April 16, 2009

NEC, Renesas Possibly Considering Merger

Japanese microchip firms Renesas Technology Corp. and NEC Electronics Corp. are reportedly discussing the possibility of a merger in the midst of a global recession, according to Japanese media.

The Nikkei economic daily and other Japanese media outlets quoted anonymous sources that claim the two companies are close to finalizing the merger by the end of April, thus creating the third largest chipmaker in the world as soon as April 2010.

The Nikkei reported that both firms have agreed to enter talks of a merger because they see it as their chance to weather the storms caused by the global recession.

"More importantly, the combined company would have a leading 31 percent share of microcontrollers, the brains of home appliances," said the Wall Street Journal.

Both firms have more than 1.2 trillion yen ($12 billion) in combined annual sales. If a merger were reached it would replace Japanese rival Toshiba Corp. as Japan's top semiconductor maker, Nikkei said.

The new entity would be in third position globally, behind Samsung Electronics Co. of South Korea in second, and US-based Intel Corp.

Renesas, the second-biggest Japanese chipmaker, is a joint venture between Hitachi Ltd. and Mitsubishi Electric Corp. NEC Electronics, ranked third in Japan, is a subsidiary of leading high-tech company NEC Corp, according to AFP.

NEC Electronics shareholders were pleased at the reports, as the stock shot up 12 percent on Thursday.

Still, no official word has been said from either firms on whether or not the talks are ongoing.

"Nothing has been decided regarding business reorganization," an NEC Electronics company spokeswoman said.


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