(Bloomberg) — NEC is riding the wave of Japan’s defense spending expansion in the face of rising geopolitical risks.
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Boosted by the government’s changing stance on military spending, NEC aims to increase sales in its aerospace and defense sector by more than 60% to reach 400 billion yen ($2.6 billion) in the three years to March 2026. The goal is to That growth may include acquisitions. Chief Executive Officer Takayuki Morita added that the company has the ability to finance deals worth about 400 billion to 500 billion yen.
More policymakers are recognizing that military spending contributes to the development of cutting-edge science and that command of technology strengthens the nation’s defenses, he said.
“There is a growing recognition that things like submarine cables, satellites, and AI are absolutely essential technologies for national security,” Morita said. This policy consensus will remain as long as the Liberal Democratic Party and coalition partner Komeito remain in power after Sunday’s national election, he said.
Former Prime Minister Fumio Kishida has promised to increase Japan’s military spending to 43 trillion yen over the five years ending in March 2028. The government has also increased the estimated profit margin on defense-related government orders from 8% to 15% to help companies stay in business. In a country where the constitution forbids war, this means investing in areas that were previously considered taboo.
This has proven to be a boost for NEC, which has roots in 1899 and has long supplied radar systems and satellite connectivity to Japan’s Self-Defense Forces.
Investors had previously questioned NEC’s commitment to defense, which remains a small part of its overall business. “Now they see it as one of our growth areas,” Morita said. The company’s aerospace and national security division will hire 750 people in the year ending March, with plans to add another 450 jobs by March 2026.
NEC, once the world’s largest semiconductor maker, has reinvented itself by focusing on IT services and infrastructure operations, including supercomputers for artificial intelligence-related research. The Tokyo-based company doesn’t currently make chips, but its semiconductor business was spun off and later absorbed by Micron Technology and Renesas Electronics, but it has invested in Japanese foundry startup Rapidus. It’s home.
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Morita said the world’s dependence on Taiwan Semiconductor Manufacturing for semiconductor contract manufacturing is “unhealthy,” but declined to comment on whether NEC would provide additional funding to Rapidus.
“As a company that believes the current state of the chip supply chain is less than ideal, our position stands with Rapidus,” he said.
–With assistance from Sherry Anne and Natsuko Katsuki.
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