NEC Electronics Announces New Management Policies

Specifically, the company will:

1.

Re-allocate resources equivalent to approximately 1,000 engineering positions. Approximately 400 engineers will be shifted to automotive and digital consumer projects, while additional resources for outsourcing of development (approximately 600 positions) will be cut within one year.

2.

Aim to become the global leader in automotive microcontrollers (MCUs), and expand its lineup of other automotive products.

3.

Aim to set the global standard for chips for digital televisions, and expand its sales for other digital consumer applications.

4.

Reorganize its manufacturing facilities to improve cost competitiveness, and consolidate the company's nine front-end manufacturing lines in Japan to four lines.

1.

Re-allocate resources equivalent to approximately 1,000 engineering positions

Approximately 400 engineers from NEC Electronics' system-on-chip (SoC) development staff, including structured ASIC engineers, will be shifted to digital consumer and automotive projects. In the area of mobile handsets, the company will continue to work on the digital baseband technologies, but will shift resources away from application processors to digital consumer projects. Outsourcing costs equivalent to approximately 600 positions will be cut.

2.

Increase focus on automotive products

NEC Electronics is positioning itself to become the world's #1 supplier of automotive MCUs. Furthermore, the company is expanding its other automotive offerings such as multi-core devices for car navigation systems and image recognition technologies for pre-crash safety systems, as well as power management devices for high voltage resistance and current control.

3.

Increase focus on digital consumer products

NEC Electronics will establish a low-end platform based on the company's EMMA^TM series of digital image processing devices. It will add 100 engineers toward this effort by April 2007, and increase the number of development and support staff at NEC Electronics China with the aim of developing a global standard platform for hardware and software used in digital televisions. In addition, the company will expand its share of the market for digital television chips by pursuing synergies between EMMA and LCD driver ICs for televisions, and further collaboration in product planning and marketing.

4.

Reorganize manufacturing lines to improve cost competitiveness

NEC Electronics currently has four front-end manufacturing facilities with a total of nine manufacturing lines in Japan. The company plans to consolidate these lines, ultimately reducing them to four manufacturing lines at four sites.

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NEC Yamagata will primarily manufacture SoCs on its 300mm line. It will close its 8-inch line.

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NEC Kyushu will be the flagship facility for flash-based MCUs and automotive MCUs on its 8-inch line. It will close its 6-inch line.

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NEC Kansai will focus on manufacturing display drivers and power management devices on its 8-inch line. It will close its 6-inch line.

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NEC Yamaguchi will manufacture multi-purpose MCUs, multi-purpose ASICs, and LCD driver ICs while improving manufacturing efficiency on the existing 6-inch line.

The 8-inch line at NEC Yamagata, as well as the 6-inch lines at NEC Kansai and NEC Kyushu, will be closed by fiscal year 2010. The 5-inch lines at NEC Yamagata and NEC Kansai will be closed eventually, but the timing will be considered carefully while being mindful of fulfilling existing commitments to customers, as well as the need to improve profits.

With respect to back-end manufacturing (test and assembly), NEC Electronics will accelerate shifting of production to overseas facilities. The Japanese back-end facilities will serve primarily to manufacture high-value-added products, and support overseas facilities.