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.