Home > News
  print button email button

Saturday, July 7, 2012

Renesas survives for now; future remains cloudy


By MIE SAKAMOTO
Kyodo

By drafting drastic restructuring measures, ailing chipmaker Renesas Electronics Corp. has for the time being avoided the fate of Elpida Memory Inc., which filed for bankruptcy protection in February.

But merely implementing the measures, which include a reduction in the number of domestic plants and personnel cuts, may not be enough to eliminate all the concerns surrounding its struggling business, given the harsh business environment.

"We will establish a strong revenue base that can endure fluctuations in market conditions," Renesas President Yasushi Akao told a news conference Tuesday in Tokyo, noting the company is still targeting a double-digit operating profit margin.

The manufacturer was formed through the April 2010 merger of Renesas Technology Corp. and NEC Corp.'s semiconductor unit. Renesas Technology was itself the product of a merger between the semiconductor units of Hitachi Ltd. and Mitsubishi Electric Corp. in 2003. NEC, Hitachi and Mitsubishi Electric are the largest shareholders in the company.

Renesas Electronics has often stressed that taking over all the operations of three industry giants left it with too many plants and employees for the scale of its business.

"Considering sales posted by the three companies in the past, Renesas' revenues need to be far in excess of ¥2 trillion," said Satoru Oyama, principal analyst at iSuppli Japan. "But actual sales are lower than ¥1 trillion."

The company posted group sales of ¥883.11 billion in the business year to March.

Though its workforce grew in line with the integration, Renesas barely made any moves to restructure operations and "the company is now paying the price for postponing such efforts," Oyama said.

Adding to the negative impact of the strong yen, Renesas was badly affected by the March 2011 earthquake and tsunami, which damaged its core plant in Hitachinaka, Ibaraki Prefecture, and forced the company to book hefty losses.

"Due to the natural disasters and deteriorating market conditions, we are facing a very severe situation," said Akao, Renesas' president. "Taking into consideration the current environment, we believe that we need to carry out (reforms) in a very short period."

The company is expecting to receive around ¥100 billion in assistance from NEC, Hitachi and Mitsubishi Electric, as well as from its main creditor banks to facilitate the rehabilitation process.

Renesas is also considering a private placement of new shares that could raise tens of billions of yen to shore up its capital base, and is currently discussing the plan with overseas funds.

While such steps may be sufficient to ensure a small degree of restructuring, they could merely end up being "first-aid treatment," according to Oyama at iSuppli Japan.

"The company has yet to draw up a fundamental strategy," he noted.

The chip-maker has said it will prioritize its microcontroller business, which is the global leader with an estimated market share of around 30 percent, while scaling down its loss-making system chip operations, which turn out products for telecom and other electronic devices.

To achieve this, the company is looking to move forward stalled negotiations with Panasonic Corp. and Fujitsu Ltd. on integrating their system chip businesses.

But some analysts remain skeptical about the company's chances of mounting a comeback, as some automakers have reportedly already stopped purchasing microcontrollers from Renesas to diversify risks in the supply chain, following the severe disruption to their production caused by the Great East Japan Earthquake.



We welcome your opinions. Click to send a message to the editor.

The Japan Times

Article 2 of 9 in Business news

Previous Next



Back to Top

About us |  Work for us |  Contact us |  Privacy policy |  Link policy |  Registration FAQ
Advertise in japantimes.co.jp.
This site has been optimized for modern browsers. Please make sure that Javascript is enabled in your browser's preferences.
The Japan Times Ltd. All rights reserved.