Call me a hopeless romantic. Three years ago, when I was sitting in the same room at Renesas HQ in Tokyo with Mr. Akao, the then president of Renesas, talking about Renesas' future, I actually did believe that the Japanese company's acquisition of Nokia's modem business was a bold step, which might lead to something.
Do you think it was Renesas' management that blew this whole thing, or it was inevitable because the global smartphone market so drastically shifted?
"Do you think it was Renesas' management that blew this whole thing, or it was inevitable because the global smartphone market so drastically shifted?"
Without a doubt, it was RMC management. The Apple/samsung duoploy in the smartphone market is blamed much. I mean, RMC couldnt find sockets in LG/HTC/Nokia/Motorola/huawei etc.... And even in the same market conditions, spreadtrum and mediatek thrived.
>> It's impossible to maintain, without big design wins.
That is the main reason. The problem is not just the number of staff but the fact they have not had a great design win in the market. When that does not happen, market share stalls and revenue drops. That is the problem.
Sure iPhone and Samsung providers are thriving. Tomorrow's market will be dominated by others, and those who provide for those are going to be tomorrow's winners. Renesas just couldn't wait for another brand to gain traction.
It might have been inevitable. If your modem isn't used by Apple or Samsung, then unless it's used by the next 4 or 5 biggest guys, it's hard to imagine that the huge ongoing investment makes business sense.
Anyone who spent some time to follow the history of Renesas and Akao could see that he would have done nothing to right the ship. Had he been an effective manager, Renesas Technology probably would not have rapidly going down the WW Semi Ranking after it was created in early 2000s. Soon after the formation of RMC, it was obviously Akao and his croonies were not going to make it. The operation was "bloated" from the start: offices in many geographies worldwide (Japan, US, China, India, Germany, Finland). Money were wasted by unnecessary business travels. Japanese management were saddled with indecision and top-heaviness. European management were saddled with high cost (this could be OK with the right market strategy though) and slow moving (typified by the spectacular failure of STE and perhaps Alcatel as well). US management was simply a window dressing at the time. Given the competition are the very aggressive MediaTek, Spreadtrum, HiSilicon, Samsung in Asia; and Qualcomm, Intel, Broadcom, Marvell, Nvidia in US. RMC was doomed to fail to many people with true understandings of technologies, semiconductors, and markets in Asia/US/Europe.
In truth, I was not surprised at the demise of RMC. However, I moan the once great Nokia modem engineers are now in the wilderness. I wish someone with good vision and bravery to pick them up, do the right thing, make the right move, and show the world what they can do!
IMHO, today's markets move faster than good strategies.
Secondly, I see a trend where someone grabs a market with a fresh technology (Google with MapReduce; Apple with iPhone/iPad) and competitors quickly respond by open sourcing a competing technology (eg Hadoop is open source MapReduce and Android-based Galaxy devices are open sourced iPhone/iPads), so there isn't even time for a number three technology to emerge.
In networking, a handful of companies including Nicera (acquired by EMC) were trying to move fast with a version of software-defined networking. Competitors saw this and created Open DayLight, an open source version of the same functionalty.
The dog-eat-dog business climate has morphed into a cut-em-off-at-the-knees environment.
"Samsung will be fine for a while to come. Apple, however, won't be."
Somehow, I feel it will be the otherway.. Apple is differentiated by its OS atleast. Samsung will feel the pressure of low cost highend Android smartphones.. coming from Google/Amazon/Chinese vendors and selling at 199-399
If you look at the notebook pc market with Apple/others... thats what it tells atleast.
As an RMC employee, let me point out a few things in this article. Firstly, its not 1100 people from Finland that are laid off, rather its 800. Then there are 200 in UK and 100 in Denmark thus 1100 under the Finnish entity.
Second, RMC concentrated on the mid-tier sector and there are LTE design wins in that region with phones expected to come out next month which bring LTE Cat4 phone prices down to $300-$400. How they will work out now is still unknown. Thats not so bad considering a company like Broadcom has been operating profitably in that sector and the competition is relatively scarce, atleast for LTE.
