Kunihiko Iwadare and Takeshiro Maeda established Nippon Electric Limited Partnership on August 31, 1898 by using facilities that they had bought from Miyoshi Electrical Manufacturing Company. Iwadare acted as the representative partner; Maeda handled company sales. Western Electric, which had an interest in the Japanese phone market, was represented by Walter Tenney Carleton.[3] Carleton was also responsible for the renovation of the Miyoshi facilities.[4] It was agreed that the partnership would be reorganized as a joint-stock company when treaty would allow it. On July 17, 1899 the revised treaty between Japan and the United States went into effect. Nippon Electric Company, Limited was organized the same day with Western Electric Company to become the first Japanese joint-venture with foreign capital.[5] Iwadare was named managing director. Ernest Clement and Carleton were named as directors. Maeda and Mototeru Fujii were assigned to be auditors. Iwadare, Maeda and Carleton handled the overall management.[6]

The company started with the production, sales and maintenance of telephones and switches. NEC modernized the production facilities with the construction of the Mita Plant in 1901 at Mita Shikokumachi. It was completed in December 1902.

The Japanese Ministry of Communications adopted a new technology in 1903: the common battery switchboard supplied by NEC. The common battery switchboards powered the subscriber phone, eliminating the need for a permanent magnet generator in each subscriber's phone. The switchboards were initially imported, but were manufactured locally by 1909.

NEC started exporting telephone sets to China in 1904.

In 1905, Iwadare visited Western Electric in the U.S. to see their management and production control. On his return to Japan he discontinued the "oyakata" system of sub-contracting and replaced it with a new system where managers and employees were all direct employees of the company. Inefficiency was also removed from the production process. The company paid higher salaries with incentives for efficiency. New accounting and cost controls were put in place, and time clocks installed.[7]

Between 1899 and 1907 the number of telephone subscribers