The Casio, Hitachi and NEC mobile merger simplified

At the end of August, we reported on the possibility of a merger between three of Japans smaller mobile device companies. Casio, Hitachi and NEC all have other manufacturing concerns, but their mobile divisions haven’t been hugely succesfully. Now the three companies have confirmed that they will be merging their mobile units into one, much larger venture. They’ve released some details - so we can have a look at what it will mean.

The merger:

Casio and Hitachi already have a joint-venture in the mobile device market. They set up the Casio Hitachi Mobile Communications Co. (ch-mobile) back in 2004. The ch-mobile will be merging with the mobile terminal unit of NEC in April 2010, to create NEC CASIO Mobile Communications, Ltd.

NEC is the top dog in this merger by a long shot. Between them, the three companies have invested 1 billion Yen in the startup - that’s over €7.5 million / $11 million. NEC has paid the largest amount of that by far, bearing 66% of the initial investment, and the plan is to bump that figure up to 5 billion Yen in June 2010, after the company is set up. In return for that much larger investment, 80% of the board of directors will be made up from NEC. And that doesn’t even take into account the fact that NEC will be appointing the overall Director.

This will be a highly independent company. At present, ch-mobile is a subsidiary of Casio. The new deal will see ch-mobile break away from Casio to form the new company. The mobile terminal unit of NEC is also breaking away from it’s parent company, though NEC hasn’t yet announced how that will affect the rest of the corporation.

The company:

What will NEC CASIO Mobile Communications be doing? Dissecting the press release leaves you this: they will be merging the technology, development and business assets of the NEC and ch-mobile to develop a new range of mobile devices. In particular, they will be integrating what they refer to as the “core” technologies from the two companies. ch-mobile is very focused on camera-related devices - thanks to the digital camera business from Casio and Hitachi’s digital image processing technology. You then add this to the core technologies from NEC: high-speed 3G access, LTE research, and an open Linux-based platform.

Why are they doing this?

Check out our earlier report for a more detailed look at the reasons behind the merger, but here’s a brief overview:

1. Better market share - the combined market share of the new company could be as high as 20% of Japanese mobile device sales - which is only 2% behind market leader Sharp.
2. Eliminates overlap - the three companies share some major clients. NEC supplies NTT DoCoMo and Softbank. Casio also supplies Softbank. Casio and Hitachi overlap on telecoms company KDDI
3. Market saturation - Japan is such a saturated mobile market that for the smaller manufacturers merging is essential to stay competitive.
4. Possible foreign expansion - All three companies make mobiles almost exclusively for Japan. With the consolidated backing of three manufacturers working together, a US or European launch of their devices might be something we’ll see in the future.