Spinning off the semiconductor business and founding NEC Electronics (2001)

Carving out an in-house founding business

At the heart of this decision was the question of whether a founding business that had climbed to the top of the world could be cut away from the parent on the grounds of losses. Semiconductors were the source of the technology that had underpinned the C&C diversification, and a home-grown pillar developed as one with communications and computers. Moving the memory business, its prices collapsing, into a joint venture first, and then carving out even the remaining logic operations into an independent company, can be seen as a process of stepping down from the comprehensive-electronics form of holding everything in-house. The weight of this restructuring lies in the fact that NEC put its hand to the founding business not while in good health but under the pressure of one of the largest losses in its history.

While the spin-off showed early fruit in independent accounting and faster management, the semiconductor business it carved out eventually left NEC’s hands and was folded into Renesas. The separation, in exchange for lightness, entailed relinquishing the initiative in a business it had long nurtured. What to keep in-house and what to put outside — the question of selection and concentration still asked today — NEC was made to confront ahead of others, and with its very founding business as the object. That an actual exit from the business followed the spin-off drawn up on the logic of efficiency is where the reach of this decision shows through.