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Toshiba, NEC in talks to integrate semiconductor operationsTOKYO, Jan 30, 2009 (Kyodo News International - McClatchy-Tribune Information Services via COMTEX) -- Toshiba Corp. and NEC Corp. have begun talks on merging their struggling semiconductor operations, seeking to boost their profitability to counter plummeting chip prices and dwindling demand, sources familiar with the matter said Friday. Fujitsu Ltd. may also participate in the deal in the future since it is also looking for a tie-up partner for its semiconductor unit, which was spun off in March last year, they said. A three-way integration, if realized, is likely to trigger a major realignment in the semiconductor industry, experts said. As Toshiba is expecting to post its largest-ever loss in the current business year through March, its president, Atsutoshi Nishida, has indicated that the company is looking to spin off the system large-scale integrated circuit operations of its semiconductor division. "We are studying drastic structural reforms, including the possibility of establishing a separate company, in consideration of an industry reorganization in the future," Nishida said at a press conference Thursday. The talks are likely to involve integrating Toshiba's system LSI operations with NEC Electronics Corp., a major chip-making subsidiary of NEC, the sources said. The talks about a merger have come as no big surprise as Toshiba and NEC have already formed an alliance to jointly develop a cutting-edge system LSI. Fujitsu, which established Fujitsu Microelectronics Ltd. as a spinoff of its system LSI business, plans to accelerate its streamlining efforts and ensure a profitable corporate structure before moving ahead with a possible chip-making merger with Toshiba and NEC. In order to turn around the chip industry downturn, analysts often say companies need to relieve an excess of costly production facilities. But there remains a risk that the talks may fall apart over which facilities to keep, the sources said. Toshiba, the world's No. 2 maker of NAND flash memory, and other major chip-making companies throughout the industry have been reeling under a global industry-wide slump caused mainly by price erosion from a supply glut and falling demand as a result of the spreading global recession. Since semiconductor chips are often used in digital home appliances and automobiles, slowing personal consumption amid the economic downturn has also resulted in the price fall. On Thursday, Toshiba said it expects a group net and operating loss of 280 billion yen for fiscal 2008, its first red-ink in seven years. Its semiconductor businesses alone are likely to incur an operating loss of 290 billion yen. NEC Electronics also revised its earnings projections for the whole of fiscal 2008 downward and said it now expects a group net loss of 65 billion yen and an operating loss of 55 billion yen. To see more of Kyodo News International, go to http://www.kyodonews.com Copyright (c) 2009, Kyodo News International, Tokyo Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |