Will Japan sell Renesas to foreign companies?

Several investors, including China's Tsinghua Unigroup and Germany's Infineon Technologies, are expressing interest in buying Renesas Electronics, which used to be Japan's most troubled chipmaker.

Tsinghua's ambitions in the memory chip business are well known. It is reportedly targeting an investment in Renesas as a vehicle for China to gain a foothold in the logic business—especially in the automotive and MCU segments.

Recently, it was revealed in a Reuters report that the Chinese conglomerate will invest $47 billion over the next five years to become the world's third-largest chipmaker.

Infineon is said to regard Renesas as an ideal fit, based on the Japanese chip vendor's strength in infotainment, head unit and digital cockpit technologies and other areas of automotive electronics where Infineon lags. It's also important that Renesas has a strong position both among Japanese and European automakers. Renesas, for instance, is the only Japanese chip vendor among Audi's strategic R&D partners. Other members belong to the Audi's group are STMicroelectronics and Infineon.

Of course, no company contemplating investment in Renesas is making any public comments yet. But speculation has been rampant among industry sources in Japan in recent weeks.

Renesas financial results FY2014, FY2015 (Source: Renesas)

Fuelling the speculation are several factors.

First, Renesas is profitable again. In the recent full financial year that ended March 31, 2015, Renesas generated a net income of about $671 million (82.4 billion yen), ending its losing streak.

Second, behind the current flurry of activity is the Innovation Network Corp. of Japan (INCJ), a government-backed turnaround fund planning to draw down its investment. A "lockout" period during which the INCJ could not sell its Renesas shares ended Sept. 30.

Nikkei, Japan's economic newspaper, reported last week that INCJ which owns close to 70 per cent of Renesas wants to lower its stake to less than 50 per cent.

Renesas automotive chip business (Sales: Billion yen) (Source: Renesas)

Third, Renesas continues to maintain a strong presence in the automotive semiconductor market, especially through its ties to Japanese automakers. Its automotive business increased both year over year and quarter over quarter, supported by a sales rebound in the first quarter of this year.

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