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A Semi Spin-off in Semiconductors

Following a $2.44 billion loss for its last fiscal yea, ending in March, Japanese electronics manufacturer NEC Corp. said it plans to spin off some of its key semiconductor assets into a new subsidiary in November. It plans to take the new company public.

NEC, Japan's No. 2 chipmaker behind Toshiba, also said that further NEC Group restructuring includes a plan to separate both the color TFT (thin film transistor) liquid crystal display and color PDP (plasma display panel) businesses, possibly by next October.

The semiconductor spin-off excludes NEC's DRAM, or dynamic random access memory, chip operations via Elpida Memory Inc.

The company is betting that the separation and the IPO will help it raise funds and remain competitive with its foreign rivals. Its ADRs on the Nasdaq exchange were up 31 cents to $7.65 in late morning trading.

"We realized that to do battle globally, our semiconductor operations would need a very solid capital base," NEC President Koji Nishigaki told a news conference in Tokyo.

NEC said that it will separate its semiconductor business under a scheme of "kaisha-bunkatsu" or separation of business and establish a new subsidiary company in November of this year. The new company's business domains are system LSIs, IC and discrete devices and compound semiconductor devices.

The new company is expected to have $5.5 billion in sales, a workforce of 25,000 employees and will become a specialist semiconductor solutions company that focuses on high-end system LSIs, NEC said. Although an IPO is planned, NEC will retain 70 percent ownership of the new unit.

After the separation of its semiconductor business, NEC said the company will be comprised of NEC Solutions and NEC Networks, and "it will position its business focus on providing integrated solutions (including services) for mission critical systems in open environments and concentrate further on IT and networking integration solution business."