By Yuzo Yamaguchi and Daisuke Wakabayashi
TOKYO -- Japanese electronic-goods makers NEC Corp., Hitachi Ltd. and Casio Computer /zigman2/quotes/202492162/delayed JP:6952 +1.88% Co. have begun talks about merging their mobile-handset operations to create the country's second-largest cellphone maker by shipments after Sharp Corp., people familiar with the matter said.
The talks come amid growing pressure on Japanese cellphone makers to boost profitability by consolidating operations to save money in a domestic market nearing saturation, while chasing growth in developing international markets such as China.
The people familiar with the matter didn't provide further details on the talks.
Analysts say a consolidation of the three could help them share development costs and ride out the tough local market, as well as give them greater clout in efforts to expand overseas.
According to data from research firm BCN Inc., a combined NEC-Hitachi-Casio operation would have had a market share of about 20.2% at the end of March. That would put it behind Sharp, which had a 21.8% share of Japan's huge but stagnating market for mobile phones, but ahead of Panasonic /zigman2/quotes/201785256/delayed JP:6752 +0.72% Corp. with 16.8%.
As well as having little room to grow in Japan, the market for handsets has been altered in the past 18 months by a shift in sales policy at service providers. While companies like NTT DoCoMo Inc. and Softbank Corp. long offered new handsets for token amounts, they now expect consumers to shoulder the full cost of new phones, often carrying price tags running into several hundred dollars.