Opinion | Lenovo, NEC ties grow with smartphone talks

In many ways, such a handover would mirror what happened to western electronics makers in the 1970s and 80s when Japanese and Korean electronics giants like Sony (Tokyo: 6758) and Samsung (Seoul: 005930) began their own spectacular rises. That trend saw many former Western consumer electronics giants like Zenith and RCA either close or get sold to other companies as they couldn't compete with their lower cost Asian rivals. Now Japan is facing the same kind of pressure as the West once did, with former superstars like NEC, Panasonic and Sony all facing similar challenges from lower cost rivals like Lenovo that come from China and other developing markets.

I commented at that time that NEC's recently formed PC tie-up with Lenovo was a likely factor behind the decision to re-enter the China smartphone business. The pair's original tie-up saw NEC put its Japanese-based PC business into a joint venture with Lenovo, with indications that Lenovo would eventually take over the business completely. I speculated that NEC was hoping to use its new Lenovo ties to boost its chances of success upon re-entering the Chinese mobile phone market, and that a more formal tie-up could follow.

So, here's what I think of this potential new tie-up between Lenovo and NEC, and what might the next step be in the growing romance between these two companies? Strategically, a takeover of the NEC mobile phone business would give Lenovo an important foothold in the Japanese smartphone market where consumers have a natural bias towards domestic brands. Lenovo could also use the NEC name internationally as a platform to develop its high-end smartphone business, drawing on the association of high quality that comes with many Japanese brand names. For these reasons, a purchase of NEC's mobile phone business could be a smart move for Lenovo if it can acquire the unit for a good price and move some or all of NEC's high-cost manufacturing operations to China.