Troubled chip makers have decided the best way to survive is merge. Elpida Memory, Japan’s largest computer-memory chipmaker, has begun merger talks with Powerchip Semiconductor, Rexchip Electronics and ProMOS Technologies.

Yukio Sakamoto, chief executive officer of Tokyo-based Elpida, refused to say much more about the deal other than the fact that talks had begun and ideally the four companies would merge. The combination would be the biggest reorganisation in the industry since 1999, when Elpida and Hynix Semiconductor were formed after falling prices forced mergers among Asian chipmakers.

Elpida is set to post a record annual operating loss as the global recession exacerbated a glut in the market. Powerchip, Taiwan’s largest memory chipmaker, said at the very least it will deepen cooperation with Elpida as part of a proposal submitted to the government for a bailout.