Chip Maker Renesas Rethinks Japan Focus – WSJ.com

Chip Maker Renesas Rethinks Japan Focus – WSJ.com.

TOKYO—Renesas Electronics Corp. takes the stage as one of the world’s biggest semiconductor makers Thursday, but it faces major challenges in the need to rethink its dependence on the Japanese market and to reorganize overlapping operations.

Bloomberg News

Junshi Yamaguchi, president and chief executive officer of NEC Electronics Corp., left, and Yasushi Akao, president of Renesas Technology Corp., in Tokyo last December.

Born out of a merger between NEC Electronics and Renesas Technology that takes effect Thursday, Renesas Electronics becomes the world’s third-biggest chip maker, with revenue of 1.05 trillion yen ($11.3 billion), according to company figures. This would put it behind only Intel Corp. of the U.S. and Samsung Electronics Co. of South Korea.

One of the company’s top priorities will be increasing its overseas presence. It aims to do so by teaming up with more Chinese chip design houses and seeking chip orders from Taiwanese electronics makers that develop and manufacture appliances sold under Japanese brands, its president Yasushi Akao said in an interview.

“It’s inevitable that our focus will shift more to overseas markets, where growth potential lies,” said Mr. Akao, previously president of Renesas Technology.

“Our resources have so far been a little too concentrated in Japan,” he said. “There are many independent design houses in China, and we need to tap those local resources” by seeking partnerships.

The merged company is the world’s biggest maker of microcontrollers, or chips used to control electronic operations in cars and consumer devices, with a 30% market share. In Japan it is the dominant player, with a 60% share.

But in China—where demand for lower prices is especially strong and Japanese chip makers struggle to offer products that meet local preferences—the share is less than 20%.

Meanwhile, a growing number of Japanese electronics makers are working with Taiwanese and other makers on an original design manufacturer, or ODM, basis. Mr. Akao says the company will approach the Taiwanese players to capture some of that market.

He said Renesas Electronics will try to raise its revenue earned overseas to more than 60% in the next five years, from about 50% now.

In the nearer term, Mr. Akao’s first task is to shape and define the new entity to ensure it is fully integrated. He will need to address the task of reorganizing overlapping operations to do that. “We have said we’ll streamline and consolidate, but it’s never as simple as it sounds,” he said.

For the first 100 days, the company will look closely at each specific operation and decide whether, how and when to consolidate it, he said. But the actual implementation of such plans will likely take at least two years in most areas, he said.

NEC Electronics, the chip-making unit of NEC Corp., and Renesas Technology, a joint venture owned by Hitachi Ltd. and Mitsubishi Electric Corp., had been working toward merging since April 2009.

NEC, Hitachi and Mitsubishi now have a combined shareholding in the merged company of 89.6%.

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