Third, a workforce of under 2000 is virtually unheard of in this industry, its not at all bloated. I would rather say its bordering on anorexic. The likes of Qualcomm and Intel have around 5000. There is a startup like culture in RMC meaning that everyone is expected to do everything, no matter what. This generated a lot of flexibility in the workforce and I see that as a strength.
I agree that not having a China strategy was bad but the ambitious Japanese plan was to take on Qualcomm in the global market; flawed as it was, here we are now.
Thanks for your correction in regards to the geographical breakdown of the Finnish entity' employees.
I am glad you spoke out as an RMC employee. Your description of RMC -- in terms of where things are at this point for design wins -- gives a much fuller view.
I do recall reporting on RMC's ambition to take on Qualcomm on several occasions in the past.
The sad part of the whole thing is that RMC was born as a wholly owned subsidiary of deeply troubled Japanese chip giant Renesas.
GeeKv2, had RMC been an independent startup, do you think it could have survived?
The thing that has baffled everyone is the fact that Renesas is pulling the plug right at the time when the labour of 7 years of hard work is finally beginning to pay off.
The problem as I see for Renesas Elec is that it will take another year until the mobile division becomes profitable. They just cannot afford the running costs until then. With the bail out funding coming from the government, they have been forced to take this step much in the same way the Greek government is firing its employees.
Its hard to imagine that this company could have come even this far if it was an independant startup. Bear in mind that it takes several years of R&D to make a product that can reach a consumer's hands. The funding required for it is staggering. Renesas bought this from Nokia who already had invested for 5 years so practically, they have done only about 40% of the work. Making a triple mode modem integrated with an application processor is one hell of a job.
Back when Infineon sold its modem to Intel, the reason was simple. They could not afford the R&D to compete in future and took the right decision to sell it. Intel is pumping money into R&D and will surely succeed.
Junko, as an RMC employee, I completely agree with GeeKv2's comments. We find this decision totally inexplicable. The supply lines have been cut just when the products are well and truly ready for the big boys in the industry.
RMC's modem had actually negotiated the minefield of certifications when this happened. The product is certified by both ATT and NTT DoCoMo (http://low-powerdesign.com/strauss/).
Also, the RMC solution was an integrated single chip triple mode solution (Modem + APE in one SoC and a triple mode RFIC). For such a product, I believe 2000 employees does not sound too bloated.
Scud, I hear you. For those engineers who have truly worked hard and delivered the goods, it is not just inexplicable but unacceptable to see their efforts unnoticed, unappreciated and undervalued.
It is unfair for RMC employees to be described as "bloated." But I am pretty sure that's how the company management often describes the nature of business to save their incompetence.
Like I asked before, where was the company manegent when this was all happening?
More significantly, where will RMC's solution -- already certified by AT&T and NTT docomo -- and its IP go?
REL has been trying to sell RMC since the past 6 months. Concerning the IP and the actual product, as Heikki (SVP, Wireless Modem, RMC) says, it will be a crime against humanity if that gets wasted. Someone will definitely buy it partly, if not the workforce.
As to why nothing has be sold so far, only REL can answer that and we are many who want to know it.
Lets not forget that this is an industry plagued by patent wars. Who knows if Nokia had a role to play here and it ended up spoiling the party. After all it wouldn't want its patents to land up in the hands of someone like Samsung
Best of designers from RMC can start small fabless design house and create new IPs and cash it from big guys like Google, Micorsoft or others. It is never too late. There are always failure on path, give it one more try and designers together can find next wave in modem business.
That's one of the most positive comments I've heard so far. You are absolutely right. The company might erroneously think that it can exist with fewer designers, but hey, designers don't need the company to exist. They can create their own.
@Junko: Time and again there are many organizations like these in current past. Often designers has their own vision and dreams that do not fit into calculated risk strategy of big organization. They need to look for VCs and float new organization. They come out with wornderful ideas and product. One recent example is Enpirion, engineers from AT and T. I wish all best for RMC designers for new innovation.
One of my trusted industry sources just shot me an e-mail, lettingme know that he believes that one of the OEMs who had deployed the Renesas LTE SoC is Samsung: He said, "the upcoming Galaxy Ace 3 LTE smartphone apparently is utilizing the Renesas chipset."
