The source said the size of the offering may rival that of NEC Electronics, which raised $1.3 billion in Japan's largest IPO of 2003, although this depended on market conditions.
Hitachi Ltd and Mitsubishi Electric Corp merged the bulk of their chip-making operations in April to form Renesas, creating the world's third-largest chip maker behind Intel Corp and Samsung Electronics Co Ltd.
The company specialises in microprocessors - chips that hold processor, memory and other key functions on one sliver of silicon.
Less than a week ago, market sources said another major Japanese chip maker, Elpida Memory Inc, had appointed Deutsche Bank AG and Daiwa SMBC to arrange an IPO expected to raise about 100 billion yen ($938 million).
The IPOs, which are likely to be among the largest in Japan during 2004, reflect the need for Japanese semiconductor makers to raise funds to keep pace with global rivals in the chip sector, which requires intensive capital spending.
Renesas said in December it would raise its capital expenditure target by 37 percent to 123 billion yen ($1.15 billion) for the year to March to boost production capacity of high-capacity flash memory chips at a subsidiary.
However, the capital spending figure is dwarfed by that of Intel, which last week forecast 2004 capital spending of between $3.6 billion and $4.0 billion, compared to $3.7 billion in 2003.