In a Japanese government-backed move, Renesas Electronics, Fujitsu Ltd and Panasonic Corp may merge their chip operating businesses to create one unified company capable of taking on its competitors and turning a profit, according to people familiar with the matter.

With stiff competition from chipmakers Intel and Samsung, the three Japanese semi-conductor manufacturers are discussing ways in which they can turn around their system LSI chip businesses (system-on-a-chip) with all three companies reported to have suffered heavy operating losses for the fiscal year ending in March.

Innovation Network Corporation, a government-backed investment fund, is considering supporting the three-way merger after getting involved in similar restructuring plans with other Japanese companies struggling to be profitable.

While Fujitsu is expected to report a loss of ¥15 billion this fiscal year in its device-solution business segment, which includes system chips, Panasonic expects to record a loss of ¥22 billion and Renesas ¥48 billion.

The three companies have yet to agree of plans, though the Nikkei believes that an agreement could be signed by March with a new business starting up by the end of the year.

Source: FT.com