Fujitsu confirms Toshiba chip tieup talks


The latest wrinkle would reduce Japan's "Big Five" chipmakers to a "Big Three," focused on appliances and phones

TOKYO, Japan -- Fujitsu Ltd. confirmed on Thursday that it is in talks with Toshiba Corp. to link their chip manufacturing.

A Fujitsu spokesman stated that a chip tieup is "likely" and said negotiations with Toshiba are ongoing. But he refused to confirm a report that Toshiba and Fujitsu will sign a comprehensive partnership on chips.

Fujitsu is focusing on its chip business as one way to rebound from large losses in 2001.

"We would not deny that we are in talks with Toshiba over such alliance possibilities, but Toshiba is not the only one we are talking with. Nothing specific has been decided," spokesman Takashi Yagi said, according to Reuters news agency.

The two companies have been exchanging data and aim to sign a final, broad chipmaking alliance in May, the Nihon Keizai Shimbun business daily reports.

The companies already cooperate on making memory chips. Their combined chip operation will focus on making chips for digital home appliances and cars, the Nikkei states, citing sources close to the deal.

Toshiba is the world's second-largest chipmaker, behind Intel Corp. It had sales of $5.2 billion (680 billion yen) in the last business year. Fujitsu posted chip sales of $3 billion (396 billion yen).

Still No. 2

So the combination of the two would form a company with annual sales of around 1.1 trillion yen. That would still be the world No. 2, but it would also reshape Japan's chip industry.

Word of a formal link between the two companies comes three days after Hitachi Ltd. and Mitsubishi Electric Corp. said they will combine most of their chip operations within a year (full story).

Japan's "Big Five" chipmakers -- Toshiba, NEC, Hitachi, Fujitsu and Mitsubishi -- have been under heavy pressure from competitors in Korea, the United States and Europe.

Together, they expect a total loss of $11.5 billion for the business year, which ends on March 31 in Japan.

If both the Toshiba-Fujitsu and Hitachi-Mitsubishi links go ahead as planned, the "Big Five" will become the "Big Three," with NEC -- Japan's No. 2 chipmaker -- going it alone. Analysts call the shakeup "natural" after a horrible 2001 (full story).

On the broader corporate front, a flurry of combinations and tieups have surfaced as Japan heads toward year end. Companies are seeking deals to keep their bankers and investors happy ahead of their results (full story).

Japanese chipmakers have been selling out of lower-end and less-profitable lines, where competitors like Samsung Electronics and Micron Technology have the edge. Toshiba sold its U.S. dynamic random access memory factory to Micron last year.

The Japanese chip companies are instead concentrating on making chips for consumer electronics and the next generation of mobile phones. Many of the companies that make those goods, including Sony and Matsushita Electric, are based in Japan.

Japan's stock market is closed on Thursday for the vernal equinox holiday.

Tokyo's Topix index of all section 1 stocks closed down 1.34 percent at 1,097.85 on Wednesday. The tech-influenced Nikkei was down even more sharply, off 2.3 percent.