Renesas to Reduce 5,000 Jobs as Losses Force Restructuring
Renesas Electronics Corp. (6723), the Japanese chipmaker that’s been unprofitable each year since it was set up in 2010, will eliminate more than 5,000 jobs, or 12 percent of its workforce, as it seeks to trim losses.
The job cuts will be achieved through offering incentives and early retirements and could save the company 43 billion yen ($539 million) annually, Renesas said in a statement today. The Kawasaki, Japan-based chipmaker may also close or sell as many as 10 of its 18 domestic plants in three years.
Renesas shares jumped the most in more than two weeks in Tokyo before the announcement on speculation the job cuts may help trim losses exacerbated by falling TV demand and chip prices. Japan’s chipmakers have struggled as South Korea’s Samsung Electronics Co. extended its dominance, with Micron Technology Inc. of the U.S. agreeing to buy bankrupt Elpida Memory Inc. yesterday.
“We can’t see the whole picture regarding revival yet,” Takeo Miyamoto, an analyst at Deutsche Bank AG, said by phone. “The impact of the proposals will change depending on how long the company plans to keep implementing the proposals.”
The company, which had 42,800 workers as of the end of March, will give the buyout offer to workers from Sept. 18 to Sept. 26 and those who accept will leave by Oct. 31, according to the statement.
Renesas planned to cut as many as 14,000 jobs as part of the restructuring, the Nikkei reported last month. In 2010 as well, Renesas had said it was cutting 5,000 workers.
Shares of Renesas jumped 9.8 percent, the biggest gain since June 14, to 348 yen on the Tokyo Stock Exchange before the announcement. The stock has dropped 26 percent this year.
“The management’s responsibility is to pick a way for survival, even if that involves pain or sacrifice,” Renesas President Yasushi Akao told reporters in Tokyo today. “We needed to take more drastic measures on our cost structure as our top line is more unstable than before, in addition to the opportunity losses from the earthquake last year.”
The manufacturer, 91 percent owned by NEC Corp. (6701), Hitachi Ltd. (6501) and Mitsubishi Electric Corp. combined, posted a net loss of 62.6 billion yen in the year ended March 31. Falling demand for TVs and a drop in prices for chips used in computers have eroded profit at Renesas’s unit making System LSI chips, used for functions ranging from processing images for TV screens to crunching data.
Sony, Sharp Corp. (6753) and Panasonic Corp., Japan’s three biggest television makers, posted a combined 1.6 trillion yen loss last fiscal year as TV prices declined. Declining prices for DRAM chips, the main memory used in PCs, led Japanese chipmaker Elpida to file for bankruptcy in February.
Renesas is counting on increased demand for microcontrollers in emerging markets, inverters and autos to help it turn profitable. Demand from automakers including Toyota Motor Corp. is recovering after last year’s earthquake and tsunami in Japan disrupted car output, Renesas said in May.
The chipmaker has reached a “basic agreement” with its three major shareholders and is holding negotiations on details of assistance with them and banks, Akao said June 26. He declined to comment further on shareholder support today.
As part of restructuring, Renesas sold its high-power amplifier business to Murata Manufacturing Co. in March and disposed a plant in northern Japan to Fuji Electric Co. July 1.
Renesas got 43 percent of its semiconductor sales of 786 billion yen from microcontroller chips last fiscal year, while system chips accounted for 26 percent, according to the company. Domestic auto manufacturers rely on Renesas for 60 percent to 70 percent of chips used in their cars, Kunihiko Onuma, head of Hitachi’s automotive systems unit, said June 14.
Renesas was formed through the merger of money-losing chipmakers Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric (6503), and NEC Electronics Corp.
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