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Analysis: Winners and losers in Renesas-NEC merger

Posted: 29 Apr 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Renesas NEC merger? microcontroller? Japan chipmaker?

Japan's Renesas Technology Corp. and NEC Electronics Inc. have announced they will merge in a blockbuster deal.

The two companies provided few details about the merger, but many analysts believe that this deal makes little sense. There are too many overlapping products and the integration issues will be a nightmare.

If the Renesas-NEC merger goes through, here are the winners and losers in my opinion:

Winners
1. Microcontroller rivals to Renesas and NEC. The proposed merger of Renesas and NEC will create a lot of confusion in the MCU market. Both companies have MCUs, which are overlapping. Renesas just rolled out the RX, a MCU line that is supposed to unify its already confusing MCU lineup.

Customers will worry about the fates of the various lines from Renesas and NEC. The beneficiaries: MCU rivals Atmel, Cypress, Freescale, Microchip and Texas Instruments, among others.

2. Renesas' management. I suspect the combined Renesas-NEC company will be led by Renesas' management. Renesas has a bigger share of the MCU space, which is critical for the future of the company. MCUs are a good business.

3. Renesas' products. I believe Renesas' products will survive in the long run. NEC's products? It's less clear. Not sure what will happen to NEC's MCUs, mobile devices and ASICs.

4. NEC Corp. For years, parent company NEC has been looking for ways to jettison its loss-ridden semiconductor unit. In 2002, it spun-out the unit. Now, it can wash its hands clean by getting rid of the poor performing group.

5. IBM's "fab club." Renesas' partner in process technology is Panasonic. The companies recently announced a 32nm process. NEC Electronics recently joined IBM's "fab club." NEC and Toshiba Corp. are also co-developing processes.

There is no way that the combined Renesas-NEC Electronics company can pursue both strategies. Over time, I expect the combined company to scrap the Panasonic alliance and go with IBM's "fab club." IBM's group has more resources and R&D might. In all, NEC is the winner here.

Losers
1. Customers. No telling what will happen to the products from NEC and Renesas. There are too many overlapping products. Many will get phased out. A mess in the making.

2. Employees from NEC and Renesas. Look out for a staggering amount of layoffs in the future. The integration issues for the combined entity will be enormous.

3. NEC management. I believe Renesas' management will ultimately run the combined company.

4. Emma. Emma is NEC's device for mobiles. I'm speculating that NEC's product for handsets and handhelds could get dumped. Renesas also sells a similar chip line, which is use by handset makers for NTT's mobile network.

5. Fab tool suppliers. The combined Renesas-NEC company means one less chipmaker to sell tools. Who will take the hit? Applied Materials, ASML, Canon, Nikon, Novellus, TEL and others. Just about everyone.

- Mark LaPedus
EE Times





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