NEC and Renesas to Merge into World’s Third Largest Chip Business

 

NEC Electronics and Renesas are planning a merger to create the third biggest semiconductor maker in the world. That would put Intel and Samsung as first and second. At present the interested parties have only announced that they are talking about it, not that a deal has been done.

Focal Points:

• NEC Electronics was separated from NEC in 2002, while Renesas was a merger in 2003 of semiconductor units at Hitachi and Mitsubishi. The two operations specialize in microcontroller units and admit that it is the recession that is driving them towards a merger.
• Both NEC and Renesas focus on system-on-chip (SoCs) products, with NEC a leading supplier for consumer electronics and Renesas for hand-sets and automotive applications. They figure the overlap is not too bad and that putting them together makes a stronger business.
• The new company would have three major product groups, MCUs, SoCs, and discrete products, and will become the world’s third-largest semiconductor business. That’s assuming it doesn’t continue to shrink.
• Both companies will go through structural reform to cut costs and then plan to merge at that point. The resulting company would still be public, have a new name and precise shareholdings would be announced and voted on just prior to the deal being complete.
• The two plan to sign an agreement at the end of July, 2009 to integrate their business operations and will then seek government departmental approval.

Meanwhile Hitachi also said it has also decided to merge its Hitachi Communication Technologies, its telecommunications equipment maker, back into the main group. It is a wholly owned subsidiary and offers equipment for building IP networks and video distribution systems for communications carriers.