http://news.yahoo.com/s/afp/20050909/tc_afp/japanhitachitoshibaelectronicscompany_050909041923;_ylt=AvNCYyjOeG7RzMM9%20pzWNufEMO7gF;_ylu=X3oDMTA5bGVna3NhBHNlYwNzc3JlbA--

Hitachi, Toshiba and other Japanese electronics firms are considering setting up a new firm to produce system chips in a joint effort to fight overseas rivals, a newspaper reports.

Among other partners were Panasonic brand maker Matsushita, NEC Electronics and Renesas Technology, a joint venture of Mitsubishi Electric and Hitachi, the Nihon Keizai Shimbun said.

Participants were in final talks to invest a total 200-300 billion yen (1.8-2.7 billion dollars) in a chip foundry, with production of made-to-order system chips developed by each firm due to start in 2007, the report said.

Howerver, the companies played down the report, saying that although such a proposal had been floated in the past, an agreement was some way off.

``It is a common idea in the industry that we should set up an independent foundry because investment for next-generation products would be too heavy to be shouldered by a single company,`` a Hitachi spokesman said.

``We are having various talks over it but I don`t know if we should call them `negotiations`,`` he said.

NEC Electronics spokesman Hisashi Saito said the companies had yet to enter even the first stage of talks, although such a plan had been discussed in the past.

Officials at the other companies reported to be involved also stressed that nothing had been decided, while analysts doubted the commercial feasibility of the joint venture project.

``Japanese electronics firms are now working hard to create a vertically-integrated production model in which they make everything -- from key devices to final product,`` Shinko Securities analyst Yoshihide Otake said.

``The reported plan goes completely against such a move. I also think that there is no merit in such a plan, given difficulties in combining the forces and operations of each company into the single vehicle and managing them,`` he added.

The Nihon Keizai said the new venture, which would focus on mass-producing system chips, would allow the electronics companies to defray the enormous capital outlays and compete against Intel and Samsung Electronics.

Each company would likely be restricted to hold a stake not larger than 20 percent in the venture, the report added.