NEC Electronics and Renesas Technology, two of Japan’s “big four” semiconductor companies, are in talks on a merger that would create the world’s third-largest chipmaker by sales and restart consolidation of the fragmented and lossmaking sector.

People close to the situation confirmed that talks had taken place but NEC said no decision had been made, adding that it could still choose a different partner or a deal other than a full merger. Japan’s Nikkei newspaper had earlier reported that the companies wanted to close a deal by the end of April.