Renesas to reinforce business structure

TOKYO, JAPAN: Renesas Technology Corp. has announced a variety of structural reforms that will be undertaken to reinforce its business structure as part of the company’s key strategy in achieving growth from FY2009 onward.

In the current harsh business climate, the company’s business results for FY2008 (ending March 31, 2009) are expected to reflect a substantial reduction in net sales and incomes. Current forecasts are ¥680 billion in net sales (down 28 percent, or ¥270.5 billion, from the previous fiscal year), a loss of ¥110.0 billion in operating income (down ¥153.6 billion from the previous fiscal year), a loss of ¥133.0 billion in pre-tax income (down ¥161.2 billion from the previous fiscal year), and a loss of ¥206.0 billion in net income (down ¥215.5 billion from the previous fiscal year).

As the unfavorable business climate is expected to continue after FY2009, Renesas is implementing structural improvements to enable profitability under such severe situations. At the same time, the business structure will be improved and strengthened so that it can withstand weakening market conditions and major changes in the economy.

Broken down by individual business segments, the MCU business will be positioned as the company’s core competence, and the system solutions business will focus on fields which compliment the strategy of the MCU business. In the standard products business, which is centered around products such as power MOSFETs and analog devices, the focus will be on the three applications, including power supplies for PCs/servers, imaging display equipment, and automotive.

The specific measures to be taken are described below.

Strengthening MCU business as a core competence

In order to sustain the undisputed No. 1 MCU position and lead the global market, Renesas Technology will consolidate product families and concentrate development resources, while boosting its expertise in elemental technologies and strengthening the power of its brand. In the system solutions business, the company will accelerate the development of cutting-edge technology in the fields where it is most competitive through advanced platform design techniques. At the same time, the company will aim to achieve synergy effects with the MCU business.

Reform of manufacturing structure

By downsizing the production capacity of the 5- and 6-inch front-end process lines, as well as moving to larger wafers, Renesas aims to increase efficiency in manufacturing. The production lines listed below will be affected by these adjustments:

(1) Front-end process facility: Kofu Site (Kai, Yamanashi Prefecture)

The Kofu Site is Renesas Technology’s main production base for standard products such as diodes and transistors. The 5-inch lines at Kofu are being closed down and their production will be consolidated into the 6-inch lines by the end of FY2009. Additionally, the 8-inch lines will be expanded.

(2) Front-end process facility: Takasaki Site (Takasaki, Gunma Prefecture)

The Takasaki Site is a main production base for standard products such as transistors and linear devices. Its 5-inch lines will be consolidated into the 6-inch lines. In addition, the products manufactured on the 6-inch lines are gradually being transferred to 8-inch lines at other sites.

(3) Front-end process facility: Kochi Site (Konan, Kochi Prefecture)

At the Kochi Site, a main manufacturing center for MCUs and mixed signal devices using 6-inch lines, the operations of the second floor are being consolidated into the first floor production lines in order to boost production efficiency. This transition is expected to be completed by the end of FY2009.

(4) Front-end process facility: Renesas Northern Japan Semiconductor, Tsugaru Factory (Goshogawara, Aomori Prefecture)

The Tsugaru Factory, a base of a manufacturing subsidiary of Renesas, produces MCUs using 6-inch lines. Part of the lines at the factory will be halted in FY2009, in order to increase efficiency.

(5) Back-end process facility: Renesas Eastern Japan Semiconductor, Gunma Factory (Takasaki, Gunma Prefecture)

The Gunma Factory produces standard products such as diodes and linear devices as a manufacturing subsidiary of Renesas Technology. The company will re-evaluate the use of its production lines for improving efficiency.

Optimization of human resources

The company has begun to implement and to evaluate a variety of measures designed to achieve more efficient and effective placement of human resources.

(1) Strengthening of human resources in the MCU business

Beginning in FY2009, human resources will be redeployed to strengthen the MCU business, including reassignment of personnel from sectors of system solutions business, production units and other areas, to design and engineering for the MCU business.

(2) Introduction of a special early retirement system

In contrast to the current early retirement system (New Life Plan), the company is implementing a limited-time special retirement program with an added bonus for FY2008 in Japan.

(3) Reduction of design subcontractors and temporary personnel at production sites

The company is reducing temporary workers at production sites by 2,500 between the second half of FY2007 and FY2008, as well as downsizing the number of design subcontractors.

Renesas Technology will undertake a variety of steps, including measures such as those described above, aggressively and quickly in order to boost competitiveness in MCUs, the company’s core competence. The company also aims to secure profits by re-establishing its business structure.