Tokyo: Sony Corp. is set to begin formal talks to buy a Japanese chip plant from Renesas Electronics Corp. to increase production of smartphone image sensors, people with knowledge of the situation said.

Sony plans to begin due diligence next week, and the companies may not reach a final agreement, the people said, asking not to be identified because the discussions are private. The Tokyo-based company is increasing output of the sensors, which help phones take high-quality photos, as companies such as Apple Inc. buy Sony’s technology for use in their own devices.

Chief executive officer Kazuo Hirai is seeking to bolster profits as the company struggles with falling demand for televisions and missteps with its Hollywood studio. While its smartphone business has just 3.7% of global shipments, Sony has garnered almost a third of the $7.6 billion market for low-power sensors.

Sensor demand is growing for smartphones, Tsunenori Ohmaki, an analyst at Tachibana Securities Co. in Tokyo, said by phone. Sony is considering the acquisition of Renesas’ Tsuruoka plant to expand sensor production.

The components are called complementary metal-oxide semiconductors, or CMOS chips, and are used in Xperia phones, Cyber-shot cameras and competitors’ products such as the iPhone.

Spending plans

Sony and Renesas will sign a memorandum as early as next week as they initiate talks over the plant in Tsuruoka, another person with knowledge of the plans said.

Sony is deciding between purchasing the Renesas plant in northern Japan and investing in its own chip factories in the south, said the person, who asked not to be identified because the talks are private.

The company has said it plans to spend ¥60 billion ($585 million) this financial year on facilities for its chip operations, which gets 77% of sales from image sensors.

Mami Imada, a Tokyo-based spokeswoman for Sony, and Taizo Endo, a spokesman for Renesas, declined to comment.

Sony may pay about ¥10 billion for the factory and retain 900 employees, Nikkei reported earlier on Wednesday.

Sony’s brand name for its CMOS chip is Exmor, which acts as an eye for electronic products, capturing light to convert into electronic signals for processing. The latest chip uses less power and faster processing to catch vivid images under low light.

Renesas said in August it plans to close some plants in Japan in three years, including one in Tsuruoka. Renesas has held talks with companies other than Sony in the past and failed to reach an agreement partly due to disagreement about price, one of the people said. BLOOMBERG

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