Electronic
NEC Electronics is considering options to improve competitiveness including a tie-up with privately held Renesas and hasnt come to a decision, Shinichi Kaede, a spokesman at the Kawasaki, Japan-based chipmaker, said today. The shares rose the most in almost four months after Kaedes comments, made in response to a Nikkei newspaper report.
Renesas, a semiconductor venture of Hitachi Ltd. and Mitsubishi Electric Corp., and NEC Electronics, the chip unit of NEC Corp., aim to reach an agreement this month and combine by April 2010, the Nikkei said. A merger would create Japans biggest chipmaker with annual sales of more than 1.2 trillion yen ($12 billion), it said.
Chipmakers are seeking to consolidate as the global recession drives down demand for chips used in automobiles, flat-panel televisions and mobile phones. Semiconductor-industry sales are projected to fall 24 percent this year, research firm Gartner Inc. said in February.
“Restructuring in this industry is inevitable and has been a long time coming,” Yukihiko Shimada, an analyst at Mitsubishi UFJ Securities Co., said by telephone. “In the long term, the merger could save the two companies from meaningless competition in the microcontroller business” and chips for mobile phones.
Shimada rates NEC Electronics shares “market perform.”
Competitors In Microcontrollers
Shares of NEC Electronics, Japans fourth-largest chipmaker, jumped 12 percent to close at 930 yen on the Tokyo Stock Exchange, the biggest gain since Dec. 22. Renesas, the countrys second-largest semiconductor maker, is unlisted.
NEC Electronics and Renesas compete in the production of microcontrollers, mini-computers dedicated to a specific function, such as operating a liquid-crystal display in a microwave oven, cruise-control in a car, or remote control for a DVD player. They also make chips that operate LCDs, semiconductors that control wireless signals in mobile phones and analog devices.
Hirotaka Ohno, a spokesman at Tokyo-based Renesas, said nothing has been decided, declining to confirm or deny talks have taken place with NEC Electronics. Mitsubishi Electric, which owns 45 percent of Renesas, and NEC, which owns 70 percent of NEC Electronics, said in separate statements to the Tokyo Stock Exchange the Nikkei report isnt based on their announcements and nothing has been decided.
Taiwanese Chipmakers
Hitachi, which controls the remaining 55 percent of Renesas, isnt the source of the report, the companys spokesman Atsushi Konno said by telephone. Nothing has been decided, he said.
The partnership may help Elpida, which posted a fifth straight quarterly loss in the three months ended Dec. 31, become more competitive by lowering research costs, and bolster its capital. The Tokyo-based chipmaker earlier this month said it may sell a stake of about 10 percent to the Taiwanese venture.
Two Unprofitable Companies
Renesas expects to record a record loss this fiscal year and wont turn profitable until the 12 months ending March 2011, the company said yesterday.
NEC Electronics forecast in January its net loss will probably reach 65 billion yen for the 12 months ended March 31, its fourth straight year of deficits. The same month, Renesas forecast a 206 billion yen net loss as the company books restructuring and tax-related charges and sales slump 29 percent.
Renesas is consolidating production lines, cutting wages and reducing research spending to slash costs by about 80 billion yen in the 12 months started April 1, President Yasushi Akao said in an interview in Tokyo yesterday.
The company last month sold 54 billion yen of its shares to Hitachi and Mitsubishi Electric, Akao said.
NEC Electronics is cutting 86 percent of its temporary workforce, slashing research spending and closing productions lines.