TOKYO (Reuters) - Japan's Renesas Electronics Corp 6723.T said it had agreed to buy Integrated Device Technology Inc (IDT) IDTI.O for $6.7 billion, its second major acquisition as it deepens its push into semiconductors for self-driving cars.

The deal for the U.S. chip design firm underscores fierce competition between global chipmakers as they seek to boost their product line-ups and market share in the highly lucrative field of automotive chips.

Renesas is second only to NXP Semiconductors NV NXPI.O in auto-related chips and commands 30 percent of the global market for microcontrollers used in cars. But it is weak in so-called analog chips which process signals from things such as sound, light or temperature into digital data.

In particular, Renesas has been keen to get its hands on IDT’s know-how in analog semiconductors for wireless networks and sensors - expertise crucial to develop autonomous driving and connected car technology.

It will pay $49 per share in cash for IDT’s outstanding shares, a 16 percent premium to their closing price on Monday.

“We were weak in chips for wireless networks needed for the Internet of things and connected cars. We’ve been wanting to get such assets,” Renesas Chief Executive Officer Bunsei Kure told a news conference.

Renesas said that the combination with IDT will allow the Japanese firm to provide more comprehensive chip systems for its clients. IDT is also strong in chips for data centers, opening up a new stream of revenue for Renesas.

Renesas’ stock climbed 4 percent higher in afternoon trade, regaining some ground lost in a 14 percent slide since the Japanese firm said it was considering buying IDT on Aug. 31.

While IDT has averaged nearly 20 percent revenue growth in the past four reported quarters, some analysts worry that benefits from the deal could be hard to come by.

Renesas Electronics Corp's logo is seen on its product at the company's conference in Tokyo, Japan, April 11, 2017. REUTERS/Toru Hanai/File Photo

“Renesas is weak in telecommunications chips, so the combination isn’t bad,” said Akira Minamikawa, principal analyst at IHS Markit. “But IDT doesn’t have many automotive clients. Bringing their chips up to the level needed for automotive standards will not be easy.”

IDT generates just 11 percent of its revenue from automotive and industrial businesses.

The deal comes on the heels of last year’s purchase of U.S. chipmaker Intersil Corp for $3.2 billion which also expanded its portfolio of analog chips.

The companies need to gain approval from the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security issues, as well as from antitrust authorities in markets such as China.

Renesas said it was confident of obtaining the necessary approvals.

Renesas, which expects the deal to close in the first half of 2019, will finance the acquisition with 679 billion yen ($6.1 billion) of bank loans as well as cash, and expects to repay 200 billion yen every year.

The loan will be offered by the core banks of Mitsubishi UFJ Financial Group Inc 8306.T and Mizuho Financial Group Inc 8411.T, a source with direct knowledge of the matter told Reuters. The source was not authorized to be talk publicly on the matter and declined to be identified.

S&P Global Ratings put Renesas on a negative credit watch, saying it might cut the firm’s rating by one or two notches if the acquisition proceeds as planned.

“Key financial ratios for Renesas Electronics would likely deteriorate significantly - even taking into account IDT’s possible contribution to earnings,” S&P said.

Renesas was late to join a wave of consolidation in the chip industry as it struggled to recover from damage suffered at key plants in an earthquake that hit Japan in 2011.