TOKYO, May 22: NEC Corp announced a strong rise in annual profits on Thursday as Japan's booming market for mobile phones and communications gadgets burnished its balance sheet.

The Japanese electronics giant said its group net profit rose 18 per cent in the fiscal year to March 31 to 91.58 billion yen ($789 million), and it predicted earnings would edge up in the current business year.

Group sales in 1996/97 also rose 12.5 per cent to 4.9 trillion yen ($42.2 billion) amid a surge in demand for mobile communications equipment and PCs in the domestic market.

"A decline in our overseas sales was more than offset by a big increase in sales in domestic mobile communications and personal computer markets," NEC said in a statement on its business results.

Mobile phones have become a standard fashion accessory in Japan, especially for teenagers, and PC sales have been buoyant as the country has belatedly caught the Internet bug.

Group pre-tax profit slipped 19.9 per cent to 121.2 billion yen ($1.04 billion) in the year, mainly due to a sharp decline in chip prices that started at the beginning of 1996 but has since been stemmed.

Nevertheless, one analyst said NEC, which is Japan's biggest chip maker, would be alone among the nation's major chip firms in turning a profit in semiconductor operations in the 1996/97 business year.

He added that NEC's chip profits are expected to expand as the stabilised prices are particularly beneficial for companies with a big chip-production system.

NEC expects its semiconductor output in the current business year to March 31, 1998, to rise by 18 per cent year-on-year to 1.3 trillion yen ($11.2 billion). Its actual semiconductor output fell six per cent to 1.1 trillion yen ($9.4 billion) in 1996/97.

It plans to spend 190 billion yen ($1.63 billion) on capital investment in semiconductor operations in 1997/98, unchanged from its actual investment in 1996/97.

In 1996, global overcapacity and a slowdown in international PC sales caused a protracted freefall in DRAM prices, squeezing Japanese electronics makers, which depend heavily on DRAM production.

But production cuts by South Korean chip makers halted the price slide early this year and helped to bolster the market, although a substantial recovery has yet to take hold.

Analysts said the stable chip prices will support earnings at big-name electronics makers like NEC in 1997/98.

For the current business year, NEC forecast a group net profit of 92 billion yen ($793 million) and group sales of 5.5 trillion yen ($47.4 billion).

The company said it expects sales in its PC business to total 950 billion yen ($8.18 billion) in 1997/98, up from 925 billion yen ($7.97 billion) the previous year. Total PC shipments in 1997/98 are expected to top 4.07 million units, up from 3.73 million units in 1996/97, it said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.