"When volume reduces it becomes difficult for the business," said NEC's Jasper.
NEC does have attractive technology. Its "Medias W" smartphone, released in Japan in April, has drawn attention in the country for its two 4.3-inch screens, which can flip open to form a large tablet-like display.
Any deal would probably involve other Japanese firms as well. NEC owns 70 percent of its mobile division, in which Casio and Hitachi hold smaller shares.
As for Lenovo, it's not the first time rumors have swirled around possible acquisition targets to help its smartphone business. Earlier this year, reports emerged that Lenovo might also be interested in buying smartphone maker BlackBerry.
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