Kawasaki-based NEC Electronics Corp. and Renesas Technology Corp. (a joint venture between Hitachi Ltd. (HIT) and Mitsubishi Electric Corp.) pushed back the proposed merger of their business operations until the end of September for the second time this year.

Due to a delay in completing due-diligence on the companies’ assets, including the manufacturing and sales sites worldwide, the companies had decided to postpone the contract to the end of July. Again in July, the companies decided to postpone the agreement to integrate business operations at NEC Electronics and Renesas until the end of August.

In April 2009, both NEC Electronics and Renesas had been negotiating to integrate business operations. The consolidation took place to weather the difficult economic conditions, weak demand and pricing pressure that weighed heavily on chipmakers. This merger would make the combined company Japan’s largest chip maker with more than 30% market share, and the third-largest chip maker worldwide.

The delay can be attributed to lack of funds as The Nikkei reported that Hitachi, Mitsubishi Electric and NEC Corporation (parent companies) were planning to provide financial assistance of about ¥200 billion ($2.1 billion) to Renesas and NEC Electronics for the successful completion of the merger. This financial aid will help speed up the integration process. The injection of funds will also help to reduce Renesas debt and lower restructuring costs.

The merger, once complete, will give tough competition to large chip manufacturers such as Freescale Semiconductor Inc. (FSL), Intel Corp. (INTC) and Samsung Electronics Co.

NEC electronics is the supplier of chips to Japan’s number one electric car maker, Toyota Motor (TM) and the number one online gaming company Nintendo, maker of the Wii console.

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