STMicroelectronics, Europe’s largest semiconductor manufacturer, has denied reports that it is in talks to acquire the semiconductor operations of its US rival Motorola.

According to a report in the Financial Times, the two companies have been discussing a merger that would create the second largest semiconductor business in the world after Intel, with sales of more than €11.1 billion. A deal could be signed as early as 2003, reported the newspaper.

But STM investor relations spokesperson Benoit de Leusse has dismissed the report. “We are holding no talks with Motorola. We work together with Motorola as part of a manufacturing joint venture and communicate with the company regarding that venture but nothing more,” he told US news service InfoWorld.

Motorola, ranked the seventh largest semiconductor company in the world, has recently undergone an extensive restructuring programme following a dramatic drop in sales, Analysts have speculated that this could involve selling off its semiconductor business.

Motorola has already been in discussions with German technology giant Siemens about the possibility of swapping its wireless infrastructure business with Siemens’ mobile handsets operation.

STM is 36% owned by the French and Italian governments. If a merger were to go ahead, both companies would have to consult with European regulators over competition concerns. According to the FT, STM executives have already “sounded out” regulators in Brussels.

Although STM has a considerable presence in Europe, the acquisition of Motorola’s semiconductor operations would help raise its profile in both the US and Asia, with the combined company’s revenues helping it leapfrog over Japan’s Toshiba in second place.