Sumitomo Metal Industries Ltd. and Mitsubishi Materials Corp. announced Tuesday they will fully integrate their silicon wafer operations by forming a new joint venture in January.

The two firms are already cooperating in the development and production of next-generation wafers through Silicon United Manufacturing Corp., a 50-50 joint company they set up in July 1999.

Under the latest deal, the two firms will transfer all their silicon wafer-related operations, including Sumco, into the new venture, a Sumitomo Metal spokesman said.

The new firm’s name, capitalization and other details will be determined later, he added.

In terms of sales, the reinforced joint venture will become the second-largest silicon wafer company in Japan after Shin-Etsu Chemical Corp.

Sumitomo Metal’s wafer division posted 115 billion yen in sales in the year to March 31, while Mitsubishi Materials’ wafer division registered 100 billion yen in sales in the same year.

Reijiro Mori, an adviser for Sumitomo Metal, will become president of the new company.

By expanding their alliance, the two firms aim to improve their international competitiveness in the silicon wafer business, an area that requires massive investment.

They also hope their business integration, including that of their sales divisions, will improve the efficiency of their overall operations.

Silicon wafers are used as substrates for semiconductors.

Established in 1949, Sumitomo Metal is Japan’s fourth-largest producer of crude steel.

With production bases in Wakayama and Ibaraki Prefecture’s Kashima, its strength lies in steel pipes and tubes, including seamless pipes.

For fiscal 1999, it posted consolidated net losses of 145.1 billion yen on sales of 1.424 trillion yen.

Mitsubishi Materials, founded in 1950, is the top manufacturer of nonsteel metals. It posted 12 billion yen in consolidated net losses for fiscal 1999 on sales of 986.8 billion yen.

The latest alliance comes amid the ongoing realignment of major Japanese steelmakers, making it more likely that Sumitomo Metal will tie with another Japanese steelmaker.

NKK Corp. and Kawasaki Steel Corp. — Japan’s No. 2 and No. 3 steel makers — announced Friday they will integrate operations in October 2002 under a joint holding company.

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