December 13^th, 2002 (12:00am) - NEC Corp. is in talks with Nintendo Co. to develop a chip for Nintendo’s next generation video-game console that will replace the GameCube and compete with Sony Corp.’s planned game machine, NEC officials said.

Engineers at NEC Electronics Corp., the fully owned unit of Japan’s second-largest chipmaker, and Nintendo, the world’s No. 2 maker of video-game consoles, are discussing the possibility of co- developing a system chip for faster graphics, said two NEC executives who declined to be identified. Nintendo spokesman Yasuhiro Minagawa denied the companies are in talks.

Last year, the two companies jointly created a system chip, which combines several functions, for GameCube consoles. While NEC Electronics has not officially decided to supply chips for a new console made by Nintendo, analysts expect such a partnership.

``It is natural for NEC to go with Nintendo,’’ said Hideki Wakabayashi, an analyst with Mizuho Securities Co., who rates NEC ``hold.’’ ``It will be difficult for NEC to switch and start supplying to Sony Computer Entertainment Inc.’s game machine.’’

Sony is developing the next version of the PlayStation 2 and Nintendo is under pressure to come up with a rival product.

Global shipments of the GameCube, which went on sale in September 2001 in Japan, totaled 6.7 million as of Sept. 30. Sony has sold 41.6 million PlayStation 2s, which debuted in March 2000.