Much of Renesas’s automotive chip revenue is generated by the company’s long-standing relationships with Japan’s leading carmakers, including Toyota. Since automotive companies tend to need certain qualified products on a long-term basis, these EOL discussions are neither pleasant nor easy. Sakuta, however, said, contrary to some industry speculations, Renesas is making progress negotiating with carmakers.
Hisao Sakuta, CEO
(Source: EE Times/Junko Yoshida)
“Of course, we have been repeatedly told [by certain automotive companies], ‘Never ever come and visit us again,’ ” said Sakuta. “But in the end, our customers will need us, and we will need them. We’ve been pleading for them to come back to the table, and we are succeeding to an extent.” In fact, Renesas now faces more difficulties in areas unrelated to automotive, according to Sakuta.
The impact of EOL decisions on some products is already showing in the company’s financial results. Because Renesas needs to stockpile EOL products in advance, the company has seen an artificial income boost in the latest quarter, said Renesas CFO Hidetoshi Shibata: “To ensure constant positive results, we need to do further reforms.”
Although EOL discussions with customers can be tough, both parties need to preserve a level of mutual respect and trust. Sakuta explained that a chip supplier and customer need to agree on how long the chip vendor can keep supplying certain needed parts, and how many chips the customer actually needs over a certain period of time. The customer is relying on its own forecast of how many products it will actually sell in the future, and the supplier is heeding its needs, Sakuta explained. “If they say they need 100 chips, we’d have to make a lot more than 100 chips, because they can’t be short of parts. But if any parts are left unused, who pays for them? Do we share the risk with our customer?”
Sale of Renesas SP Drivers
Renesas’s decision this year to unload its stake in Renesas SP Drivers, a fabless supplier of drivers and controllers for liquid crystal displays, wasn’t exactly popular. Industry analysts questioned Sakuta’s wisdom in this sale, at a time when Renesas SP Drivers’ products are designed into Apple’s iPhones, making a healthy contribution to Renesas’s revenue.
In fact, Renesas SP Drivers is the world's largest maker of small and midsized LCD drivers, holding a 30 percent share of the market.
Speaking about ending this business, Sakuta said, “Surely, Renesas SP Drivers has been profitable. But my view is that a lot more needs to be done in the LCD drivers of the future.” Citing Renesas’s commitment to concentrate on automotive and industrial electronics, he added, “I predict Renesas SP Drivers’ business will eventually become a little remote island, very little to do with our core businesses. We wouldn’t be able to maintain the current share, over the long term.”