Two years after its creation through the merger of the semiconductor units of Hitachi and Mitsubishi, Renesas reports that it is largely on track to accomplish many of its goals, and is getting out in front of the pack in some industry innovations.

The company gained share in the microcontroller business, maintaining its position as number one worldwide at 22 percent of the market, according to analyst firm Gartner/Dataquest.

One of the growing markets for Renesas is MCUs for the automotive market, and currently the company is seeing an interest in dual core microcontrollers in that space.  That’s because dual core MCUs can offer system redundancy, something highly valued in the automotive space where  consistent performance is so essential, according to Daniel Mahoney, president and CEO of Renesas Technology America.

“There are designs that are taking place now, and we are partners on those,” he said.  “We work with subsystem makers and also directly with automotive manufacturers.”

With those kinds of innovations in addition to the company’s aggressive moves to streamline the business, it’s not surprising that it gained strength in its core CPU market.

“While so many other things were going on with the merger and cost reductions, we still gained market share,” said Mahoney.  He attributed those gains to a broader portfolio and a single set of tools available to developers.

“We’ve also gotten better at selling microcontrollers,” he said.

The company said revenues were higher on those microcontroller gains. Total revenue at Renesas reached $9.3 billion (1,002 billion yen) compared with $9.1 billion in fiscal 2003 (986 billion yen).

And whereas the virtual company experienced a loss in the year before the merger, in its first year of operations, fiscal 2003, Renesas posted a net income of $83 million (9 billion yen) and more than doubled that for 200 to $185 million (20 billion yen).

These higher profits have come from an internal effort across the board to reduce costs so the company reduce the break-even point by about $1 billion or 100 billion yen. By the end of fiscal 2004, the company got half way to that goal, Mahoney said.

“In 2006 we expect to achieve that goal,” he said. “There have been hundreds of cost reducing initiatives across the company. It’s been a disciplined effort over time with steady and consistent progress.”

Mahoney also pointed out that although cost reductions were a big part of the new company’s plans, they did not affect Renesas’ spending on capital equipment.  The company made a commitment to spend 10 percent of revenues on that and over the first three years of operation has invested $2.7 billion or 290 billion yen.  This year spending is expected at $741 million or 80 billion yen.

That spending is essential for a company that maintains leading edge process technology. 

“Foundries can’t ramp as quickly,” Mahoney said.  “So we rely on our own leading edge.”  He estimates that Renesas farms out less than 10 percent of its manufacturing to foundries.  The company is also investing in IP and is keeping its entire high end packaging work in house as well.

Looking forward, Renesas expects a slightly down to flat year in 2005 for the semiconductor market, and it expects its own performance on the revenue side to mirror the larger market.  Those changes will come due to average selling price erosion that will offset any gains in unit sales. 

“Although we are moving into more of a headwind in the industry, we will see more share gain and profitability gain,” Mahoney said.

In 2005, like many companies, Renesas is planning to expand in China to work better with partners who also have operations there, including both non-Chinese companies and also developing domestic companies. Renesas will increase its operations there to 24 sites in 12 cities, up from its 2004 operations of 21 sites in 9 cities.  It plans to increase its design workforce from 200 to 500 between fiscal 2004 and fiscal 2007 and increase its total China workforce from 3,000 in 2004 to 6000 in fiscal 2007.

“Most of the total will be in assembly and test,” Mahoney said.

Big end application growth areas for Renesas include consumer electronics wireless devices and navigation systems for automobiles.

By: DocMemory
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