Panasonic, Fujitsu and Renesas May Merge System Chip Operations

Jiten Karia,

The three Japanese chip-makers are in talks about a potential merger in a government-backed deal

Renesas Electronics, Panasonic and Fujitsu may merge their large systems chip operations as a solution to the slump in the Japanese electronics sector, according to Reuters.

The deal would also include the Innovation Network Corporation (INC), a government-backed investment fund, as a way to outsource chip manufacturing to privately held GlobalFoundries. Last year, the fund invested ¥200 billion (£1.6bn) in Japan Display, the combined effort between Hitachi, Toshiba and Sony in producing touchscreen displays.

Japanese consolidation

Global competition is seen as one of the key drivers of the proposed deal, with chip makers in the US, China and South Korea providing stiff competition. Yukihiko Shimada, a senior analyst at SMBC Nikko Securities in Tokyo, told Bloomberg: “Chip makers may be seeking consolidation as they face a tough business environment. Still, investors need to be careful whether such a plan will actually come through. We’ve seen a similar report in the past.”

Should the deal between the three companies go through, Bloomberg reports that the partnership could begin production of new chips in March 2013. It also speculates that the development of systems chips would be undertaken by a new company spun off from Panasonic, Fujitsu and Renesas and manufactured by the aforementioned INC and GlobalFoundries partnership.

However, as Haruo Sato, a senior analyst at Takai-Tokyo Securities, told Reuters, problems can be expected. “The top management of the three companies would have to reach agreements on tough issues such as allocation of resources, including job cuts. I think it will be extremely hard for them to reach a compromise,” he said.

Similar problems could face fellow Japanese company Elpida Memory. Like other tech firms in the country, it has been struggling against the market and was expected to be acquired by Micron Technology. Following the death of CEO Steve Appleton, Mark Durcan will likely be leading any further negotiations to save the Japanese semiconductor manufacturer.