NEC to take over Casio, Hitachi mobile phone operations

The move will create Japan's second-largest cellphone maker with sales of 390 billion yen ($4.3 billion) and could trigger more consolidation in a sector worn down from infighting in a crowded market.

NEC, Japan's No.3 handset maker, said on Monday it would split off its mobile phone division and merge it with a cellphone joint venture operated by Hitachi and Casio.

NEC will hold 70.7 percent in the new venture, while Casio will hold 20 percent and Hitachi 9.3 percent, allowing Casio and Hitachi to keep the loss-making cellphone businesses off of their consolidated books.

"With the market shrinking as it is now, we knew that there was not enough space here for 8 companies to survive," NEC Senior Vice President Akihito Otake said at a news conference.

How quickly cost savings will kick in from lower procurement and development costs is not yet clear, he said. The bulk of production will be at NEC's production facility, and the venture aims to merge production, although no timetable has been set.