Merger could create Japan’s largest chip maker

Japanese chipmakers NEC Electronics Corp and Renesas Technology Corp are in merger talks prompted by adverse market conditions in the semiconductor sector.

A merger of the two companies, which collectively made USD13.7bn in 2008, would create Japan's largest chip maker by revenue, surpassing Toshiba Corp. It would be the third-largest globally behind Intel and Samsung, according to market researcher iSuppli.

Though there is no confirmation on the talks, the Nikkei reported last week that a merger would likely be carried out by April 2010 with NEC Electronics the surviving company. An NEC spokesman said last week that the company would like to see its semiconductor unit rebuild its business on its own, but that the firm "won't rule out any possibility." Representatives at NEC Electronics and Renesas declined to comment.

Oversupply and weak demand have recently caused chip prices to plummet, making life difficult for semiconductor companies.