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Panasonic, Fujitsu consider chipmaking merger

by Andrew Bulkeley | Published February 8, 2012 at 12:09 PM

Panasonic Corp. and Fujitsu Ltd. on Wednesday, Feb. 8, confirmed they are interested in merging their chipmaking operations as the Japanese companies, disadvantaged by a strong yen, hope to better compete against foreign rivals.

Earlier Nikkei reported that Panasonic and Fujitsu, along with local peer Renesas Electronics Corp., may carve out and join their chip development businesses into a new entity with "several billion tens of yen" in backing from government lender Innovation Network Corp. of Japan, or INCJ.

Renesas denied the report Wednesday.

The news ignited Renesas shares, which gained 10.1%, or ¥51, to ¥556. Panasonic gained 3.3%, or ¥21, to ¥657.00. Fujitsu is privately held.

Prices for computer chips, which power handheld devices, consumer electronics and computers, have been in the gutter for years as production innovations and a glut of manufacturers kept supply strong. Now Japanese electronics companies are struggling more as the strong yen stiffens the already-steep competition with foreign rivals.

Proof of the tough market comes from Tokyo-based Elpida Memory Inc., which is reportedly being forced by creditors to enter talks with Boise, Idaho-based Micron Technology Inc. or Taiwan's Nanya Technology Corp.

"Fujitsu is exploring possibilities for improving its semiconductor business from many different angles. However, no decision has been made," Fujitsu said.

If true, the talks appear to be modeled on a deal for Japan Display announced last November. In that agreement, INCJ agreed to pay ¥200 billion ($2.6 billion) for a 70% stake in the bundled liquid-crystal display activities of Sony Corp., Hitachi Ltd. and Toshiba Corp.

The INCJ was formed in 2009 as a public-private partnership between the government and 19 major Japanese corporations.

Panasonic is struggling to stave off the effects of a global economic downturn and this month said it expected to post a record ¥780 billion loss in the year ending in March because of waning sales. The company said revenue has slid more than expected -- it previously forecast a loss of just ¥420 billion. Renesas is still working to offset the effects of the country's catastrophic earthquake, which affected one of its main plants. Renesas also recently revised its forecast for its fiscal full-year loss downward to ¥57 billion after sales in the nine months to Dec. 31 declined 21.9% to ¥673.4 billion.

Elpida Wednesday also denied media reports concerning its future. The company is negotiating with loanholders on debt that must be repaid next month. Its creditors include the Bank of Tokyo-Mitsubishi UFJ Ltd., Sumitomo Mitsui Banking Corp. and Tokyo's Development Bank of Japan Inc.

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