OSAKA/TAIPEI -- Panasonic will sell its loss-making semiconductor business to Taiwan's Nuvoton Technology, Nikkei has learned, leaving an industry that it first entered in 1952 and which now faces headwinds from the U.S.-China trade war.

The sale will close a chapter in Japan's transition from a chipmaking powerhouse in the 1980s and '90s to a supplier of equipment and materials to rising South Korean and Taiwanese players.

Panasonic's chipmaking business ranked among the world's top 10 producers by sales around 1990. Now, the company is preparing to sell wholly owned Panasonic Semiconductor Solutions to a midsize Taiwanese company that supplies the likes of HP, Dell and Microsoft.

The chip unit handles development, production and sales. Panasonic will also part with three Japanese chipmaking facilities under TowerJazz Panasonic Semiconductor, a joint venture with Israel's Tower Semiconductor.

Panasonic had been working to turn its chipmaking businesses around as recently as April, when it announced plans to sell some operations to Kyoto-based peer Rohm. It also put greater emphasis on automotive products such chips designed to control electric-car batteries -- the focus of a partnership with Tesla.

This Panasonic chip plant in the southern Japanese city of Hioki closed in 2014. (Photo by Koji Zenke)

Panasonic Semiconductor logged an operating loss of 23.5 billion yen ($215 million) for the fiscal year ended in March on sales of 92.2 billion yen. Panasonic had making profitability in semiconductors a top priority for this fiscal year, but decided to unload the business as the trade war sinks demand.

Panasonic as a whole forecasts a 27% drop in operating profit to 300 billion yen this fiscal year. The company also plans to exit the liquid crystal display business in 2021 as part of a broader campaign to dump loss-making operations.

Nuvoton, a subsidiary of Taiwanese specialty memory chip maker Winbond, makes microcontrollers, controllers, and audio- and power-related chips.

A smaller rival of Texas Instruments, Infineon and Renesas Electronics, Nuvoton listed on the Taiwan Stock Exchange in 2010. Winbond owns a 61% stake.

Winbond President Chan Tung-yi previously told the Nikkei Asian Review that his company eyed growth from mobile, automobile, and factory automation applications, adding that he was not worried about emerging Chinese players, market demand or trade tensions.

Japanese companies once dominated the global semiconductor industry, commanding a 49% market share in 1990. But slow decision-making on investment and consolidation have left them trailing South Korean and Taiwanese rivals.

No Japanese company was named as a top 10 producer in global rankings published by Gartner last year, and their combined market share had shrunk to 7%.

Additional reporting by Cheng Ting-Fang and Lauly Li.