In a deal that was too good to pass up, NIPPON SHEET GLASS CO., LTD. agreed to sell EPITAXX, INC. to JDS UNIPHASE CORP. for $400 million payable in the San Jose, California firm's common stock. West Trenton, New Jersey-based Epitaxx supplies optical detectors and receivers for fiber-optic communications and cable television networks. Its products include long-wavelength detectors and receivers that have application in such much-in-demand products as DWDM (dense wavelength-division multiplexing) and SONET/SDH (synchronous optical network/synchronous digital hierarchy) transmission equipment. Nippon Sheet Glass bought Epitaxx in 1990 for roughly $10 million. The Japanese company already has ties to JDS Uniphase -- a maker of components for optical communications systems that has used acquisitions to fuel its rapid growth -- as a supplier of microlens products.
The restructuring plans that Japan's big, vertically integrated consumer and industrial electronics manufacturers have announced in recent months might be targeted mainly at businesses in Japan, but they also can impact operations in the United States. The latest example of this growing reality is the announcement by NEC AMERICA, INC. that it would sell its Hillsboro, Oregon production facility to a contract manufacturer. Opened in 1985, the plant currently makes a variety of NEC CORP. communications network products, including access network systems, integrated communications systems and SONET equipment. It also produces electronic systems for cars and trucks. Some 500 people work at the factory, which reportedly ships $200 million worth of products annually. Whatever contract manufacturer buys the plant will continue to make NEC-brand communications network equipment and automotive electronic systems, but it presumably will attempt to win business from other companies. NEC America's decision to make the Hillsboro factory a contract manufacturing facility is still rare for a Japanese-affiliated company. It is not unprecedented, though. In late 1998, MITSUBISHI CONSUMER ELECTRONICS AMERICA, INC. turned its Braselton, Georgia cellular telephone plant over to SOLECTRON CORP., the top contract manufacturer.
Two other announcements accompanied this news. First, NEC CORP. disclosed that it planned a "significant" expansion of its network integration and systems integration operations in the United States over the next three years. The buildup will include a roughly 50 percent increase in staffing to about 1,600 people. Although details were scarce, Irving, Texas-based NEC BUSINESS NETWORK SOLUTIONS, INC. apparently will be the primary vehicle for this growth (see Japan-U.S. Business Report No. 353, February 1999, p. 11). Second, NEC USA INC. revealed that it had established the Venture Development Center in San Jose, California to support its parent's strategic reorientation toward R&D and Internet solutions. The facility has the job of commercializing technological breakthroughs that are not necessarily part of NEC's mainstream businesses today and establishing ventures capable of bringing these new technologies to the market. The Venture Development Center will be staffed by R&D specialists from other NEC organizations around the world, including the USA Development Center opened in 1997 in Princeton, New Jersey, although outsiders are expected to be brought in.
These changes ironically are occurring against the backdrop of NEC CORP.'s increasing business with AT&T CORP. Earlier this year, the world's premier provider of voice and data communications started wide-scale deployment of the NEC ITS-2400A, an OC-48 (2.5 gigabits per second) SONET multiplexer. AT&T is using the system to carry all types of sub-OC-48 private line and switched traffic and for SONET ring restoration. The carrier also is using NEC's SpectralWave-32/64 system to help it meet the skyrocketing demand for greater speed and bandwidth. Like other members of the SpectralWave family, this equipment is designed to carry traditional SONET traffic as well as Internet Protocol and other data traffic. AT&T is expected to be a major customer for NEC's forthcoming compact, small-footprint SpectralWave-160, which incorporates the company's L-band (long wavelength) optical amplifiers to deliver high channel counts and large capacity. This system moves traffic at OC-48 and OC-192 (10-Gbps) rates.
Traffic is being carried at 10-Gbps on the coast-to-coast network layer of GLOBAL CROSSING LTD.'s North American Crossing network, thanks to HITACHI TELECOM (USA), INC.'s AMN 5192 OC-192 SONET system. This equipment was ordered before Global Crossing acquired the former Frontier Corp. (see Japan-U.S. Business Report No. 355, April 1999, p. 10). By installing the Hitachi Telecom equipment in its backbone, Global Crossing not only is able to increase its network capacity in large increments, but the four-fiber BLSR (bidirectional line switched ring) technology featured in the AMN 5192 ensures the network's reliability and survivability. The North American Crossing network connects more than 120 metropolitan areas around the United States.
For the first time, KDD SUBMARINE CABLE SYSTEMS INC. has gone outside its traditional group of Japanese suppliers to buy optical fibers for undersea cable systems. It has signed a multiyear contract with CORNING INC. for its Submarine LEAF and Submarine SMF-LS optical fibers. KDD-SCS first will deploy these products in the TAT- 14 transatlantic system, which is scheduled for completion in October 2000. Sources in Japan estimate that about 20 percent of the optical fibers KDD-SCS uses for this project will be purchased from Corning. They also say that the yen's appreciation and the technical sophistication of the Corning optical fibers were behind the contract. Corning's year-old Submarine LEAF optical fiber is designed to minimize the occurrence of nonlinear optical effects, which can degrade the performance of advanced undersea systems. Its Submarine SMF-LS optical fiber, which has been commercially available since 1997, reduces the impact of four-wave mixing, a nonlinear optical effect that can impact the transmission characteristics of multiwavelength systems.
NTT MOBILE COMMUNICATIONS NETWORK, INC. tapped the team of LOCKHEED MARTIN CORP. and ORBITAL SCIENCES CORP. to build and launch the N-STAR c geosynchronous communications satellite. Scheduled to be delivered into space in the first quarter of 2002, the satellite will provide S-band communications services to mobile users in Japan, augmented by a C-band feeder link. It will be designed to operate for 10 years, supplementing NTT DoCoMo's current pair of U.S.-built N-STAR satellites. Prime contractor Lockheed Martin Commercial Space Systems of Sunnyvale, California will supply the entire payload, which it will mate with Orbital's STAR bus. Dulles, Virginia-based Orbital also will be in charge of providing the ground system, securing a launch vehicle and conducting initial satellite operations. This is the first time that Lockheed Martin and Orbital have teamed up to bid for a satellite contract. On their own, both companies broke into the Japanese commercial satellite business last year, ending the hold that HUGHES SPACE AND COMMUNICATIONS CO. and SPACE SYSTEMS/LORAL INC. had on the market (see Japan-U.S. Business Report No. 351, December 1998, p. 9).
An exchange rate of ¥106=$1.00 was used in this report. aaaaa