Renesas looks to automotive and smart society to drive recovery
A more global outlook is going to play a key part in the restructuring strategy which Renesas, the world's leading supplier of microcontroller chips, is planning after the company has posted two consecutive years of losses following massive supply disruptions in the wake of natural disasters in Japan and Thailand.
Renesas, a product of successive mergers of the chip divisions of major shareholders Mitsubishi Electric Corp , Hitachi Ltd and NEC Corp, said the job cuts would save the company 43 billion yen ($541.97 million) annually.
In return for the restructuring, the chipmaker is expected to secure 100 billion yen in loans and other forms of financial support from its major shareholders and four banks. Reports in Japan suggest that shareholders have already agreed in principle to provide 50 billion yen in assistance.
Last week EE Times Europe caught up with Robert Green, President and CEO of Renesas Electronics Europe to learn what the company is planning for its major markets in Europe as the company strives to return to profitability.
“Renesas has been changing in the past two years and is looking to be less dependent on the Japanese market. We are looking more globally now,” said Robert Green, President and CEO of Renesas Electronics Europe. “In Financial Year 11 we had the practicalities of earthquake recovery. We managed that and we are now back to normal in terms of shipping to the market but we still have to financially recover from that situation. So this is the task for FY12”.
Green continued: “The focus of the company has been changing in the past two years. We need to be moving in a more global direction and be less dependent on the Japanese market. We are also focusing on the automotive market and we are very much an automotive company. And in the non-automotive sector the focus is on the so-called smart society which covers the whole development of the connected society and the added intelligence being applied to the new smart infrastructure that we are now seeing more and more”.
“Looking back we registered a difficult financial report at the end of Financial Year 11,” explained Green. “We had an earthquake to deal with for one year which disrupted our business continuity but now we are back to aiming where our strategic intent is focused”.
“In the microcontroller business we have a strong position and we intend to keep this strong position and invest in this. We have new portfolios of products coming out on new processes and this remains a core focus”.
“The Analog & Power business, which includes mixed-signal/analog products and discrete power products, is also going to be an area of investment. It is an area where we are expanding our portfolio”.
Green admitted: “In the SoC business, which includes some ASICs, custom products and some ASSPs, there is some decision making going on that is focusing on what is thought to be core and what is thought to be non-core technologies. The tendency will be in the SoC area to focus on businesses relating to long life cycle markets such as communication infrastructure and industrial automation businesses. These are businesses that have life cycles alongside the automotive sector. We tend to support customers over long life cycles. We develop products and invest in products that tend to have long life cycles as compared with other businesses that are more consumer like and which have very short life cycles. We will generally tend to be de-focusing on consumer markets such as TV and digital still cameras. Where the markets are still changing and the markets are volatile”.
“This will mean a reduction in the development of some of the products for the Japanese market which tend to be more consumer-like. In terms of Europe this does not tend to have such a big effect because we are not a consumer-led semiconductor market in that sense. What this approach will mean is that we will be re-affirming our commitment to industrial markets in Europe”.
“The stable business of longer term life cycle business fits to the overall structure of our business as a whole,” continued Green. “We are still being stretched by industrial customers who are saying can you guarantee a product supply for 20 years instead of 10 years or so”.
Boosting design engineering in Europe
“In the automotive sector everything in the car is our focus. We are investing to support driver information systems, driver assistance systems as well as the multi-media side of applications,” explained Green.
“Generally speaking we have been increasing our design engineering activity in Europe since the start of the company. We are doing more work in Europe on automotive software and functional safety design and analog/mixed signal engineering and we are doing more work in Europe supporting the global products”.
“We work with the aim of intelligent business continuity and you will see it in some of the manufacturing for microcontrollers we are arranging. These days there is move to applying a dual fab or multi fab concept. We started this some time ago and the earthquake re-confirmed that we should do this. Ninety percent of our microcontrollers should be available from two sites. Not necessarily within the company but with the same processes. So it might be with a foundry and an internal fab but we have that availability for microcontrollers”.
“Currently about 80 percent of our MCUs can be made at two different manufacturing sites with the same processes. We are aiming at making that percentage more like 90 percent of the coverage which is what customers are looking for now in terms of business continuity and de-risk strategies. The recent earthquake experiences have spurred on this trend.”
Changing the production environment
“We are looking at changes in the production environment,” admitted Green. “There is a tendency to accelerate the move from some of the lower geometry wafer sizes to the bigger wafer sizes. That will mean some closures of old lines and there will be some transfer of some of our wafer lines to external parties overseas. The net result will be that we will increase our outsourcing to overseas foundries. There will be less production in Japan”.
“There will be an increase in outsourcing to overseas foundries and a decrease in manufacturing in Japan. We are trying to move the business to become more global with the aim of 60 percent of the business being outside Japan. The split is about 50/50 at the moment and we are looking to move it to 60/40 in favor of outside Japan”.
“We are moving to higher wafer sizes and miniaturization of the geometries,” continued Green. “We are utilizing outsourcing more. For example, TSMC is playing a big part in that. We are working with them as a partner on 40nm processes. We will continue some in-house production in specialized areas such as compound semiconductor technologies for instance which will remain in the company. On the back end there is an acceleration of shift to overseas outsourcing because this is relatively simple to do”.
“The leading edge wafer lines such as 8 inch and 12 inch lines will continue as they are and will continue to support production. There are three 150 mm lines where we will shrink the capacity of these factories to meet the appropriate demand. There are some other factories where we may reduce their capacity or may transfer them out of the company. Two have already been decided and are scheduled for closure”.
