Sept. 7 (Bloomberg) -- Toshiba Corp., Japan’s biggest chipmaker, may contract out some production of large-scale integrated circuits to cut manufacturing costs.

The company may give orders to Chartered Semiconductor Manufacturing Ltd. of Singapore or Globalfoundries of the U.S., the Nikkei newspaper reported today, without saying where it obtained the information.

“We are considering outsourcing any system LSI output that exceeds our production capacity, but nothing has been decided at the moment,” Toshiba said in a statement to the Tokyo Stock Exchange today.

Slumping global demand for the chips used in consumer electronics and increasing costs of the race to make smaller, more powerful devices has led Fujitsu Ltd. to outsource output of its most advanced semiconductors and is forcing NEC Electronics Corp. and Renesas Technology Corp. to merge operations. Toshiba on Aug. 5 said the company may contract out all of its system LSI production.

Toshiba climbed 3.4 percent to close at 482 yen on the Tokyo Stock Exchange. The benchmark Nikkei 225 Stock Average added 1.3 percent.

The company’s chip business, also the world’s second largest source of flash-memory chips, in July reported a loss of 36.2 billion yen ($389 million) in the quarter ended June 30, as sales slumped 23 percent from a year earlier to 225.2 billion yen. The LSI business was responsible for more than half of the deficit and 31 percent of revenue, Toshiba said at the time.

LSI devices combine several functions on a single chip and are used in automobiles and electronics such as game consoles and flat-panel televisions. The devices accounted for 5.3 percent of Toshiba’s total revenue in the first quarter, according to the company’s earnings statement.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: September 7, 2009 03:40 EDT