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Honda, Nissan and Toyota among the companies that will rescue Renesas

A 200 billion yen ($2.55 billion) deal is being cooked up to buy Renesas Electronics Corp., the world's fifth-largest chipmaker, according to a report from the Nikkei business daily. It said that a Japan government fund is likely to team up with around 10 companies. The report revealed further that Innovation Network Corp., which is funded by taxpayers, intends to invest 150 billion yen to buy two-thirds of Renesas' shares on a voting rights basis.

The report also stated that a consortium of Japanese firms, which include Canon Inc., Denso Corp., Honda Motor Co., Nikon Corp., Nissan Motor Co., Panasonic Corp., Toyota Motor Corp. and Yaskawa Electric Corp., is believed to make an investment of a total of almost 50 billion yen.

The Nikkei added that German industrial group Robert Bosch GmbH may also invest in Renesas. None of these companies have released official statements about this matter. According to a Renesas spokesman, no decision has been made yet.

Read the entire article Honda, Nissan and Toyota among the companies that will rescue Renesas

Major Japanese companies team up to save Renesas

Toyota Motor Corp. is leading a consortium of Japanese companies in order to rescue Renesas Electronics to oppose a bid for the chipmaker by the U.S.-based private equity firm KKR, according to the Nikkei business daily last Saturday. This group of automakers have the support of a state-run fund.

The Nikkei said that the group aims to invest 100 billion yen ($1.3 billion) in Renesas to obtain a majority stake in the company before the end of the year.

The publication didn’t cite a source. The Nikkei also announced that the group included the government's Innovation Network Corp., Panasonic Corp., Nissan Motor Co., Honda Motor Co., Canon Inc., Fanuc Corp. and auto parts makers Denso Corp. and Keihin Corp.

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Renesas expects a record annual net loss of $1.9 billion

Citing plummeting prices and aggressive overseas competitors, Renesas Electronics predicted that it will post a record annual net loss of 150 billion yen ($1.9 billion). Renesas, the Japan-based manufacturer of microcontroller chips, said that its market share has narrowed considerably in the past few years as the strengthening yen pulls down the overseas profits as competition from companies like Samsung Electronics leads to fewer orders. Renesas is on course to report losses for the third consecutive year. It hopes to avoid bankruptcy by reducing its work force and selling off plants. Last February, Japanese chipmaker Elpida Memory Inc., had filed for bankruptcy protection.

For the quarter from April to June, Renesas reported an operating loss of 17.6 billion yen, which is slightly better than the 19.1 billion-yen loss posted a year ago after it had closed plants after the natural disaster that occurred in Japan last year. Renesas said that it would get back to being profitable on an operating level, predicting a profit of 21 billion yen for the year that ends in March 2013. However, restructuring costs and other losses would result to a net loss that would more than double the 62.6 billion-yen net loss in the prior year. When interviewed at a media briefing after the results were announced, Renesas President Yasushi Akao said that semiconductor sales are expected to improve in the later part of the year.

The company is also likely to post a profit in the full-year to March. However, restructuring costs and special losses will result to a 150 billion-yen net loss. Renesas said that its prediction for a full-year operating profit, which was well ahead of market forecasts for a 28.3 billion-yen operating loss, was made because of a forecasted increase in microcontroller chip sales in the second half of the year. It also anticipated a bump in system-on-chip sales from the second quarter, particularly for chips used in game consoles. Renesas said that semiconductor sales for the year to March are predicted to reach 810 billion yen.

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Renesas wants to widen its market share by partnering with Taiwan Semiconductor

Renesas Electronics Corp. is confident that by partnering with Taiwan Semiconductor Manufacturing Co., it will be able to widen its market share as well as its operating margin. Based in Kawasaki, Japan, Renesas is considered the No. 1 producer of microcontrollers used in cars throughout the world. It supplies to companies like Toyota Motor Corp. Shinichi Iwamoto, a senior vice president who heads the unit, seeks to increase its share of the microcontroller market from 27% last year to 35% in five years. The company hopes to reach customers in emerging markets. Iwamoto said that the alliance with TSMC would contribute in cutting fixed costs and raising the profit margin.

He said that the alliance with TSMC could also play a role in increasing the ratio of products made by other countries for it from 15% last fiscal year to around 30% in 2016. TSMC, the biggest custom chipmaker in the world, will begin to ship 40- nanometer chips to Renesas for the devices that will be used in cars. These include those used to trigger airbags. He said that TSMC’s production capacity is flexible and so this will widen its business.

He also said that both companies will think about creating smaller 28-nanometer chips that offer higher energy efficiency. Last May 25, an insider said that Renesas is planning to raise capital amounting to 100 billion yen ($1.3 billion). It also seeks to cut a minimum of 1,000 jobs. Since Renesas was founded in 2010, it has yet to post a profit. These job reductions account for nearly 25% of its workforce, which currently has 42,800 members. TSMC spokeswoman Elizabeth Sun said that the company forecasts that it will likely get more orders from Renesas in the future due to its partnership on 40 nanometer and beyond.

Read the entire article Renesas wants to widen its market share by partnering with Taiwan Semiconductor

Renesas Electronics Corp. is still the world's largest producer of automotive semiconductors despite losing its biggest plant following the earthquake that occurred in Japan in March 2011. According to industry rankings published by Strategy Analytics Ltd., Renesas accounted for 13.8 percent of the semiconductor industry's automotive sales of $23 billion in 2011. Right behind Renesas were Infineon Technologies AG, STMicroelectronics N.V., Freescale Semiconductor Inc., and NXP Semiconductors. STMicroelectronics overtook Freescale as the world’s No. 3 chipmaker.  Renesas, meanwhile, managed to increase its automotive revenues by 10 percent to $3.2 billion, despite the loss of its Naka chip plant in Japan, according to Chris Webber, vice president of Strategy Analytics' automotive practice.

Webber said that global sales of automotive semiconductors soared 11 percent in 2011, and gave predictions of a 10 to 12 percent increase this year.

However, some roadblocks are on the way. One of them is the current debt crisis in Europe as well as the economic slowdown in China, both of which could result to lower global auto sales. Another roadblock is that Renesas posted JPY63 billion in the fiscal year ended March 31, 2012.

Read the entire article Loss of its biggest factory will force Renesas to restructure

Renesas Electronics Corp. is planning to implement a JPY50 billion ($630 million) capital increase as well as 6,000 job cuts in order to recover from the effects of the destruction brought by the earthquake and tsunami disasters that shook Japan in March 2011, Yomiuri Shimbun reported. Renesas is also reeling from the global oversupply of memory chips that brought prices down as well as from stiff competition and the strong yen.

The 6,000 job cuts represent around 15 percent of Renesas’ total workforce. A source told Reuters that Renesas was considering several plans, including a capital increase, but said discussions were still in early phases. Investors seemed to welcome Renesas’ job cut plans as company shares soared as high as 11 percent. 

Renesas, however, declined to comment on the local report. Japanese chipmakers used to account for 27 percent of global semiconductor revenue, and that was in 2003. Eight years later, amidst dropping prices and stiff competition from South Korean companies, Japanese chipmakers only accounted for 19 percent of the global semiconductor revenue in 2011, according to research firm IHS iSuppli.

Read the entire article Renesas Electronics to cut 6,000 jobs and raise JPY50 billion capital, says report