Renesas Electronics Announces Growth Strategy to Enhance Corporate Value

  Renesas Electronics Announces Growth Strategy to Enhance Corporate Value

Business Wire

TOKYO -- December 10, 2012

Renesas Electronics Corporation (TSE: 6723, hereinafter “Renesas”), a premier
supplier of advanced semiconductor solutions, has been implementing a range of
measures to strengthen its earnings base and financial foundation, as outlined
in press releases issued on July 3, 2012 and September 28, 2012, respectively
titled “The Direction of Various Measures to Establish Robust and Profitable
Structure”, and “The Progress of Various Measures to Establish Robust and
Profitable Structure”.

In working to strengthen the company’s earnings base, since the merger on
April 1, 2010 Renesas has been pursuing integration synergies, and building on
its dominant number one position worldwide in the microcontroller (MCU) market
by optimizing our business portfolio and streamlining the manufacturing
structure among a range of other such measures. Steady implementation of these
measures has produced tangible results, including an approximate 20% reduction
in fixed costs in the last two years.

However, after considering the impact of the 2011 Great East Japan Earthquake,
along with the impact of global economic uncertainty, Renesas determined that
further measures were necessary to respond to dramatic changes in the global
economic circumstances and domestic operating environment. Accordingly,
following an announcement on July 3, 2012, Renesas has been implementing
additional business and structural measures, centered on an early retirement
incentive program and significant restructuring of domestic production sites.

The early retirement incentive program, as outlined in Renesas’ announcement
of October 16, 2012, received 7,446 applications, and all applicants retired
as of October 31. The restructuring of domestic production sites has been
proceeded as planned, including an agreement to transfer Renesas High
Components (Aomori Factory) to AOI ELECTRONICS CO., LTD. as announced on
October 12, 2012. Renesas intends to continue efforts to create a lean
organization and management structure, and under the current management
framework the company is planning to pursue further rationalization
initiatives to boost competitiveness, including further optimization of the
personnel structure.

In terms of strengthening the company’s financial foundation, on September 28,
2012 Renesas announced new financing totaling 97 billion yen from major
shareholders and main banks. Renesas also entered into an agreement for a
syndicated loan totaling 161.1 billion yen, arranged by the main banks, which
allows the company to convert short-term debt to long-term debt and secure
stable long-term funding. Through these initiatives Renesas has secured
sufficient funding for the foreseeable future to enable implementation of
ongoing structural reforms.

Today, as detailed in a press release titled “Renesas Electronics Announces
Share Issue through Third-Party Allotment, and Change in Major Shareholders,
Largest Shareholder who is Major Shareholder, Parent Company and Other Related
Companies”, Renesas announced a decision to issue 150 billion yen in shares
through third-party allotment to The Innovation Network Corporation of Japan
(hereinafter “INCJ”), Toyota Motor Corporation, Nissan Motor Co., Ltd., Keihin
Corporation, Denso Corporation, Canon Inc., Nikon Corporation, Panasonic
Corporation and Yaskawa Electric Corporation, with the aim of establishing a
financial foundation resistant to rapid changes in the global economy and
domestic business environment and investing in core business areas for growth
to enable a recovery in performance. Details of the third-party allotment are
available in the aforementioned press release.

In the emerging Smart Society brought about by the increasing pace of network
connectivity in electronic equipment and social infrastructure, control
systems that embed MCUs and IT equipment using SoCs are rapidly converging.
Therefore, the new market for control systems based on MCUs is expected to
expand. As this transition progresses simultaneously in advanced and
developing countries, an extremely large new market will be created for the
semiconductor industry to exploit. By strengthening its earnings base and
financial foundation, Renesas aims to respond to these changes in the market
and construct high value-added MCU-based kit solutions for customers with
further strengthened Analog and Power semiconductors, which are essential to
the kit solutions, while improving its competitiveness in SoCs. Renesas will
realize growth in this new market by supplying platforms that combines these
kit solutions with software including IPs and OS commonly used for each
application, contributing to shorter development periods, increased cost
competitiveness and productivity for customers.

