Still thinking like old Hitachi
Renesas still thinks like Hitachi used to think in its glory days, hoping to singlehandedly control any entire emerging market.
Renesas probably should keep its business serving the automotive industry. But how about spinning out a team of Renesas engineers -- for example, the gang working on smart buildings or smart homes -- to forge a partnership with a red hot startup like Nest Labs in the United States?
Dismantling the giant, splitting off several smaller companies, and selling them off seems far more feasible than trying to engineer yet another inward consolidation among Japanese semiconductor companies who are already weak and bloated.
Japan: Bankers’ graveyard
Charlie Cheng, CEO of Kilopass (Santa Clara), has been visiting Japan every three weeks over the last 12 months, looking for potential deals. Noting “I don’t believe in early-stage startups,” Cheng called spin-offs of large companies’ divisions in Japan as good targets for acquisition.
Think about some of the Japanese companies’ semiconductor divisions. They probably have every IP core you need – ranging from ARM, USB to PCI Express, etc. – and they have teams of engineers with vast experience and knowledge of production infrastructure. If you are a fabless startup, rather than taking chances on your own, why not leverage the infrastructure some of those Japanese semiconductor divisions could offer? Alternatives for such startups in the United States are to go out and hire a back-end team specialist like eSilicon or Open Silicon to get the first product out the door. In numerous instances, U.S. fabless chip companies just had to close their operations without ever taping out their first silicon.
What Cheng is advocating is a classic M&A play that makes eminent sense.
But Cheng is quick to acknowledge that such deals are easier said than done – especially in Japan. Many U.S. M&A specialists, investment bankers and private equity firms came and went in Japan over the last 20 years. “Japan is known as a ‘bankers’ graveyard’,” said Cheng. Banks have failed to close deals in Japan, because a) Japanese companies really don’t make decisions; and b) they are in denial, he explained.
I get that Renesas sees a host of opportunities in its self-styled Smart Society. I also know Sebt believes that 2012 will be a good year for his company – finally harvesting “the fruits of the merger with NEC Electronics,” as he put it. I also applaud Renesas’ integrity and its genuine effort to create stronger relationships with customers – especially after Japan’s earthquake and tsunami in 2011.
And yet, I think if Renesas, or Japan’s semiconductor industry, is to
survive in the 21st Century, a consolidations among Japanese companies
is not the answer. It’s time for these big fish to swim beyond their