Mitsui Chemicals is buying JSR for ¥1.84 trillion ($12 billion) with support from state-backed Development Bank of Japan to strengthen its hold over a key chip materials linchpin.

Mitsui Chemicals and DBJ will acquire all shares of JSR from government-backed Japan Investment, the companies said in a filing Monday. DBJ will pay ¥200 billion in cash for a stake that will be converted to preferred shares without voting rights, it said.

The deal for JSR, one of the world’s leading makers of photoresists needed to make advanced chips, would further a government-backed effort to consolidate Japan’s fragmented semiconductor-materials industry. Japan is home to the world’s largest suppliers of silicon wafers and dominates several other critical chip materials, but many of its smaller suppliers remain vulnerable to foreign takeovers.

Mitsui Chemicals’ shares extended their decline to as much as 15% in Tokyo.

JIC took JSR private two years ago.…