Renesas Electronics plans to close or sell half of domestic plants

June 19, 2012


Struggling semiconductor maker Renesas Electronics Corp. plans to close or sell off more than half of its plants in Japan over the next three years.

Sources said the company is contemplating selling or closing at least 10 of the 19 plants now in operation domestically.

The downsizing is intended to help turn around profitability.

The plant sales and closures will not come without pain as about 4,000 plant workers will likely be laid off, hurting local economies in the process.

Renesas hopes to offer early retirement packages to 5,000 employees.

The downsizing is expected to cut the company payroll by about 12,000 workers, or 28 percent of its 43,000 total.

The company is also considering selling its Tokyo-based affiliate, Renesas Mobile Corp., which develops semiconductors for mobile phones. Renesas Mobile has about 1,800 employees.

Renesas was created through the merger of the semiconductor divisions of its three parent companies, NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp.

Renesas took over the plants of those three companies.

Due to concerns about upsetting local communities, little effort was made until now to consolidate and integrate those plants into a more efficient structure.

Renesas officials have already begun negotiations with Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, over the sale of its Tsuruoka plant in Yamagata Prefecture, which has about 1,300 employees.

The Tsuruoka plant manufactures system LSI chips used in videogame equipment and digital cameras, but it has been operating at below capacity because Japanese electrical equipment manufacturers have been performing poorly.

Renesas has already decided to sell its Tsugaru plant in Aomori Prefecture in July to Fuji Electric Co. The plant employs 550 people and produces microcontrollers that are installed in automobiles and home appliances.

As for the additional eight to 10 plants that would also be closed or sold off, company officials are looking at facilities with outdated production lines or ones that handle the final assembly steps in the semiconductor manufacturing process.

The company plans to maintain its Naka plant in Ibaraki Prefecture as a main facility, despite damage from the Great East Japan Earthquake and tsunami last year.

The damage affected global automobile production because the plant manufactured the microcontrollers essential for auto production.

Renesas will likely keep its plants in Ehime and Kumamoto prefectures going. They mainly manufacture microcontrollers.

Renesas has been negotiating with the three parent companies and financial institutions for an injection of 100 billion yen ($1.3 billion) to carry out the downsizing measures.

While the financial institutions have agreed to provide loans totaling 50 billion yen under an existing loan framework, discussions on the remaining 50 billion yen have hit a brick wall.

NEC officials have refused to cooperate in providing support either through additional capital or loans.

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