Renesas restructure moves focus firmly out of Japan

As part of a major restructuring process, Renesas will streamline its production facilities in Japan as well as moving product focus away from the consumer electronics sector which defines the Japanese marketplace, according to Rob Green, CEO of Renesas Electronics Europe.

The company intends to focus on the overseas market, including Europe, by refocusing on the automotive and what it calls ‘smart society’ segments. Green also described the restructure in terms of a refocus on long-lifecycle products such as telecoms infrastructure and industrial automation, away from the volatile short-lifecycle consumer electronics market. They have already de-focussed on SoCs for this market and withdrawn from the large display driver IC business, while their RF power amplifier business was sold to Murata earlier this year.

Another part of the restructuring will see Renesas outsource a significant amount of production overseas. Currently around half of production is outside Japan, but this is moving towards 60% and will soon go beyond that. The aim, Green says, is for 90% of Renesas MCUs to be available from two sites (currently this percentage is in the 80s).

As a result of the product refocus, numerous production facilities in Japan are scheduled for reduction of capacity, sale or closure. Their front end strategy is to enlarge and miniaturise wafers, and keep production of specialised products in-house while outsourcing leading edge products. They recently agreed to license their MONOS (Metal-Oxide-Nitride-Oxide-Silicon) 40nm embedded flash technology to TSMC as part of this. The plan is for five FEOL fabs to remain unchanged (including the leading edge site at Naka), with three reducing capacity and four facing sale or closure. The back end of line will accelerate its shift overseas and expand use of sub-contractors inside and outside Japan. The plan here is for just one BEOL fab to stay untouched, two to reduce capacity and a further six will probably close or be sold.

The overall aim of the restructuring is to increase profitability; Renesas made a net loss of 62.6 billion yen in the year up to March 2012, in major part down to the wake of last year’s natural disasters in Japan and Thailand. Indeed, part of the plan to improve the company’s financials includes an early retirement incentive plan with which they want to save 43 billion yen per year.

These seem like drastic measures to rescue the world’s number one MCU company, but they are entirely necessary to gain the support of the banks and reassure the financial community. I hope it works.

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