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Renesas outlines product, cost-cutting strategies

Posted: 02 Jul 2004 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? rf-multipurpose chips? memory devices? risc processor?

Fifteen months after its formation, Japan's Renesas Technology Corp. has put the finishing touches on a corporate reorganization to sustain its future growth and prepare for the next semiconductor cycle.

Tokyo-based Renesas, the joint chip venture between Hitachi Ltd and Mitsubishi Electric Corp., has recently reorganized its product operations into three groups, expanded its 300mm fab manufacturing unit and implemented a new cost-cutting program.

The moves - aimed to make the company a more nimble and flexible supplier of chips - include a major reorganization within the chip giant. Renesas was the world's No. 3 IC maker in terms of sales in 2003, behind only Intel Corp. and Samsung Electronics Co. Ltd, according to iSuppli Corp.

Previously, Renesas had three "product-oriented" business units, which separately sold its ASIC-SoC-controller lines, RF-multipurpose chips and memory devices. Under the new plan, the company has revamped its organization and launched three new groups: System Solution, Standard Products and Memory.

The new organization is designed to move the company from a product to a solutions-oriented supplier of semiconductors, said Daniel Mahoney, president and CEO of Renesas' U.S. subsidiary, Renesas Technology America Inc.

In addition, Renesas continues to cut costs, following the merger. When Renesas was hatched last year, the joint chip venture appeared to have too much overhead and fab and assembly capacity, according to analysts.

Renesas recently closed a fab in Germany and downsized its RISC processor venture with STMicroelectronics Inc. SuperH Inc., the joint venture formed by Hitachi and ST to develop the SH series of RISC processors, has ceased licensing activity and its engineers been folded back into Renesas and ST, according to a recent report in the Silicon Insider newsletter (see June 14 story).

However, in a recent interview at the company's U.S. headquarters, Mahoney denied that SuperH Inc. has been shut down. SuperH Inc. still exists, but the operation has been "resized to reflect market conditions," he said.

Renesas has taken other steps to cut costs, including a plan to reduce some ?30 billion ($277.2 million) within its overall operations by fiscal 2005. Called the "BEP100 project," the plan calls for the company to lower its material, outsourcing, logistics, labor and related costs.

In total, the company hopes to reduce its quarterly sales break-even point to ?100 billion ($923.9 million) by fiscal 2005. Renesas projects sales growth in fiscal 2004, but "we're re-engineering the company," he said. "We want to reduce costs, but we're not cutting capex. We are investing in capital."

It is also preparing for the next semiconductor cycle, a possible slowdown in 2005 or 2006. At present, the company sees strong demand for its flagship microcontroller, flash memory and other product lines, although a potential slowdown is looming on the horizon, he said.

"We're half way through the year and it's looking relatively strong," he said. "But there could be a dip in '05 and '06."

In fiscal 2003, which ended March 31, Renesas reported net income of $79.4 million on sales of $7.971 billion. In fiscal year 2004, Renesas projects sales of $10.1 billion.

Its capital spending is expected to hit $831.4 million in fiscal 2004, down from $1.1 billion in fiscal 2003. However, the company is not scaling back manufacturing.

In a move to keep up with current and future chip demand, Renesas plans to expand its 300mm fab capacity over the next year. The company has also moved into 90nm pilot production within its 300mm fab unit in Japan, dubbed Trecenti Technologies Inc. It is also accelerating its 65nm process development, with plans to move the technology into volume production by 2006.

- Mark LaPedus

Silicon Strategies

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