Japanese rivals NEC and Hitachi are merging their memory chip businesses, forming what could become the world's largest chip maker.
The companies announced the plans last week, after a long period of instability in the memory chip market, where oversupply has caused prices to slump, forcing manufacturers to announceprofit warnings, cut jobs and consolidate businesses.
Under the alliance, which would have a combined market share of nearly 20%, the firms will consolidate their chip operations, which could affect NEC's plant in Livingstone, Scotland.
While the announcement was welcomed by stock markets, Joe D'Elia, associate director at the analysts Gartner Group analyst firm, was not impressed.
"The merger may reduce costs, but they still have to manage capacity," he told PC Week. "This does nothing to address the imbalance of supply and demand in the (memory) market."
D'Elia described the consolidation as part and parcel of the memory market and predicted more such announcements.
Asked whether the merger was likely to stem the huge losses that both companies face, his answer was brief: "No."
NEC president Koji Nishigaki said the first products made at the merged firm would be next-generation 256Mb DRAM chips.
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