Renesas Technology Corp and NEC Electronics Corp (6723.T) have struck a basic agreement to merge by around next April, the Nikkei business daily reported.
With combined sales of more than 1.2 trillion yen, the merger will create Japan's biggest and the world's third-largest chipmaker, the paper said.
While details have yet to be finalized, the deal will likely take the form of NEC Electronics, Japan's third-largest chipmaker, absorbing the No. 2 Renesas, the Nikkei said.
Major shareholders of the merged entity should include NEC Corp (6701.T), which holds a 65 percent interest in NEC Electronics, as well as Hitachi Ltd (6501.T) and Mitsubishi Electric Corp (6503.T), whose stakes in Renesas stand at 55 percent and 45 percent, respectively, the paper said.
Renesas and NEC Electronics will likely announce their agreement as early as Monday, the paper said without citing sources.
(Reporting by Bijoy Koyitty in Bangalore; Editing by Deepak Kannan)