Japanese conglomerate Nippon Telegraph & Telephone will take a 5% stake in electronics company NEC as part of a tie-up to develop fifth-generation wireless technology, Nikkei learned Wednesday.
The deal, estimated at 60 billion yen ($562 million), will make NTT the third-largest shareholder in NEC.
The partnership aims to ensure Japan has its own homegrown 5G technology in light of the clash between the U.S. and China -- both leaders in this crucial field -- and with protectionism on the rise in the world more broadly.
The two companies are expected to work on equipment for 5G core networks, which manage communication lines. NEC also will collaborate on NTT's proposed Innovative Optical and Wireless Network, or IOWN, high-speed broadband infrastructure.
Globally, 5G networks are expected to become the foundation for innovations such as smart factories, self-driving vehicles and telemedicine.
The market for core systems and base stations has largely been a three-way race among Huawei, Ericsson and Nokia, which together control 80% of the base station market. Japan, which launched commercial 5G service in March, relies on foreign players for the basic technology underlying its networks. The NTT-NEC tie-up aims to change that.
NEC also hopes to use the deal to accelerate its expansion overseas. The company boasts a high market share in Japan, with its equipment used in the 5G networks of carriers such as NTT Docomo and Rakuten, but it lags far behind the big three elsewhere.
NEC recently announced an agreement with Rakuten, a newcomer to Japan's wireless scene, to jointly develop core network technology with an eye toward marketing 5G systems abroad.
Though Huawei is a major player in the market for 5G gear such as base stations, distrust toward China has been growing in the U.S. and Europe, due partly to the coronavirus pandemic. Calls are mounting in London to block the company from the U.K.'s 5G networks, and the government has reportedly entered talks with NEC about providing equipment.