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September 17, 2009

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Japanese chip firms on road to state aid

JAPAN'S NEC Electronics Corp will absorb Renesas Technology Corp after raising 200 billion yen (US$2.2 billion) from their parent firms, which could smooth the way for the government to also extend aid to the loss-making chip makers.

NEC Electronics and Renesas, which seek to create the world's third-largest semiconductor maker, will receive investments of 82.5 billion yen from Hitachi Ltd, 67.5 billion yen from Mitsubishi Electric and 50 billion yen from NEC Corp, the firms said in a joint statement.

But the money is unlikely to go far to fund investments that would yield new growth for the two firms, weakened by sluggish demand in a sector dominated by bigger rivals Intel Corp and Samsung Electronics Co.

NEC Electronics and Renesas face a combined net loss of 99 billion yen this year and significant restructuring costs ahead. The two are estimated to have a roughly 20 to 30 percent product overlap.

Japan's new Democratic Party government is more likely than not to make use of a new aid program designed to shore up businesses hit by the global financial crisis, an Economy Ministry official said last week.

"Nothing is certain," the official said, "but it would be easier to get understanding (from the public and politicians) if the parents are also willing to help out. Semiconductors are important for Japanese industry as a whole."

Under the new aid scheme, Japan aided PC memory maker Elpida Memory Inc with a government-backed credit line last month.



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