Report: NEC Electronics, Renesas Near Merger

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

The Nikkei business newspaper reported Thursday 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 a percent. NEC holds the majority of NEC Electronics shares, while Renesas is jointly owned by Hitachi and Mitsubishi Electric.