Renesas Electronics, Panasonic and Fujitsu are in discussions to merge their system chip design and development divisions to form a joint venture.
The new firm will secure funds from Japan’s government-backed investment fund Innovation Network Corporation, according to Nikkei.
A basic agreement between the companies is expected to be reached by the end of March.
Under the tentative plan, the joint company will be established by March 2013 and develop advanced system chips for smart phones, automobiles and other products.
Further details about the new venture are expected to be revealed by the end of this year.
The three companies are struggling due to strong yen and intense competition from US, South Korea and China, besides Intel Corporation and Samsung Electronics.
They expect the merger would boost their position in the market by integration.
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The new company is expected to play a major role in the survival of the chip industry in Japan.
The move will also enable Panasonic and Fujitsu to concentrate on profitable business segments.
Renesas, earlier a joint venture between Hitachi and Mitsubishi Electric Corporation, merged with NEC Electronics Corporation in April 2010.
