Oki to Sell Chip Business to Rival Rohm

First major allignment in Japanese seminconductor industry since 2003.

Troubled electronics maker Oki Electric Industry Co. has agreed to sell its semiconductor business to rival Rohm Co. in a deal worth about $800 million, the two companies said May 28. Oki will spin off its semiconductor business and sell 95% of the shares in the new firm, to be called Oki Semiconductor, to Rohm by October 1.

The two firms estimate the value of the shares Rohm will buy to be about 85.5 billion yen (US$822 million), although the exact sale price has not yet been decided.

Oki, which suffered 1.4 billion yen in pre-tax losses for the year to March 2008, has scaled down its semiconductor business amid price competition with rivals from South Korea, Taiwan and elsewhere. It has tried to find a niche but faced financial constraints due to the massive investment needed to handle cutting-edge technologies. Rohm, Japan's eighth largest chipmaker, has also suffered a decline in its operating profit in its chip business due to stiff price competition.

With the sales, Oki hopes to "conduct a more flexible business operation, to establish an efficient and agile management structure that corresponds to the rapidly changing semiconductor market," Oki president Katsumasa Hinozuka said. Rohm said it aims for a synergy effect by putting Oki Semiconductor under its umbrella as the production of the two firms is not overlapping greatly.

It is the first major realignment in the domestic semiconductor industry since Hitachi Ltd. and Mitsubishi Electric Corp. integrated their system chip operations in 2003.

It is the first major realignment in the domestic semiconductor industry since Hitachi Ltd. and Mitsubishi Electric Corp. integrated their system chip operations in 2003.

Copyright Agence France-Presse, 2008

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