Junko, Long back in the very same forum I had predicted that RMC is not going to survive. It has come true. I had even predicted that KKR buyout offer will be blocked and Renesas is not going to have a foreign CEO despite there were such rumors. After reading the 5 reasons you have mentioned here for Renesas fall, I am really surprised that you missed (was it intentional?) the most fundamental reasons. Being a native Japanese, I can understand that as a Japanese reporter you may not be willing to openly criticize the Renesas management, which has remained mostly Japanese till day. However, that does not change the ground reality. Living in a denial mode does not help at all. Change in market order, China strategy, consolidation issues are all fine..but they are not the primary reasons. When other companies operating in the same market conditions are making money, why couldn't RMC? It is because RMC and Renesas do not have what it takes to survive and thrive in the market. I have seen Renesas group and many other companies very closely, and I have no qualms in saying Renesas had / and still has one of the most mediocre guys in the management team. I was shocked when Mr. Kawasaki was made President of RMC..He is an outright non-performer..I don't know on what basis was he selected for this job. They should have gotten an outsider with solid experience of pulling through the difficult weather. When companies remain in denial mode, when they refuse to come out of their cozy shell, when they promote mediocrity...they are bound to fall. That's exactly what is happening with RMC, ST Ericsson and even companies like Nokia. RMC had to bite the dust because of its useless management. I would suggest you to analyze the management quality of companies like Qualcomm, Broadcom, NVIDIA, Mediatek vis-a-vis Renesas / RMC. You will get your answers. As an outsider, I knew almost 1 year back that Renesas didn't have money to run RMC...I am sure Renesas / RMC management also saw this coming. Yet, they did nothing. Why didn't they approach private equity firms or angel investors or potential buyers one year back when they knew this was coming? Despite of this shutdown, most of the RMC employees in Japan are happy..because they will go back to Renesas, they won't have to work for demanding clients like Samsung, and they won't have to take the pain of communicating in English with team members sitting in Europe and India. Let me use this space to make another prediction. Things are not good at all with Renesas. Right now they have 30,000 employees, but I see less than 10,000 after 5 years.
Thanks for your detailed analysis here, Kobayashi-san.
"As an outsider, I knew almost 1 year back that Renesas didn't have money to run RMC...I am sure Renesas / RMC management also saw this coming. Yet, they did nothing. Why didn't they approach private equity firms or angel investors or potential buyers one year back when they knew this was coming?"
In your analysis, you wasted no time to get to the point. I do applaud you for that.
The management's inaction, indeed, was the biggest crime -- no question.
You pointed out that my nationality might have clouded my editorial judgement. Perhaps. But in my mind, it was something that goes out without saying... (also as a reporter, I needed something more to write about than just blaming the management's incompetence for its failure. But again, that's probably an excuse on my part.)
You also wrote:
"...Despite of this shutdown, most of the RMC employees in Japan are happy..because they will go back to Renesas, they won't have to work for demanding clients like Samsung, and they won't have to take the pain of communicating in English with team members sitting in Europe and India."
Now, that's a frightening thought.. but I have actually heard the same story.
But don't you think that it's about time for those Japanese employees at RMC today to stop expecting their automatic"return" to Renesas?
I am sorry if I came across rude. Perhaps I am pained by the way mismanagement, lack of accountability, and apathy has ruined two large semiconductor companies, viz. Renesas Technology and NEC Electronics. At some point in time, they had the total revenue fo 16-17 Billion Dollars and they directly employed 50,000+ people (not sure how much indirect employment they generated). Today, they are a one company, and down to 7-8 Billion Dollars revenue and direct employment of about 30,000 people. Billions of dollars of GDP and thousands of jobs lost in Japan due to mismanagement. What kind of (dis-)service this so called elite management did to the country?
"But don't you think that it's about time for those Japanese employees at RMC today to stop expecting their automatic"return" to Renesas?"
Their return is guaranted. Because, all RMC employees are on a temporary transfer from Renesas Elec. to RMC. They are still very much on the rolls of Renesas Elec. and their pension / social insurance is still with Renesas. So, this concern does not arise for them.
"There isn't much Renesas left to start with."
