Tokyo  - Japan's semiconductor industry is to experience a major shake-up, as electronics companies Renesas Technology and NEC Electronics are considering to merge, a news report said Thursday.

The two companies were in talks and a deal is expected by the end of the month, the Nikkei, a business daily, reported. A merger, which is expected to go ahead by April 2010, would create Japan's largest chipmaker.

The move was to to ensure the companies' survival during the global downturn.

Renesas, a joint venture between Japan's largest electronics company Hitachi Ltd and Mitsubishi Electric, is the country's second largest chipmaker after market leader Toshiba.

NEC Electronics, which is owned to 65 per cent by NEC Corp comes third. Under the merger deal NEC Electronics was to remain listed on the Tokyo stock market as the surviving entity.

With annual sales of more than 1.2 billion yen, (12 billion dollars) the new company would become the world's third largest chipmaker after Intel Corp and Samsung Electronics.

Renesas and NEC Electronics are believed to have suffered significant losses in the business year that ended March 31, as Japan's electronics industry is hit by one of of its worst-ever crises.

The Tokyo Stock Exchange said it stopped trading in NEC Electronics shares. (dpa)