“I estimate that as a result of this process in terms of fabs probably 30 or 40 percent will be outsourced,” suggested Green. “Some of details have still not been finalised and are still in discussion”.
“We remain very attached to some of the leading processes in the company,” commented Green. “So whether we manufacture them in-house or outside we will stay attached to processes such as the embedded Flash which is very much under our ownership and we will invest in that as a first priority”.
“We are licensing TSMC to produce our 40 nm embedded Flash process. We are also licensing TSMC to be able to sub-license on to other semiconductor companies. That represents a new arrangement and we will continue investing in that. The next step 28 nm embedded Flash is the direction we will invest in. For sure we will develop 28 nm embedded Flash,” said Green emphatically.
“The back-end situation is seeing big changes,” said Green. “All these factories are inside the company in Japan. Some decisions are still to be made but the net result is that more manufacturing goes outside of Japan into the partner companies. In terms of diffusion we are working with TSMC and Global Foundries and we have tended to work with ASE on the assembly and test side”.
“We have been working with TSMC for at least ten years as a partner and with Global Foundries for some time now”.
“We are going to be manufacturing 40nm embedded Flash microcontrollers in our Naka fab and we are also going to be sourcing devices produced on the same process in TSMC. TSMC will also be allowed to license the embedded Flash part of the technology”.
“On our roadmap we will be aiming at 28 nm in the future,” remarked Green. “This is our core expertise which we will retain. We believe we are ahead of the market. We believe we are ahead of the game in terms of embedded Flash and we aim to keep it that way. We want to keep a firm grip on the microcontroller market and this is a way to do that. We have started development of 28 nm. We will be sampling the 40 nm in 2012. We aim to invest and aim to stay ahead”.
“We have a strong leadership position in microcontrollers with a No. 1 position and we are quite far ahead with regard to our competitors”.
“In our microcontroller market sector we have an automotive business and a general purpose industrial business. It is pretty well balanced between the two and with a 27 percent market share overall. We have a 42 percent share in the automotive business. And that reflects a strong share in Europe”.
“In terms of maintaining this ranking and strengthening the business that we have then 40nm is a big part of that strategy,” emphasised Green. "We have been working with the automotive companies and decisions are now being made these days for the new generations of automotive modules for 2014 onwards. In the past few weeks we have probably got commitments of over a billion Euros of business on 40nm microcontroller products from the market. We will be moving from 40nm to 28nm so we aim to keep that edge going forward”.
Green said: “We are also looking to build micro-isolator technologies, which have a number of advantages against the standard opto solution. One of them being that we can also add other circuits to the basic function so we can add more integration in general and offer improved space saving”.
“Our focus on smart society solutions sees several similarities with our automotive solutions,” Green pointed out. “A smart meter would typically use one or two microcontrollers depending on its complexity and there might be a DSP plus there probably would be some analog requirements as well. There would be some isolation and there would be some bus connectivity. We would aim to offer a complete solution and we would take a similar philosophy as that we would apply to the automotive market”.
“We see the smart society as meaning industrial automation, lighting, building automation and smart grid technologies”.
Focusing on Analog & Power
“The Analog & Power business was the result of the positive realizations of the synergies of merger where the capabilities of the two of the founder companies could strengthen the new company going forward,” explained Green.
“In general, the Analog & Power business looks like a set of power devices, including low voltage MOSFETs, high voltage MOSFETs, IGBTs, some GaN FETs, IPDs, general purpose discretes, optocouplers and various isolator circuits that aimed at the general market including the automotive market and even the EV market”.
“In the mixed-signal area it tends to be the ASIC or ASSP oriented products aimed at the automotive environment or power management arena such as smart battery systems or motor drivers”.
“In terms of Analog & Power we see this as a very big move forward for the company in terms of addressing the needs of the market place”.
“In the automotive area for Analog & Power we have a special focus on the powertrain,” suggested Green. “It is also focused on the chassis. It is focused on the safety area as well as the body and security. For microcontrollers in the automotive sector we focus on everything”.
“In the powertrain market in Europe the top three customers take a high percentage of the market and that leads to a type of ASIC orientation or custom orientation for mixed signal products for the powertrain,” said Green. “It is similar for the chassis arena, where top three tend to take a high market share and specify the requirements for that. As we change to the body environment then the top three have a smaller share and the number of customers is going up so there is more of an ASSP slant to the types of products”.
“We tend to target our custom products in this area. For the body sector we tend to look at standard products for this application”.
“We have a chip design center in Dusseldorf which is doing a number of designs for microcontrollers and SoCs. We are also doing analog, mixed-signal and ASSP or ASICs”.
Market share goals
“We are targeting about a 30 percent market share in the automotive area,” said Green. “We are quite aggressive as to where we want to be in that area. Our current market share is about 15 percent”.
“We are increasing our design resources in Japan and we are also increasing our design resources in Europe to support this drive. We are doing much more design work in Europe for some of these ASIC products in the new generation process at our Dusseldorf center. While in our Bourne End design center in the UK we are doing a lot of work on some of the functional safety requirements for automotive applications. This is all increasing right now”.
“In the non-automotive markets we are strengthening our market share in optocouplers in the general industrial market. We are introducing IGBTs and higher voltage power MOS in general for the industrial sector for motor control for example”.
Moving forward with confidence
“We are making agreements with the shareholders in terms of getting capital injection into the company and also with Japanese banks to also secure capital,” explained Green. “So going forward the figures have not been announced yet but we will be in a very positive financial position in order to take these steps forward in terms of some of the costs of this restructuring. We will be in a good enough position with regards the capital position for that. We can be confident that there will be plenty of capital injection that will cover the ongoing situation”.
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