Japan lines up national champion chip group Three Japanese semiconductor manufacturers including Panasonic and Fujitsu are in talks to merge their operations to create a national-champion chipmaker that would be backed by the government, according to people familiar with the matter. The discussions, which are still preliminary, could result in the second state-sponsored consolidation in Japan's struggling electronics sector in the past few months. The industry is facing tens of billions of dollars of losses this year and a number of well-known companies have announced plans to restructure. People briefed on the semiconductor talks said on Wednesday that the Innovation Network Corporation of Japan, a government-controlled investment fund that backed a similar three-way merger of touchscreen display makers last August, is negotiating to invest in the proposed new business. The talks centre on general-purpose semiconductors known as large-scale integrated chips, or system LSI, which form the electronic "brains" of devices as ranging from mobile phones and video game consoles to automobiles. Panasonic and Fujitsu would spin off their system LSI businesses - which in both cases are small but unprofitable parts of their overall operations - and combine them with those of Renesas, a specialised semiconductor manufacturer. Renesas is itself the product of past mergers between the LSI businesses of Hitachi, NEC and Mitsubishi. It is unclear how much INCJ would invest in the new entity. Japan's Nikkei business daily on Wednesday said the fund, which was set up in 2009, was looking to inject "several tens of billion" of yen in capital. INCJ was set up in 2009 with the ability to invest up to Y900bn ($11.7bn) of mostly government funds. In the case of Japan Display - a combination of the touchscreen businesses of Toshiba, Sony and Hitachi - it invested Y200bn and took a 70 per cent ownership stake.