Mitsubishi Electric promises loan to Renesas

TOKYO, JAPAN: Japan's Mitsubishi Electric Corp said on Tuesday it would provide 14.5 billion yen ($185.5 million) in loans to help prop up chipmaker Renesas Electronics Corp, which is fighting for survival against aggressive overseas rivals.

Shares in Renesas, the world's No. 1 maker of microncontroller chips used in cars, surged 15 percent to 260 yen following the news.

Renesas has struggled to turn a profit in its system LSI chip business as it struggles to compete against rivals such as South Korea's Samsung Electronics Co Ltd.

Renesas, a product of successive mergers of the chip divisions of its major shareholders Mitsubishi Electric, Hitachi Ltd and NEC Corp, plans to reduce its workforce by 12 per cent and halve the number of domestic plants.

"We do not plan to provide any further loans to Renesas (after this)," said Mitsubishi Electric executive officer Hiroki Yoshimatsu at the company's earnings briefing.

"With a responsibility to return these loans, they (Renesas) have to steadily move forward their restructuring plan and return the company to profitability and return the loan," he said.

The loan will be made on October 1, Mitsubishi Electric said.

Mitsubishi Electric, which owns a 25 per cent stake in Renesas, declined to comment on the scope and type of support that Hitachi and NEC would provide to Renesas.

NEC is due to report its April-June results at 0600 GMT.

Mitsubishi Electric shares were up 4.1 per cent, compared with a 1.1 per cent rise in Tokyo's benchmark Nikkei average.