SAN FRANCISCO—Renesas Electronics Corp. is spinning out its mobile semiconductor into a wholly owned subsidiary because the markets for microcontrollers and modem chips are worlds apart, and because executives want to improve the chances of its power amplifiers being designed into reference designs from other baseband suppliers, according to Renesas executives and market analysts.
Renesas, the leading vendor of microcontrollers and the third lagest chip company by revenue, said last week it would spin off its mobile chip unit into a new subsidiary, Renesas Mobile Corp., effective Dec. 1. The products being spun out into the new subsidiary include the company's Mobile Multimedia SoC Business Division and most of the wireless modem business that formerly belonged to Nokia Corp., which Renesas is set to acquire by Nov. 30.
The spinout announcement caught some people off guard because Renesas executives have spoken about the modem chip technology being critical to the company's future success, and because the acquisition was widely hailed as a bold and aggressive move.
Will Strauss, principal analyst at Forward Concepts Inc., applauded the spinout announcement. Setting up the wireless products in a different business makes sense because the market for wireless chips is such a dramatically different market than Renesas' core microcontroller business, Straus said. Whereas many microcontrollers are marketed for years to industrial, automotive and other markets, wireless technology is changing so fast that products can become obsolete within a year, he said.
"It's a good move," said Strauss, adding that he was also impressed with the speed of Renesas' operational execution.
Dan Mahoney, president and CEO of Renesas' U.S. unit, Renesas Electronics America Inc., said the primary reasons for the move were the fast-moving nature of the mobile communications market and the fact that the new unit has the potential to help Renesas with its top-line objective of growing sales outside of Japan. Renesas' corporate strategy includes a clear directive to by 2012 increase revenue from outside of the Japanese market to 60 percent of the company's total from 45 percent at the time of the merger between NEC Electronics and Renesas Technology which formed the company.
But a second, equally compelling reason for the move, according to Mahoney is that Renesas' important power amplifier business depends on the company having its power amplifiers incorporated into reference designs created by baseband chip vendors such as Qualcomm Inc. These suppliers might feel more comfortable sharing technical information with Renesas with the "firewall" of Renesas' own baseband chip business residing in a separate company, Mahoney said.
Strauss said the strategy makes sense. Baseband suppliers would feel more comfortable doing business with Renesas because it will have "arm's length" separation from its baseband business.
Linley Gwennap, principal analyst of The Linley Group, said baseband suppliers like Qualcomm would probably try to avoid incorporating Renesas' parts in their reference design if they can even with the spinout because they would still view Renesas as a baseband competitor.
I don't think the mobile will overgrew microcontrollers at any point of time in the future. Basically the micro controller business is really huge covering different industries with and without any wireless capability inbuilt into the IC's. But in the cellular market, application processors and wireless business will be lead by different units considering the huge volumes produced/year.
the clash of the cultures is what they wan't to avoid. Great move. Though strange it seems because they just got it and it appears as if they were letting go. Not exactly but... sort of.
Nevertheless it is really very important how you manage a business and trying to Japanize a bunch of finnish staff is perhaps a call for additionaly burden. I think this is a good lesson to be learned by the media watchers like us. But... will in the future mobile overgrow microcontrollers... what do you think?
There is good need of wireless / mobile devices other then mobile phones and tablets. In industrial automation, medical instrumentation, hosptial automation and other similar fields has lots of work to do for mobile/wireless devices and there is scope for organization like Renesas can make big impact and find niche market. We eagerly await their new products and solutions.
This might be just due to a quite simple reason, I suspect that Renesas management has no confident to remotely manage those 1100 employee stationing in Europe and Finland. It is very natural to imagine that Nokia had requested and put it in their contract to separate the mobile chip set unite isolated from quite complicate Renesas organization which is a joint VENTURE by Hitachi and Mitsubishi who are very Japanese traditional cultured company. I'm sure that it could be a big chance for Renesas to make a huge break through of their mobile chip set business if they could manage this new company as NON Japanese company managed by Finnish manager, could be a great and quite capable global company, otherwise valuable and precious opportunities would be depressed by awful Japanese company management culture. I hope Renesas could make big challenge and adventure to fly in the real global mobile business. by terazjp
With more than 75% of Renesas Mobile employees outside Japan, Renesas probably wanted a seperate organization where non-Japanese managers could also have more input, as well as increase the speed of the organization. The main Renesas organization in Japan, would not be abe to manage such foreign employees or global business.