Renesas to Boost Microcontroller Share With TSMC Alliance

Renesas Electronics Corp. (6723), the world’s largest maker of microcontrollers for cars, said its alliance with Taiwan Semiconductor Manufacturing Co. (2330) will help boost market share and operating margin.

The Japanese supplier to companies including Toyota (7203) Motor Corp. aims to raise its microcontroller market share to 35 percent in five years from 27 percent last year and will target emerging-market countries, said Shinichi Iwamoto, a senior vice president heading the microcontroller unit. The chipmaking and development alliance with TSMC, extended last month, will help reduce fixed costs and widen profit margin, Iwamoto said in an interview in Tokyo yesterday.

The partnership may also help double the ratio of products other companies make for Renesas to about 30 percent in 2016 from 15 percent last fiscal year, Iwamoto said. TSMC, the world’s largest custom chipmaker, will provide 40-nanometer chips to Renesas for its single-chip microcontrollers used for devices including airbags and brake systems, the two companies said May 28.

“TSMC has flexible production capacity and technology, which will broaden our business,” Iwamoto said. The two companies will also consider cooperating in developing smaller and more energy-efficient 28-nanometer chips, he said.

Renesas gained 1.3 percent to 324 yen at the close of Tokyo trading, after jumping as much as 4.4 percent. TSMC added 1.4 percent to NT$81.6 in Taipei trading.

Capital Plan

Renesas, which hasn’t posted a profit since it was founded in 2010, was said to be planning to raise capital of 100 billion yen ($1.3 billion) and eliminate at least 10,000 jobs, a person briefed on the matter said May 25. The job cuts would amount to almost a quarter of the Kawasaki, Japan-based company’s workforce of 42,800 people.

“We expect to get more orders from Renesas in the future because of our collaboration on 40-nanometer and beyond,” Elizabeth Sun, spokeswoman for Hsinchu, Taiwan-based TSMC said.

Falling orders for its system chips from consumer electronics makers had worsened Renesas’s situation, Iwamoto said, without naming any company involved. The semiconductor maker’s customers include Sharp Corp., Sony Corp. (6758) and Panasonic Corp. (6752), which posted a combined 1.6 trillion yen in losses last fiscal year because of slumping demand for their televisions.

Renesas’s microcontroller business has operating profit margin of at least 10 percent, said Ryuji Omura, the unit’s general manager.

About 60 percent to 70 percent of chips used by Toyota and Nissan Motor Co. (7201) are made by Renesas, according to Kunihiko Onuma, head of Hitachi Ltd. (6501)’s automotive systems unit. Hitachi owns 30.6 percent of Renesas, according to data compiled by Bloomberg.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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