SANTA CLARA -- In a major shake-up of the chipmaking-equipment business and a reflection of the surging popularity of mobile gadgets, Applied Materials on Tuesday announced a $9.39 billion stock deal to form a gargantuan new company with Tokyo Electron.

If approved by stockholders and government regulators, the proposed merger of No. 1 chip-equipment supplier Applied with No. 3 Tokyo Electron would reportedly be the biggest deal for a Japanese company by a foreign corporation in six years. Together, the companies estimate they would rack up $18.2 billion in sales by 2017, far outstripping the $12.6 billion they generated over the past year.

"It's definitely a major reshaping of the equipment suppliers," said Brian Matas, a chip expert with IC Insights.

But some analysts said the corporate marriage could run into opposition from the chipmakers dependent on their equipment, who fear it would put too much market power in the hands of one company.

"We are even surprised such a deal can go through, as it has a very strong market concentration," Bernstein Research analysts concluded in a note to their clients. They predicted that chipmakers Intel (INTC), Samsung and Taiwan Semiconductor -- which buy huge amounts of chipmaking equipment for their manufacturing plants -- "won't like the idea," adding that "these players will likely fight the deal."

Although Intel declined to comment, tech analyst Patrick Moorhead also was skeptical of the merger.

"This tie up isn't out of necessity and could lead to decreased competition," he said. The merger might make sense "if the two companies were in a strategic bind," he added, "but they're not."

However, Applied CEO Gary Dickerson, who would become the new company's chief executive, dismissed such concerns during a conference call with analysts.

He said combining the two companies' technologies would enable chipmakers to produce their products "at a lower cost," while also helping them create more advanced circuits for mobile devices, which are "driving a new phase of industry growth."

Tokyo Electron CEO Tetsuro Higashi added, "I think this combination will succeed very much."

Santa Clara-based Applied's stock rose $1.45, or about 9 percent, to close at $17.44.

Under the deal, which the companies hope to complete as early as the middle of next year, Applied's stockholders would own 68 percent of the as-yet-unnamed new company and receive one share in the venture for each Applied share they hold. Tokyo Electron shareholders would get 3.25 shares for every share they hold of the Japanese company.

The merged business would be headquartered both in Santa Clara and Tokyo, listed on both the Nasdaq and Tokyo Stock Exchange, and overseen by a board made up of five members from each corporation, with another board member to be mutually agreed upon by the two firms.

Higashi will be its chairman and Dickerson, who recently replaced Michael Splinter as Applied's chief executive, said he will move to Tokyo to oversee the integration of the two businesses.

The companies said their combination will produce a powerhouse with a stock market value of $29 billion. Applied employs about 15,000 people worldwide and its sales for the past 12 months totaled $7.2 billion, while Tokyo Electron employs about 12,000 people and had sales of $5.4 billion.

Randhir Thakur, an Applied executive vice president, said the merger "could include cost savings and adjustments," but added, "as far as layoffs, it's too early to say anything about that."

He said Applied has about 8,000 Bay Area workers.

The semiconductor equipment business has been sluggish lately, due partly to the decline in sales of chips for personal computers, which consumers are shunning in favor of smartphones and tablets. That has hurt Applied's business. In its most recent quarterly financial report, its profit tumbled 23 percent to $168 million compared with the same period a year ago and its sales of $1.98 billion were down nearly 6 percent.

Both companies took pains to note that they will function as equals in the merger. The new business will be incorporated in the Netherlands, a site chosen because both firms considered it neutral territory.

The purchase is the largest of a Japanese company from outside the country since Citigroup's $8 billion deal for a majority stake in Nikko Cordial in 2007, according to data compiled by Bloomberg.

Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.

Applied Materials
Founded: November 1967
Headquarters: Santa Clara
Employees: About 15,000
Revenue past 12 months: $7.2 billion
CEO: Gary Dickerson


Tokyo Electron
Founded: November 1963
Headquarters: Tokyo
Employees: About 12,000
Revenue past 12 months: $5.4 billion
CEO: Tetsuro Higashi