Report: NEC Electronics, Renesas near merger

Mon, 04/27/2009 - 8:05am
The Associated Press

TOKYO (AP) – NEC Electronics Corp. and Renesas Technology Corp. – which is partly owned by Hitachi – are reportedly in final negotiations to merge their operations and form Japan's biggest semiconductor maker by sales.

The Nikkei business newspaper reported Thursday that the companies aim to reach an agreement this month and are likely to complete the merger in 2010. It didn't cite any sources.

Both companies are facing heavy losses in the current economic downturn and have decided it would be difficult to survive on their own, the paper said. The merger would create the world's third-largest chipmaker, behind U.S. Intel Corp. and Korea's Samsung Electronics.

The companies both issued press releases that they had made no such announcement and had not decided on a merger.

The semiconductor business requires massive upfront investment for production equipment, and selling prices face constant downward pressure as technology advances. A merger would allow the two companies to phase out older, less-productive lines and get better economies of scale.

Other chip companies are also struggling. U.S. memory-maker Spansion Inc. and its subsidiaries filed for bankruptcy in March, and German manufacturer Qimonda AG declared bankruptcy in January.

In trade Thursday, NEC Electronics was up 12 percent to 930 yen, while the benchmark Nikkei 225 stock average nudged up less than 1 percent.

NEC holds the majority of NEC Electronics shares, while Renesas is jointly owned by Hitachi and Mitsubishi Electric.

Hitachi recently announced that it will merge wholly owned subsidiary Hitachi Communication Technologies on July 1.

The merger is geared toward strengthening Hitachi’s value proposition, technological and system integration capabilities relating to Next Generation Networks (NGNs), the company said.

Hitachi provides solutions and services, including IP networks and video distribution systems for communications carriers, while Hitachi Communication Technologies provides high-speed and large-capacity processing technologies, namely telephone exchange equipment, mobile phone base stations and other mobile products, as well as optical networking products.

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