Electronics giants Matsushita Electric Industrial Co. and NEC Corp. are in talks with Texas Instruments Inc. of the United States to form a joint venture on making key components and software for third-generation mobile phones, it was learned Friday.

The cost of developing new mobile handsets is rising as they become more sophisticated, while higher competition is squeezing profit margins for phone manufacturers. The proposed venture is an attempt to slash costs by sharing key components, sources said.

Matsushita Electric, which sells many products under the Panasonic brand, and NEC are among the leading mobile phone manufacturers in Japan. They plan to sell some parts developed by the joint venture to other companies, the sources said.

According to industry observers, sharing of parts could lead to a realignment of the mobile phone manufacturing industry if the practice takes hold.

Subsidiaries of Matsushita Electric and NEC are expected to invest in the joint venture, which is likely to cost around 10 billion yen. If it goes ahead, the tieup will bring engineers from participating firms together to develop specialized chips and software for 3G handsets.

High-end mobile phone handsets already on the market offer high-speed Internet access; some allow users to make electronic payments. As the phones become more than tools for voice and data communications, they will incorporate even more functions. While this will make them popular with consumers, the cost of making the new phones is likely to continue rising, industry watchers say.

NEC Vice Chairman Akinobu Kanasugi, who served as the firm's president until March 31, has been calling on competitors to cooperate to help defray these higher development costs.