July 18, 2014 / 2:01 AM / 4 years ago

UPDATE 1-Fujitsu, Taiwan's UMC to form JV to take over Fujitsu chip plant

* Fujitsu aims to cut exposure to chips, focus on IT services

* Fujitsu also in final talks to sell small plant to ON Semi - Nikkei

* Fujitsu chip business had $3.18 bln in sales in 2013/14 (Adds background on Mie plant, Japan chip sector,)

By Reiji Murai

TOKYO, July 18 (Reuters) - Fujitsu Ltd plans to transfer its main Mie semiconductor plant in central Japan to a joint venture it will set up with Taiwan’s United Microelectronics Corp, sources familiar with the matter said on Friday.

Fujitsu has sought to cut its exposure to semiconductors, aiming like several other Japanese electronics conglomerates to shed money-losing operations and focus on core businesses with better prospects for growth and profits.

UMC for its part is seeking access to Japan’s market and technology, especially the flourishing auto sector, one of the sources said.

Fujitsu is initially expected to hold 70 percent of the new Mie chip venture while UMC will hold the remaining 30 percent, although Fujitsu will steadily reduce its stake thereafter, the sources said. They did not give financial details for the deal.

The Nikkei business daily, which first reported the UMC deal, said Fujitsu is also in final stages of talks to sell another smaller chip plant, which makes microcontrollers for cars, to ON Semiconductor Corp.

A Fujitsu spokeswoman said nothing had been decided on the matter. UMC and ON Semiconductor declined to comment.

Fujitsu’s semiconductor division, which operates the two plants, posted sales of 321.6 billion yen ($3.18 billion) in the year ended in March and a book value of 41.3 billion yen.

The Mie plant is making image sensors for Sony Corp for use in smartphones, digital cameras and other electronic gadgets, although Sony is expanding its own production of the sensor chips with the recent purchase of a separate chip plant in northern Japan from Renesas Electronics Corp.

Fujitsu had been in negotiations with Taiwan Semiconductor Manufacturing Co Ltd on a possible deal for the Mie plant, although its CEO said last year that Fujitsu had also opened discussions with other companies.

Fujitsu, which has been focusing its efforts into global IT services including cloud computing, is also planning to combine its system chip design operations with Panasonic Corp in a joint business.

Fujitsu’s shares were up 1.2 percent at 777 yen in early trade on Friday, compared with a 1.4 percent drop in Tokyo’s benchmark Nikkei average.

Several Japanese companies have sold off or reduced their exposure to semiconductor operations in recent years.

Panasonic Corp transferred three domestic chip plants to a joint venture majority owned by Israeli foundry TowerJazz Semiconductor Ltd, while the Renesas deal with Sony was part of a restructuring drive to focus on the auto sector.

Elpida Memory, which had consolidated the PC memory chip operations of Japan’s big electronics companies, was bought by Micron Technology Inc after it filed for bankruptcy.

As Fujitsu distances itself from the semiconductor business, that will leave only a handful of major chipmakers - Toshiba Corp, Sony and Renesas - in an industry that just a few decades ago was dominated by the Japanese. ($1 = 101.2200 Japanese Yen) (Additional reporting by Michael Gold in Taipei, Ran Kim in Tokyo; Editing by Edmund Klamann and Stephen Coates)

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