DETROIT – Renesas Technology Corp. is taking aim at a bigger chunk of automotive semiconductor business in North America, Europe and the emerging market of China – and the Japan-based supplier says it has the firepower needed to get it.
Only 18 months old, Renesas is anything but a fledgling upstart. Born from a merger of Hitachi Ltd. (55%) andElectric Corp. (45%) semiconductor operations in April 2003, Renesas generated revenues of ¥985.6 billion ($9.2 billion) in fiscal 2003, posting a net profit of ¥8.6 billion ($80.5 million).
The supplier is ranked No.3 overall by i-Suppli in the global semiconductor market, trailing only Intel Corp. and Samsung Group, and No.4 overall in automotive semiconductor sales.
But Renesas says it is No.1 in semiconductor sales in Japan and it is the world leader in micro control unit (MCU) sales. In addition, it holds 41% of the market for embedded MCUs with flash technology and controls 17% of the global automotive market for MCUs overall, putting it a solid No.2 behind Motorola Inc. (34%) and ahead of NEC Corp. (11%).
“Some analysts have said (that) if you are to play in the semiconductor world as a leader, you have to be a $7 billion company at least,” Volker Politz, vice president of Renesas Technology America Inc.’s Automotive Business Unit, says in an interview here. “We’re $9 billion.”
More importantly, executives say, is Renesas’ foothold in certain key product sectors, such as navigation systems and under-hood applications.
Renesas says its semiconductors are in the majority of navigation systems installed in vehicles in Japan, the leading market for such devices. That puts it in the pole position when it comes to landing business once those systems take hold elsewhere, executives say.
There are only about 300,000 navigation systems in use today in the U.S., says Anand Ramamoorthy, director-systems solutions for Renesas’ Automotive Business Unit. But he predicts it is the next growth segment here.
“Navigation and CIS (car information systems) have not taken off yet in the U.S.,” notes Politz. “But when it does, we have the (technology) blocks in place (to capitalize).”
The supplier also is going after additional under-hood applications, chiefly with its embedded flash MCUs, which can be reprogrammed over and over. Renesas says it is the only company offering embedded flash devices with single cycle access to internal flash memory at 80Mhz, and it says its quality is top-notch.
“There’s been an issue in the industry with flash,” Politz says. “Famous players have had this issue that they lost data. Our track record is officially audited at zero (defects per million parts). We have no such failures concerning data retention.”
The supplier says it shipped 22.5 million flash MCUs for automotive use in 2003, up from 7.3 million in 2000.
“We see strong growth in flash technology, particularly in automotive,” Politz says.
There was little redundancy between Hitachi andElectric operations when the joint venture was formed, the Renesas executive says. Mitsubishi was strong in mixed-signal semiconductors used for body controls and safety systems, while Hitachi focused more on MCUs used for powertrain controls and CIS devices.
“Together we’re very strong, with very little overlap,” he says.
The supplier will close a fabricating plant in Alsdorf, Germany, by the end of the year, but Politz says that business decision has little to do with the formation of the JV. The plant is outdated, he says, and it is more cost effective to shift production elsewhere than retool.
In addition, one of Renesas’ nine fab plants in Japan will be sold, the supplier says. The sale of the factory in Chitose to Mitsumi Electric Co. Ltd. will be completed by year’s end.
But other than that, Renesas officials say the company is focused on growth.
Even without those two facilities, Renesas has capacity to fabricate 267,000 wafers per month. That includes its Trecenti Technologies operations in Japan, which Renesas says is the world’s first 12-in. (300-mm) wafer plant.
“We have very huge production capacity that we can allocate to whatever (the market demands),” says Politz.
Automotive currently accounts for 10% of revenues, but that is expected to rise.
Renesas will have “at least double-digit market shares in the key applications we’re looking at,” Politz promises.
Revenue growth is projected at more than 10% annually, and Politz says he expects the automotive operations to double its billings in North America over the next six years, at which time Renesas wants to be the world’s top automotive chip supplier.
Currently, Renesas products are used in such things as powertrain, body, chassis and airbag controllers, as well as car audio and navigation systems. In addition to worldwide market share leadership in MCUs for navigation systems, Renesas says it is No.1 in MCUs for airbags (30% share worldwide and 75% in Japan) and tops in 32-bit MCUs with eFlash memory for powertrain controls.
Renesas products are found in vehicles of nearly every auto brand in the world, Politz says, with its top three end-use customers areMotor Co. Ltd., Motor Co. Ltd. and Motor Corp.
Its biggest Tier 1 customers includeLtd., Calsonic Kansei and Corp. in Japan, but it also supplies to North American-based Corp., Johnson Controls Inc., Magna International Inc. and Visteon Corp.
Overall, its automotive business is well balanced, with roughly a third of its sales in each of three key sectors: powertrain, transmission and adaptive cruise control; safety, vehicle dynamics, instrument cluster and body; and navigation, car infotainment systems and car entertainment.
The company currently counts 300 employees on the automotive side and in North America operates sales operations in Southfield, MI; San Jose, CA; and Toronto and design centers in San Jose and Raleigh, NC.
In China and Taiwan, where sales are projected to hit ¥300 billion ($2.8 billion) by fiscal 2007, Renesas has two fab plants and five applications centers and sales offices.
“We are not one of those that when the mobile phone sector came down, we suddenly came up with an automotive strategy,” Politz sums up. “We are committed to automotive.”