in the mainland chip industry.

NEC will join a growing rank of multinationals, from mobile-phone maker Ericsson to electronics giant Toshiba, outsourcing the manufacture of higher-end, more technologically demanding products to mainland factories. They are attracted by lower costs, fast-improving infrastructure and a maturing technology industry.

The NEC spokesman said the firm's China transfer would begin in about the second quarter.

Initially, the company would outsource a small proportion of PC production to several Taiwanese firms with factories in the mainland. NEC already has manufacturing agreements with several Taiwanese PC makers.

The proportion would rise gradually to 70 per cent by the end of the fiscal year on March 31 next year.

NEC is forecast to sell more than 2.8 million PC units in Japan in the year to March 31, giving it 25 per cent of the market, according to the spokesman.

With economic woes denting consumption and depressing commodity prices, NEC's PC arm was expecting a net loss of 20 billion yen (about HK$1.16 billion) this year from domestic sales, the spokesman said.

'By increasing output in China, NEC hopes to cut costs and pull its PC business out of the red in the second half of fiscal 2002,' the Nihon Keizai Shimbun reported yesterday.

NEC has assembled most of its PCs for Japan at two plants in Japan, according to Agence France-Presse.

Units manufactured overseas accounted for 10 per cent of NEC's sales in Japan, the paper said. China's contribution was marginal, the NEC spokesman said.

However, NEC already had been sourcing all mother boards - the main circuit boards in PCs - from China and Taiwan, he said.

'China is kind of the information technology manufacturing centre for all over the world,' the NEC spokesman said.

With Taiwan ending its first year in economic contraction last year, businesses, notably those in its semiconductor sector, have lobbied the Government to lift curbs on investment in the mainland.

Taiwan's cabinet was poised to grant the country's semiconductor firms approval to build wafer fabrication plants in China by the end of next month, Reuters quoted the Taiwanese Economic Daily News  as saying in a report yesterday.

Only two to three plants, using out-of-date technology, would be allowed to set up in the mainland, and the total investment should not exceed NT$200 billion (about HK$44.3 billion), the Taiwanese paper quoted Vice-Economics Minister Chen Ruey-long as saying.

The world's top contract chipmaker, Taiwan Semiconductor Manufacturing, and Taiwanese rival United Microelectronics are eyeing a presence in the mainland once the ban by the Taiwan Government is lifted.

Two high-profile, Taiwan-backed ventures - Semiconductor Manufacturing International and Grace Semiconductor Manufacturing - are building foundries in Shanghai and second-tier firms already have done so.



NEC moving Japan-market PC production to mainland