Toshiba Corp. and NEC Corp. have begun talks to integrate their troubling semiconductor operations to combat plummeting chip prices and dwindling global demand, local media reported Friday.

Fujitsu Ltd. may also participate in the deal in the future since it is also looking for a tie-up partner for its semiconductor unit, which was spun off in March last year, Kyodo News said, citing sources familiar with the matter.

Industry insiders believe if the three-way integration realized, it is likely to trigger a major realignment in the semiconductor industry.

The talks between Toshiba and NEC are also likely to involve integrating Toshiba's system LSI operations with NEC Electronics Corp., a major chip-making subsidiary of NEC, the sources said.

Toshiba and NEC have already formed an alliance to jointly develop a cutting-edge system LSI.

Toshiba, the world's No. 2 maker of NAND flash memory, and other major chip-making companies throughout the industry have been reeling under a global industry-wide slump caused mainly by the spreading global recession.

On Thursday, Toshiba said it expects a group largest-ever net and operating loss of 280 billion yen (about 3.09764 billion U.S. dollars) for fiscal 2008, its first red-ink in seven years.

Source: Xinhua