Photo/Illutration The 5G logo of NTT Docomo Inc.

Telecommunications behemoth NTT Corp. and electronics giant NEC Corp. are forming a capital and business alliance to jointly develop next-generation mobile communication technology known as 5G.

Nippon Telegraph and Telephone Corp. will take a stake in NEC with an investment of 64 billion yen ($598 million), according to a joint announcement by companies on June 25.

NTT will purchase new NEC shares through an allocation of new shares to a third party, obtaining a 4.8-percent stake in the company. That would make it NEC’s third-largest shareholder.

Both companies will also cooperate in developing 6G telecommunications technology, which will be the next generation of wireless networks after 5G, shorthand for fifth-generation technology.

Japanese companies have lagged behind their overseas rivals in developing their 5G networks and equipment market.

But NTT and NEC aim to turn the tide through their new alliance.

“We aim to develop business around the world with new, high-value technology made in Japan with a reliable partner,” Jun Sawada, president of NTT, said during an online news conference held by both companies on June 25.

In Japan, telecommunications giants started providing 5G service--which offers greatly increased telecommunications speeds and data capacity--this spring.

The 5G technology is expected to also have applications for automobile technology as well as cutting-edge medical devices.

NTT and NEC said they will develop high-performance and power-saving communications equipment for 5G, which could be marketed around the world as other countries are developing the latest communication technology.

They will also cooperate on developing 6G, which is projected to be put into practical use in the 2030s.

The companies plan to develop telecommunication equipment compatible with that of other makers by adopting unified standards, given that many leading companies overseas are developing individual 5G system designs on their own. 

The duo aims to develop equipment more efficiently, and quickly attract industry partners, by keeping their technology designs and specifications open, so it is easier to adopt.

“Opening the technology could be the last chance to be able to fight with foreign competitors,” said Takashi Niino, president of NEC.

China’s Huawei Technologies Co., Sweden’s Ericsson Inc. and Finland’s Nokia Corp. make up around 80 percent of sales of mobile networks' base-station equipment.

In Japan, NEC and computer-maker Fujitsu Ltd. are the dominant market players, but their share in the world is less than 1 percent.

“We aim to take a 20-percent share of the global market in 2030,” Niino added.

NTT announced its vision for a future communication system called “IOWN” in May 2019. The company stated that it aims to innovate in 6G by developing optical technology that could one day replace the current way information is relayed through electrical signals.

If it succeeds, network capacity would increase by more than 100-fold from current technological capabilities. Power consumption would also be drastically reduced.

The government is also backing such research and development efforts by cooperating with industry and academia. It plans to make it easier for researchers to be able to use radio waves in experiments and is also considering providing tax breaks.

The race for that future technology is already under way.

The United States, China and Scandinavian countries have already begun research and development of 6G technology, and competition is bound to intensify in the future.

It is unclear at this point how much the new business alliance will be able to help the two firms gain a foothold over their 6G overseas competitors.

(This article is written by Ryoko Takahashi and Ryo Inoue.)

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