NEC Electronics Announces Revised Full-Year Forecasts

NEC Electronics Corporation (TSE: 6723) today announced revisions to its full-year consolidated financial forecasts disclosed on July 6, 2005.

1. Revised forecast for full-year consolidated financial results
    (For the year ending March 31, 2006)

2. Background to the revisions

At the time of the revised consolidated forecast announced on July 6, 2005, NEC Electronics stated that the company was evaluating the forecast for the second half of the fiscal year. While confirming the results for the second quarter, the company also re-evaluated its outlook for the second half, and decided to significantly reduce its forecasts for net sales and income for the second half of the fiscal year.

The large decline in the forecast for net sales is the result of projected declines in sales based on the macroeconomic factors, and the declines in sales for NEC Electronics' target industries and products. Concerning the economic factors, although certain products such as LCD driver ICs have already begun recovering, the market for general purpose products such as microcontrollers and discrete components is still a fraction of last year's market, and the company expects that sales in these areas will be significantly less than initially predicted at the outset of the fiscal year.

In terms of the individual products that affect net sales, the company expects to be influenced by 1) the saturation of the Japanese and Korean markets for high performance mobile phones, and 2) increasing competition in DVD recorders and other digital consumer applications, resulting in decreasing volumes and lower prices.

With regard to income and loss, the company experienced declines in income as a result of significant decreases in sales across a wide range of products compared to the initial forecast. Additionally, the sales structure was such that the products which saw sales growth had relatively low profit margins, resulting inevitably in a significant decline in income compared to the initial plans.

Looking ahead, NEC Electronics will aggressively pursue sales, with an emphasis on strengthening product performance and sales channels for products such as microcontrollers and discrete components that have high profit margins. NEC Electronics will also take steps to improve the company's financial status as soon as possible, by strengthening design resources with the reallocation of personnel within the NEC Electronics Group, and the pursuit of cost reductions through the elimination of outsourcing and promotion of in-house production.

The consolidated financial forecasts were calculated at the rate of 110 yen per USD, and 135 yen per Euro. (Exchange rates at the time of initial forecasts were 105 yen per USD, and 130 yen per Euro)

About NEC Electronics

NEC Electronics Corporation (TSE: 6723) specializes in semiconductor products encompassing advanced technology solutions for the high-end computing and broadband networking markets, system solutions for the mobile handsets, PC peripherals, automotive and digital consumer markets, and multi-market solutions for a wide range of customer applications. NEC Electronics Corporation has 26 subsidiaries worldwide including NEC Electronics America, Inc. (www.am.necel.com) and NEC Electronics (Europe) GmbH (www.eu.necel.com). For additional information about NEC Electronics worldwide, visit www.necel.com.