Renesas plans to use funds raised from this capital increase by third-party
allotment to realize its goal of growth in the Smart Society through
investment in the five areas outlined in the table below. Based on this,
Renesas seeks to ensure sales growth in these strengthened areas, and achieve
stable profits, while increasing corporate and shareholder value.

[Specific Use of Funds Raised through Third-Party Allotment]
                                               Amount           Planned outlay
      Specific Use                         (millions of   period
        Investment related to leading-edge
(i)    process development of MCUs and      40,000         June 2013 to
        standardization of development                          March 2017
        Capex related to production                             June 2013 to
(ii)                                        20,000         March 2017
        (sample and mass production)
(iii)  Investment in automotive             40,000         June 2013 to
        semiconductor solutions                                 March 2018
(iv)   Investment in industrial             40,000         June 2013 to
        semiconductor solutions                                 March 2017
(v)    Development investment for           10,000         June 2013 to
        rebuilding the management base                          March 2016

(1) Strengthen core competencies

To strengthen the company’s core competencies, Renesas must first invest in
the development of the latest 28nm MCU process technology and in the
standardization of development basis as stated in (i) above, taking steps to
maintain our dominant leadership of the global MCU market. Regarding capex
related to production (sample and mass production) as stated in (ii) above,
capex will be pursued to increase the profitability of existing processes
currently in mass production and to improve competitiveness of the latest
processes currently under development. Along with these investments, Renesas
will also invest for applying finer process nodes and larger wafers to analog
products, thereby improving product competitiveness.

(2) Strengthen semiconductor solution provision capabilities

In relation to investment (iii) and (iv) above, namely, investment in
automotive and industrial semiconductor solutions, Renesas will strengthen its
Analog & Power semiconductor technological capabilities, which are
indispensable to kit solution proposals for customers, centered on our
existing dominant leading market share in MCUs, as well as to pursue M&A and
collaborations in Analog & Power semiconductors to enhance the product line
up. In addition, as a means of increasing the ability to provide compelling
solutions, Renesas will investigate M&A and collaboration with the makers of
embedded operating systems and with IP vendors, and will also consider M&A
with independent design houses in emerging economies.

Renesas will also pursue business expansion in semiconductor markets with high
growth potential, including HEV and EV and various vehicular information
systems in the automotive sector, smart-grid technology in the industrial
sector, and also in the area of new electronic controls equipment that is
being driven by the progress of network connectivity of electronic equipment
and social infrastructure in the emerging Smart Society, as noted above.

(3) Increase resistance to rapid market changes

In relation to investment (v) above, namely, development investment for
rebuilding the management base, one of the aims is to improve the business
evaluation system to speed up decision-making in response to sudden market
changes. Another is to improve resistance to seismic activity for
manufacturing equipment, establishing multi-fab production for creating a more
robust business continuity plan (BCP) to ensure the stable supply of products
to customers.

Through this growth investment, which is necessary to survive and prosper amid
tough global competition, Renesas will strive to enhance core competencies
that differentiate its business from competitors and achieve a rapid
improvement in profitability. In the mid-and-long term, Renesas aspires to
develop its platform business, strengthen semiconductor solution provision
capabilities and optimize customers’ systems, thereby contributing to sales
growth in core areas, higher profitability, and improved corporate and
shareholder value in the future.

About Renesas Electronics Corporation

Renesas Electronics Corporation (TSE: 6723), the world’s number one supplier
of microcontrollers, is a premier supplier of advanced semiconductor solutions
including microcontrollers, SoC solutions and a broad-range of analog and
power devices. Business operations began as Renesas Electronics in April 2010
through the integration of NEC Electronics Corporation (TSE:6723) and Renesas
Technology Corp., with operations spanning research, development, design and
manufacturing for a wide range of applications. Headquartered in Japan,
Renesas Electronics has subsidiaries in 20 countries worldwide. More
information can be found at


Media Contacts:
Renesas Electronics Corporation
Ai Kanehira, + 81-3-6756-5555
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