Japan's NEC Electronics Corp gained approval from European Union competition regulators on Wednesday to merge with peer Renesas Technology Corp, creating the world's No. 3 semiconductor maker.
The two loss-making companies have been hurt by weak demand in a sector dominated by bigger rivals Intel and Samsung Electronics Co. They face a combined net loss of 99 billion yen ($1.14 billion) this year.
The European Commission, competition watchdog of the 27-country European Union, said the transaction would not impede competition in Europe and the new company would continue to face effective competitors.
The proposed merger would not give rise to competition concerns in the markets for microcontrollers, SRAM, LCD drivers and other types of semiconductors, the EU executive said in a statement.
NEC Electronics will absorb Renesas after raising a total of 200 billion yen from their parent firms.
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The merged company, Japan's biggest chipmaker, will be called Renesas Electronics Corp after NEC Electronics absorbs Renesas' operations.
(Reporting by Bate Felix, editing by Dale Hudson)