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Sanyo Says to Give Up on Sale of Chip Unit

Japan's Sanyo Electric has given up on the sale of its semiconductor unit after talks with private equity firm Advantage Partners broke down.

"We decided not to sell the semiconductor business, and instead we will nurture it as one of core businesses in our components division," Sanyo said in a statement.

Advantage Partners had earlier this year gained priority negotiating rights to buy the unit, outbidding other buyout funds with an offer above 100 billion yen (US$855 million).

But the Nikkei business daily reported that Advantage Partners faced difficulty in raising funds for the acquisition amid a tightening of credit stemming from the U.S. subprime mortgage crisis.

Osaka-based Sanyo spun off the chip-making business last year in a move widely seen as a prelude to selling it. The unit posted 181.27 billion yen in sales in the year ended March, and squeaked out an operating profit of 4 billion yen.

Sanyo's chip unit has been floundering since an earthquake in 2004 hit its factory in northwest Japan, ruining equipment and causing customer flight.

As a group, Sanyo Electric has lost about $3.6 billion over the past three business years, hit by the chip unit's woes and sluggish sales of core electronics products such as digital cameras and mobile phones.

It is restructuring under the eye of shareholder Goldman Sachs and the sale of the chip unit has been seen as a key step towards its earnings recovery.