According to Reuters, Renesas gave no details on the tie-up, which it plans to announce next week.
It points out that chipmakers are tapping the technological prowess of companies such as TSMC, as a way of keeping their costs under control.
Renesas is already a client of both TSMC and its rival United Microelectronics. It is trying to avoid the problems of a rising yen which is making its plants very expensive.
Renesas, the world’s biggest supplier of microcontroller chips for cars, is under pressure to come up with smaller and more powerful chips at lower prices.
However, it is facing competition from the likes of Samsung. The economic conditions had forced Elpida, Japan’s last player in dynamic random-access memory chips, into bankruptcy protection earlier this year.
There are some fears that Renesas will go the same way. Its problem is that it does not have the capital to do anything to get its nadgers out of the fire.
Renesas posted a $7.8 million net loss in the financial year to 31 March after last year’s natural disasters in Japan and Thailand forced it to shut eight factories and encouraged domestic automakers to diversify their supplies.