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FH1
Hi Mark ... when you merge two firms, there must be overlap so layoffs are ...
t.alex
This is a necessary move, but i believe more have to be done to streamline the ...
Renesas moves to fab-lite strategy
Mark LaPedus
7/30/2010 12:50 PM EDT
SAN JOSE, Calif. -- Japan's Renesas Electronics Corp. has outlined its restructuring efforts in an effort to become profitable.
As expected, the company is cutting 5,000 jobs and moving towards a fab-lite strategy. It will use foundries for devices at 28-nm and below. And it will no longer invest in new fabs. In terms of R&D, it is also becoming part of IBM Corp.'s ''fab club.''
The moves have been anticipated. Renesas Electronics began its business operations April 1, through the integration of NEC Electronics Corp. and Renesas Technology Corp.
As part of the moves, Renesas Electronics will cut approximately 5,000 employees, mostly in the current fiscal year and completed by March 2013. In addition, as part of its plan to expand overseas businesses, the company will raise the number of overseas employees from 29 percent in the current fiscal year to 32 percent by March 2013.
Renesas plans to use outside foundries--such as GlobalFoundries Inc. and TSMC--on all of its 28-nm and smaller geometry semiconductor products. In line with this change, the company has positioned the 300-mm wafer lines at Naka plant and Renesas Electronics Yamagata Semiconductor’s Tsuruoka plant as manufacturing facilities for the company’s basic products, especially for systems-on-chips (SoCs) up to 40-nm.
The company will continue its research and development (R&D) of advanced processes by unifying existing development structures. It will continue to work with NEC's R&D partner, IBM Corp., for process technology. It appears that it will no longer work with Renesas' original R&D partner, Panasonic.
It applied impairment accounting to long-term assets at the Tsuruoka plant to address the change in a plan to recoup the investment.In addition, since there is currently no plan to make a large-scale investment in the 8-inch wafer line at Renesas Electronics America's plant in Roseville, Calif., and with the current scale, Renesas Electronics no longer expects to recoup the initial investment, so the company has applied impairment accounting to long-term assets at the Roseville plant.
As a result, Renesas Electronics expects to record total impairment loss of 33.1 billion yen ($382 million) in the fiscal year ending March 2011. In the quarter, the company had sales of 292.0 billion yen ($3.38 billion) and lost 33.1 billion yen ($383.1 million).
As expected, the company is cutting 5,000 jobs and moving towards a fab-lite strategy. It will use foundries for devices at 28-nm and below. And it will no longer invest in new fabs. In terms of R&D, it is also becoming part of IBM Corp.'s ''fab club.''
The moves have been anticipated. Renesas Electronics began its business operations April 1, through the integration of NEC Electronics Corp. and Renesas Technology Corp.
As part of the moves, Renesas Electronics will cut approximately 5,000 employees, mostly in the current fiscal year and completed by March 2013. In addition, as part of its plan to expand overseas businesses, the company will raise the number of overseas employees from 29 percent in the current fiscal year to 32 percent by March 2013.
Renesas plans to use outside foundries--such as GlobalFoundries Inc. and TSMC--on all of its 28-nm and smaller geometry semiconductor products. In line with this change, the company has positioned the 300-mm wafer lines at Naka plant and Renesas Electronics Yamagata Semiconductor’s Tsuruoka plant as manufacturing facilities for the company’s basic products, especially for systems-on-chips (SoCs) up to 40-nm.
The company will continue its research and development (R&D) of advanced processes by unifying existing development structures. It will continue to work with NEC's R&D partner, IBM Corp., for process technology. It appears that it will no longer work with Renesas' original R&D partner, Panasonic.
It applied impairment accounting to long-term assets at the Tsuruoka plant to address the change in a plan to recoup the investment.In addition, since there is currently no plan to make a large-scale investment in the 8-inch wafer line at Renesas Electronics America's plant in Roseville, Calif., and with the current scale, Renesas Electronics no longer expects to recoup the initial investment, so the company has applied impairment accounting to long-term assets at the Roseville plant.
As a result, Renesas Electronics expects to record total impairment loss of 33.1 billion yen ($382 million) in the fiscal year ending March 2011. In the quarter, the company had sales of 292.0 billion yen ($3.38 billion) and lost 33.1 billion yen ($383.1 million).
