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Hitachi Ltd. and Mitsubishi Electric Corp. announced Monday that they will set up a joint venture to integrate their semiconductor businesses relating to system LSIs, or large-scale integrated circuit chips.

The deal will create the third-largest LSI manufacturer in the world, after Intel and Toshiba Corp.

The joint venture, which would be set up in about a year, will cover the development, design, production and marketing of system LSI chips, which are expected to come into greater demand as the expansion of mobile phones and digital home appliances continues.

The system LSIs to be covered under the Hitachi-Mitsubishi Electric venture include microcontrollers, logic circuits and discrete devices, the two electronics giants said.

The new joint venture will be equally owned by the two firms, and its annual sales are projected to reach about 700 billion yen, they said.

Hitachi President Etsuhiko Shoyama told a news conference that the new company will aim to become a global leader in supplying microcontrollers and will target manufacturers of automobiles, mobile handsets, computer network systems and digital home appliances.

Sales from the two firms’ microcontroller businesses account for 23.7 percent, or the largest share, of the worldwide microcontroller market.

Mitsubishi Electric President Ichiro Taniguchi said during the same news conference that the alliance will help the two electronics makers speed up development technology, reduce operation costs and reinforce their competitiveness.

The global slump in the information technology sector is intensifying competition in semiconductors. While chip makers in other Asian countries have become powerful and are able to offer lower prices, Japanese chip makers are still reducing production of multipurpose DRAM chips and making greater efforts to produce system LSIs, which are more profitable, analysts said.

Base salaries shrink

Mitsubishi Electric Corp. plans to cut the base salary for all employees by an average 2.9 percent for one year beginning in April, company officials said Monday.

The company will implement the pay cut by reducing the number of annual working days by seven. The average number of annual work days is 240.

The company will also cut overtime pay for one year from April, they said.

Earlier this month, Mitsubishi Electric agreed to offer no pay-scale increases beyond standard yearly hikes in spring wage talks with its labor union.

During the wage talks, the labor union proposed a cut in base salary on condition that the regularly scheduled yearly hikes are left intact.

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