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Renesas details restructuring plans

Posted: 04 Feb 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Renesas restructure? fab shutdown? job cut?

Hit hard by the downturn, Japan chipmaker Renesas Technology Corp. has replaced its top executive amid losses, layoffs and plans to shutter older fabs.

Amid a projected $2.294 billion loss and slumping sales for the year, Satoru Ito, Renesas' chairman and CEO since 2006, will retire from his position and will become chairman emeritus. Katsuhiro Tsukamoto, currently president and COO, will be appointed chairman and board director. Yasushi Akao, will take up the post of president, while continuing as board director.

The company is also reducing temporary workers at production sites by 2,500 employees, as well as cutting the number of contractors. In contrast to the current early retirement system, Renesas is implementing a "limited-time special retirement program" with an added bonus for fiscal 2008.

As part of the plan, Renesas will focus more on microcontrollers and other products. Beginning in fiscal 2009, the company will shift an undisclosed number of employees to strengthen the MCU business, including reassignment of personnel from sectors of system solutions business, production units and other areas, to design and engineering for the MCU business.

Closing down fabs
It will also shutter older production lines. By downsizing the production capacity of the 5- and 6-inch front-end process lines, as well as moving to larger wafers, Renesas aims to increase efficiency in manufacturing.

Renesas plans the following moves:

? The Kofu Site is the company's main production base for standard products such as diodes and transistors. The 5-inch lines at Kofu are being closed down and their production will be consolidated into the 6-inch lines by the end of fiscal 2009. Additionally, the 8-inch lines will be expanded.
? The Takasaki Site is a main production base for standard products such as transistors and linear devices. Its 5-inch lines will be consolidated into the 6-inch lines by the end of fiscal 2010. In addition, the products manufactured on the 6-inch lines are gradually being transferred to 8-inch lines at other sites.
? At the Kochi Site, a main manufacturing center for MCUs and mixed signal devices using 6-inch lines, the operations of the second floor are being consolidated into the first floor production lines in order to boost production efficiency. This transition is expected to be completed by the end of fiscal 2009.
? The Tsugaru Factory, a base of a manufacturing subsidiary of Renesas, produces MCUs using 6-inch lines. Part of the lines at the factory will be halted in FY2009, in order to increase efficiency.
? The Gunma Factory produces standard products such as diodes and linear devices as a manufacturing subsidiary of Renesas Technology. The company will re-evaluate the use of its production lines for improving efficiency.

In the current harsh business climate, the company's business results for fiscal 2008 (ending March 31, 2009) are expected to reflect a substantial reduction in net sales and incomes. Current forecasts are 680 billion yen ($7.576 billion) in net sales for fiscal 2008, down 72 percent from the previous fiscal year.

It is expected to post an operating loss of 110.0 billion yen ($1.2 billion) for the year, down 153.6 billion yen ($1.7 billion) from the previous fiscal year. It is expected to report a net loss of 206.0 billion yen ($2.294 billion) in net income, down 205.5 billion yen ($2.28 billion) from the previous fiscal year.

Who's taking over?
In October, Japan's Renesas said that it plans to boost its international business and expand its MCU share, but shaky economic conditions could delay its lofty goals.

Renesas also vowed that it would continue to keep its integrated device manufacturing (IDM) strategy intact, especially at a time when many of its rivals are moving towards a fab-lite or fabless model. And the company is racing to develop next-generation chips based on 32nm technology.

On the business front, like all chipmakers, Renesas faced the possible impact of the current economic crisis and IC slowdown. The largest supplier of MCUs sells its products into the slumping automotive, consumer, industrial and related sectors. It also makes analog products, SoC devices, wireless ICs and others.

The current economic crisis in the United States and elsewhere could have a "severe effect" on the semiconductor industry, warned Tsukamoto in October. "Consumer demand will drop," Tsukamoto told EE Times at that time. Worldwide capital spending "will slow down."

Meanwhile, Tsukamoto will now lead the charge at Renesas. Until now, the company has operated under a management team headed by a chairman and CEO and a president and COO. For clarity, the titles of these posts will be changed to chairman and president, respectively, according to Renesas.

"The president will have responsibility for decision-making and business operations, while the Chairman will participate in decision-making from a broader perspective, as well as assisting the president in the implementation of business operations," according to the firm.

The following directors will resign on March 31, 2009: Satoru Ito, chairman and CEO, board director. Scheduled to be appointed chairman emeritus on April 1; Shigeo Uoya, executive VP, board director Scheduled to be appointed corporate advisor on April 1; Shiro Baba, senior VP, board director. Scheduled to move to Hitachi Ltd on April 1; and Atsushi Asari, board director.

MCU market woes
Other MCU players are also suffering. U.S.-based rival Freescale Semiconductor Inc. this week posted a massive loss in Q4.

Another rival, Microchip Technology Inc., this week said sales for Q3 of fiscal 2009 were $192.2 million, down 28.8 percent sequentially from net sales of $269.7 million in the immediately preceding quarter, and down 23.9 percent from net sales of $252.6 million in the prior year's third quarter.

GAAP earnings per diluted share for the third quarter of fiscal 2009 were 40 cents, down 2.3 percent from GAAP earnings per diluted share of 41 cents in the immediately preceding quarter, and up 4.9 percent from GAAP earnings per diluted share of 38 cents in the prior year's third quarter.

"General economic and semiconductor industry conditions continued to decline during the December quarter," said Steve Sanghi, Microchip's president and CEO, in a statement.

"We are continuing actions to reduce production levels in our wafer fabrication facilities in the U.S. and our assembly and test facility in Thailand to moderate inventory growth. We are lowering our production levels by about 40 percent in the March quarter from peak levels in the September 2008 quarter," he said. "We are charging the underutilization to cost of goods sold to reflect lower than normal production levels. We are also implementing various other actions to further reduce operating expenses."

In light of the highly uncertain global economic conditions and limited visibility, Microchip is not providing revenue guidance at this time. However, for its internal activities, we are planning revenue for the quarter ending March 31, 2009 to be approximately $173 million.

The internal plan for earnings per diluted share for the quarter ending March 31, 2009 is approximately 9 to 11 cents on a GAAP basis.

The plan for capital expenditures for the quarter ending March 31, 2009 is approximately $15 million, predominantly consisting of previously committed capital to complete the building expansion in our Thailand factory. Capital expenditures for fiscal year 2009 are expected to be approximately $106 million. The current internal plan for capital for all of fiscal year 2010 is approximately $15 million.

- Mark LaPedus
EE Times

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