Advanced Technology Investment Company (ATIC), Abu Dhabi's state fund, has offered to buy Singapore contract chipmaker Chartered Semiconductor for $1.8 billion.

ATIC’s offer to buy the chipmaker is its second big investment after spending $2.1 billion earlier this year on a 55.6 per cent stake in Globalfoundries, a joint venture with Advanced Micro Devices Inc.

Major shareholders in Hynix Semiconductor also began the sale of a $2.8 billion stake, kickstarting consolidation in the global chip sector.

The moves followed speculation that top memory chipmaker Samsung Electronics plans to buy US memory chip designer Rambus, sending Rambus shares sharply higher on Friday.

Semiconductor makers have suffered the industry's worst ever downturn during the past year, prompting expectations that stronger players with cash will take out weaker rivals in an effort to boost market share and reduce the cycle of oversupply.

The combination of Globalfoundries and Chartered could create a major rival to sector leaders TSMC and UMC, which control about two-thirds of the $20 billion chip foundry market.

'Consolidation in the foundry business has not progressed as much as it has in the memory or logic sectors,' Mizuho Investors Securities analyst Yuichi Ishida said.

'I wouldn't be surprised if consolidation should progress further among foundries as development costs on cutting-edge chips grow.'

Japan's Toshiba Corp was in talks with Chartered Semi and Globalfoundries about outsourcing production of some of its next-generation system chips to help cut costs, two company sources said on Monday.

Toshiba shares were up 3.4 per cent around midday, beating the Nikkei's 1.1 per cent gain.

Struggling sector

Loss-making Chartered, which makes chips used in Microsoft's Xbox 360 game console, has struggled against its bigger Taiwan competitors in scale and capacity, and the deal with ATIC, which is fully owned by the Abu Dhabi government, may help it tide over its financial woes.

'That makes sense because Chartered needs to find some way to survive,' said Eric Chen, a semiconductor analyst with BNP Paribas, based in Taipei.

Chartered booked a net loss of $39.4 million including a tax benefit in the second quarter -- its fourth straight quarterly loss.

In Seoul, major shareholders in loss-making Hynix, the world's No.2 memory chipmaker, said they planned to pick a preferred buyer by the end of the year.

Leading shareholder Korea Exchange Bank (KEB) said a shareholder committee consisting of previous creditors to Hynix endorsed the sale plan and would invite bids this week.

The financial firms including KEB hold a combined 28.1 per cent stake -- worth about 3.4 trillion won ($2.75 billion) at Friday's close -- after taking shares during a bailout of Hynix earlier this decade.

Singapore investment agency Temasek Holdings, which owns 62 per cent of Chartered, fully supports the acquisition, Chartered said in a statement. The deal, subject to regulatory and shareholder approval, is expected to close by the year-end.

The Abu Dhabi fund said the deal would help expand its investments in the semiconductor industry, which currently consist of a facility in Dresden, Germany and a new, state-of-the-art facility under construction in New York.

Analysts see no imminent threat to TSMC and UMC, but pricing pressure could intensify if the new entity aggressively boosts its market share by selling chips at a relatively lower price.

'If they want to get a bigger market share, they might just use a low-price strategy, but that won't be a good thing for the whole market in terms of pricing,' said Kenneth Lee, a vice president at Taiwan's Fubon Securities Investment Services.

In Taipei, TSMC shares jumped 2.5 per cent and UMC gained 4.3 per