Toshiba, Fujitsu, NEC in chip talks

TOKYO (Reuters) - Japan's Toshiba Corp., Fujitsu Ltd. and NEC Electronics Corp. are in talks to jointly develop advanced 32-nanometer chips to better keep up with rivals, the three companies said on Wednesday.

The companies aim to set up a joint venture to mass produce chips used in flat TVs and other high-power home electronics as early as 2010, with Toshiba expected to hold a leading non-majority share, the Nikkei business daily said the same day.

The joint venture idea and other schemes have been discussed but nothing has been decided, the three companies said.

"This is not enough. They shouldn't wait until 2010," said Macquarie analyst Yoshihiro Shimada. "They (also) need to spell out how their co-developed technologies can be accepted in a market where TSMC and IBM have set de-facto standards."

Chip makers are racing to halve the production cost per function of a chip every year or two -- a trend known as Moore's Law, named after a co-founder of Intel Corp.

Samsung Electronics Co., IBM, Chartered Semiconductor Manufacturing Ltd., Infineon Technologies and Freescale Semiconductor said in May they would work together on 32-nanometre chips. A nanometer is a billionth of a meter.

STMicroelectronics, which on Tuesday said it plans to work with IBM to develop next-generation chips, may also join the group, according to Gary Patton, vice president of IBM's semiconductor research and development centre.

Such moves have worried Japanese chip makers, which have been talking about but not acting on how to share the estimated 100-200 billion yen ($830 million-$1.66 billion) costs to develop the new chips, which would require less power to run more applications on cell phones, PCs and other electronics.

Toshiba, NEC Electronics and Sony Corp. had previously teamed up to develop chips with 45 nanometer features.

Toshiba was the world's No.4 maker of chips in terms of revenue in 2006, NEC Electronics ranked No.11, while Fujitsu ranked 27th, according to research firm iSuppli.

"To win against the global competition, these firms need to partner up with overseas makers like UMC " said Elpida President Yukio Sakamoto in a meeting with analysts.

Shares of Toshiba closed up 0.8 percent, while Fujitsu fell 0.5 percent and NEC Electronics dropped 1.2 percent, compared with Tokyo's electrical machinery sub index which fell 0.82 percent.

(Additional reporting by Peter Henderson in Los Angeles)