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mark.lapedus
7/30/2010 1:06 PM EDT
Renesas has made some tough choices. Is it enough? I don't think so. I think it needs to pare down its ASIC business, consolidate some MCU lines and shutter some older fabs. Any thoughts out there?
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eewiz
7/30/2010 4:24 PM EDT
Yup. In addition to that, reduce the aging but costly workforce in Japan and start design centres in China/India or work with outsourcing companies like Wipro. Also recommend to trasform some of their existing MCU line to ARM based application processors for cell phones & tablets.
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goafrit
7/31/2010 11:33 AM EDT
I hate when people think that firing staff shows a winning strategy. It is nothing but short-term effect on the greedy investors. There are companies in this world that refuse to follow that part and they remain stable. Instead of having strategies to make products that customers want, firms delight in firing staff thinking that works. What this firm has done makes no impact. It is like old Apple firing all the staff because they could not compete. But when Steve Jobs came, they realized that firing staff was not the issue, it was lacking vision and execution strategy. I hope someone just understand this in business.
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phoenixdave
7/31/2010 9:02 PM EDT
I also hate to see comments like @eewix above saying that getting rid of the "aging but costly" workforce is another winning strategy. Does developing years of experience have any value anymore?
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Silicon_Smith
8/1/2010 4:34 AM EDT
@ goafrit/phoenixdave: I totally agree with your sentiment and it is really terrible, when companies let go of people. At times like those, the corporate culture seems selfish!!
On a more general note, while, I agree with the philosophy of retaining experienced people, we can not debate the fact that sometimes companies let people go because they have no choice. For instance, the situation when semicon companies were facing reduced demand, and it was prudent to shut down fabs and reduce operations in assembly and test lines. Big companies which employ tens of thousands of people usually also employ a lot of floor people, with very specific skill set, who are difficult to accomodate elsewhere. Secondly, companies tend to be more severe on the operations side when cutting work force. Hence, the IT folks, security, facilities and other enablers come under the scanner if a company wants to shed some weight. Engineers and customer facing arms are valued, as they really define the company. Most of the people are engaged again once things start looking up as their competency was never doubted.
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yalanand
8/1/2010 5:39 AM EDT
Totally agree with you above comments...firing staff is not the solution. It has been trend for the companies to go fabless to increase the profitablity. Some of the bigges like TI went fabless (not in analog processes). Just wonder if its gud thing for the semiconductor industry because finally FAB's will owned by selected few. Any thoughts on this ?
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t.alex
8/1/2010 12:58 PM EDT
This is a necessary move, but i believe more have to be done to streamline the product lines and roadmaps of (previous) Renesas & NEC electronics as well.
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FH1
8/2/2010 12:06 AM EDT
Hi Mark ... when you merge two firms, there must be overlap so layoffs are inevitable ... but they need to be fair not to be all hugely demoralising. Management should maybe take a leaf out of the old HP culture that decreed any redundancy list should start with the department manager's name at the top!
That said, the real problem is usually marketing ... too few sales per product usually the result of a geographical imbalance between their profile and the market. The usual answer is to pare back products; the better one is to grow out of the problem. What's really needed is a feisty 'make lunch or be lunch' S&M VP and board support (patience) to allow it to happen.
As for fablite, just as ‘unlimited, abundant cheap debt’ fuelled the financial crisis, ‘ seemingly unlimited, abundant cheap foundry wafers’ will fuel an inevitable chip market crisis; and for exactly the same reasons … if something appears to be too good to be true, it is.
What if foundry wafer prices went up? What if availability was not so abundant? What if foundries started to ask their customers for up-front payments to secure future capacity? What if customers had to buy non-cancellable capacity in order to guarantee wafer availability, even in a down turn? What if I can’t get the extra capacity I need in the boom times, after all I’ll just be one on many, so will everyone else? What if I’m not considered to be a Tier 1 foundry customer? How long before the foundry investors want a greater share of the action, especially at the leading edge where foundry demand is highest and supply options limited?
Most fablite firms I talk to pooh-pooh the concept of any of these ‘what ifs’ happening. Seems to me capitalism isn’t that benevolent or accommodating. What if they did?
Malcolm Penn
Chairman & CEO, Future Horizons
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