Under the pressure of the global economy recession, NEC and Toshiba are reportedly in talks to merge theis Large Scale Integration (LSI) semiconductor businesses.

The story was reported today by the Japanese Mainichi Daily News newspaper citing unnamed sources in Japan. According to the paper, the two companies have already reached a basic agreement to combine their LSI operations in January 2010.

NEC has issued the folowing statement regarding the report.

"These reports cannot be confirmed or regarded as fact at this time. In the event of significant future business developments, NEC will continue its efforts to disclose any relevant information."

NEC's statement cannot be considered as a formal denial of the report. The semiconductor industry has been suffering from the global economy recession, and many companies are trying to survive by merging their operations with other companies. Toshiba expects an operating loss of 290 billion yen in its semiconductor division for the fiscal year that ended last month. NEC also expects that its LSI affiliate NEC Electronics Corp. will post a 65 billion yen loss for fiscal 2008.

Industry experts cannot confirm whether the economy will recover in the next 1-2 years. Under this situation, a possible merge in Toshiba's and NEC's LSI businesses could make sense.

The new formation would be Japan's largest group in the LSI semiconductor field, overtaling current leader Renesas Technology Corp., which was formed by Hitachi Ltd. and Mitsubishi Electric Corp. in April 2003.