Apr. 18--The proposed operational integration of Renesas Technology Corp. and NEC Electronics can be seen as a last throw of the dice if the two are to survive in the semiconductor industry.

It was reported Thursday that the two firms are in talks to integrate their operations by April 2010. They have found it difficult to survive on their own amid the sharply declining demand for semiconductors used for electrical appliances and automobiles as the global economic slowdown bites.

However, the nation's largest semiconductor maker, Renesas, and the nation's No. 2 chipmaker, NEC Electronics, need to undergo drastic restructuring to realize a profit in the face of deteriorating business performances.

Renesas and NEC Electronics have a competitive edge over their rivals in system LSI, a semiconductor used for automobiles and electrical appliances.

In this field, Renesas holds an overwhelming global market share as the world's No. 1 maker, while NEC Electronics is the No. 2 maker. Their combined market share is about 30 percent.

By integrating, they hope to become more cost competitive and improve their earning power.

However, NEC Electronics is expected to report an after-tax loss of about 65 billion yen in a consolidated account for the settlement ending in March 2009, and it certainly will report an after-tax loss for the fourth consecutive term.

Meanwhile, Renesas is expected to report a huge after-tax loss of about 206 billion yen in a consolidated account for the settlement ending in March.

According to U.S. research company Gartner Inc., global sales of semiconductors declined 5.4 percent in 2008 from the previous year, and sales in 2009 are expected to drop further.

The two companies likely will drastically restructure through the integration.

Renesas has 16 production plants in the nation, while NEC Electronics has eight. Some Renesas plants are reportedly accruing losses.

For the past few years, domestic semiconductor manufacturers have not been able to compete with Intel Corp. of the United States and Samsung Electronics Co. of South Korea, which has grown rapidly.

Establishing state-of-the-art production facilities requires investments of hundreds of billions of yen.

In addition to the integration talks, there are signs of a realignment of the industry.

Elpida Memory Inc., the world's No. 3 DRAM maker, is discussing a capital tie-up and business alliance with a manufacturer in Taiwan, in an effort to survive by obtaining public funds from the Japanese government and Taiwan authorities.

A noteworthy possible integration in the future is the one between Toshiba Corp. and Fujitsu Ltd.

Toshiba President Atsutoshi Nishida said the company plans to actively begin restructuring its large-scale integrated circuit (LSI) business.

At first, NEC Electronics tried to find a way to integrate with Toshiba or Fujitsu's subsidiary company, Fujitsu Microelectronics Ltd., but it had to abandon the idea after several conditions were not met.

As NEC Electronics chose Renesas as an integration partner, Toshiba and Fujitsu are expected to move toward integrating their semiconductor operations.

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