Sanyo Electric, the Japanese technology giant desperately trying to streamline its flagging operations, has cancelled the 110 billion yen (£460 million) sale of its semiconductor business, blaming the global credit crisis for the shock decision.

Investors were quick to criticise the move and what some fund managers described as Sanyo’s inexplicable flip-flop decision to retain the semiconductor business as a “key operation”. The shares nose-dived 6.6 per cent in their biggest one-day fall in eight months.

Scrapping the sale came after months of negotiations with the group of investors led by Advantage Partners, a private equity fund headquartered in Tokyo, which is understood to have pulled the deal in the wake of the credit crunch.

Sanyo said that semiconductors required “constant investment”, indicating that funding problems would have made that difficult for the bidders.

The potential for future funding problems for the unit’s new owners would have threatened jobs and long-term investment at the semiconductor unit, said a Sanyo spokesman. It will now take it off the market.

Sources close to the deal told The Times that in recent weeks, Advantage Partners may have lowered its bid for the unit as banks and other lenders withdrew credit lines. A Sanyo spokesman said only that the company would not sell assets below the “appropriate” price.

The sale of the profitable semiconductor business was a vital element of Sanyo’s ongoing restructuring plan – a project led by a group of three banks that include Goldman Sachs, and which has already involved the sale of other major Sanyo units.

Analysts warned that this may be the first Japanese deal to be hit by the fallout from the US sub-prime fiasco, but may not be the last.

One Mizuho Securities analyst said that the cancellation of the deal points to a “deeper credit crisis than Japan Inc probably fully appreciates at this time”.

The restructuring plans of Sanyo and other Japanese companies are heavily reliant on the sale of major units and funding difficulties could force a dramatic rethink of many proposed deals.

But brokers at Tokyo Mitsubishi said that Sanyo’s decision represented a poorly thought-out response to recent grim economic news from the US, and that the failure to sell the semiconductor unit at this time – even at a price slightly below book value - would come back to haunt Sanyo in the future.

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