I agree. But who cares? When you meet Renesas management next time, ask them what is their "Utilization Rate" of internal human resources. They would have no idea about it, because they do not track it!! No one in the company knows how many people are sitting idle and just drawing their salaries! This is simply unthinkable in the States here. I would suspect that the utilization rate of Renesas is less than 70%, it means they should generate the same revenue with at least 20% fewer people (if they really know how to efficiently manage the company, and if they really want to take unpopular measures). When you have 8,000 - 10,000 people in the company sitting and doing nothing worthwhile, would it really matter if another 400-500 people join these freeloaders? Besides, after the investment from Government backed fund, many employees think they are now semi-government employees, and government will keep on pumping the money whenever required. So, no worries..enjoy!
Just before the announcement of the shutting down, I attended a techinical presentation showing RMC product progress. In a recent AT&T test, the audio processing module implemented in RMC modem even outperformed the Samsung Galaxy 4. I would say our Finnish colleages have done a great job in this regard. Of course I mean this only from the engineering point of view.
I am not sure if Kobayashi san is right about everything. But everytime I was informed about the company's tough situation, the earthquake and Japanese currency would be blamed for sure. I am wondering if Mr. AkioMorita or Matsushita would say the same thing?
As for China, when a small local design house decided to make smart phones, Qualcom reached them and provided their solution even with angel investment. Now this design house sells 10M smart phones a year with estimated market value of 4B dollars. Will Samsung Galaxy ACE easily make this far? Will any of our decision makers have any idea about its name? I doubt that.
There have been some critical strategic mistakes, Renesas Electronics have cut critical staff at critical times (especially in Android development) and the customer support has been horribly underresourced.
But having horribly underresourced customer support has resulted in huge direct support from R&D for customers, introducing huge costs but also making the company extremely focussed on customers.
RMC's triple mode LTE modem has been on the parket since last November, but in only one device. That says a lot about how RMC has failed.
breizh_audio, I am familiar with RMC's operation in Rennes. (I was meaning to visit, while I was in France, but never had the opportunity) So, when you say "by former REL employees," are these people (who built Audio Voice sybsystem, for example) are NOT RMC employees? Just curious.
RMC design center in France (Renesas Design France) originally started within REL operations before joining RMC. This R&D design center was mainly in charge of supplying 2G modem for Renesas operations in the past.
I think you said what Renesas managemet needed to hear.
Funny, you mention "utilization rate."
In fact, I was in conversation with an ex-Renesas guy a few months ago back in Japan. He was telling me a story about SO many executives -- general managers, deputy general managers, assistant general managers -- who were all sitting around in a big office room in Tokyo and reading the daily newspapers, well after their lunch hours.
Part of the reason why that has happened, I was told, is because when the company repeated "integration," they couldn't figure out a way to streamline thoes managers; or to adjust their salaries.
Bloated was perhpas neither customer support nor design engineers...but rather middle and upper management.
I mean no disrespect to our Japanese and French colleagues, who I've enjoyed working with, but to me this news also means the final death of the once great Nokia Mobile Phones.
People have obviously come and gone since, but probably around 70% of the people working in the modem part of RMC are still the ex-Nokia modem people and with us all being made redundant, it marks the end of that modem software asset. I feel proud to have been part of the team and part of that asset.
Ignoring some of the awful Nokia phones that were released around the time things went pear shaped (N97 anyone?), that modem technology has been in some of the most well regarded handsets in the industry. N95, E71, 6310, 8310, 3310 to name but a few. In fact, as the modem technology was licensed to STEricsson for their NovaThor chipset, there are also products on the market today to feel proud of such as the Samsung S3 mini and some of the Sony Xperia series.
A lot of those were before my time here, but there are still a lot of people in RMC who were involved in those products and should feel proud of their legacy. And I re-iterate earlier comments that it seems a crime that such a 20+ year old software asset with proven quality might get consigned to nothing more than a DVD with some source code on it, gathering dust in an archive somewhere.
On a more general note, since the buyout of the Nokia Wireless Modem divison for a relative pittance and the inception of RMC, we have, in 2 years, taken a workforce consisting of a relatively low headcount and lacking experience in productising platforms, and become pretty much the number 2 chipset vendor in the industry. As far as I know the only vendor apart from Qualcomm with a product ready LTE triple mode implementation. What more could we have done?