Renesas to Tie Up with TSMC for Chip Manufacturing

Beleaguered Japanese chip maker Renesas Electronics Corporation said today that it will tie up with Taiwan Semiconductor Manufacturing Company according to reports from Reuters.

The tie-up with Taiwan Semiconductor Manufacturing Co. (TSMC) in the microchip business as it struggles to keep up with aggressive competitors while racking up heavy losses.

Just yesterday, Renesas said it would cut 6,000 jobs, or 15 percent of its workforce, and attempt to raise nearly $630 million as it tried to keep up with competitors and stave off heavy losses.

Renesas, a product of successive mergers of the chip units of Mitsubishi Electric, Hitachi Ltd and NEC Corp, is the world’s largest supplier of microcontroller chips for automobiles, but has struggled in the face of global oversupply and a variety of new competitors. Renesas was said to be seeking capital from these three main shareholders, who together account for about 90 percent of the stock.

Japanese chipmakers have also been hit hard by natural disasters in Japan and Thailand and a strong yen. Reuters reports that Elpida Memory, the country’s sole maker of dynamic random-access memory (DRAM) chips, has filed for bankruptcy protection.

Sources told Reuters earlier in the year that Renesas, Fujitsu Ltd and Panasonic had been in talks on combining their system chip operations with the financial backing of government-backed investment fund Innovation Network Corp. It was unclear whether a tie-in with TSMC would negate that deal.

Renesas gave no details on the tie-up, which it plans to announce next Monday, although chipmakers are increasingly tapping the technological prowess of companies such as TSMC, the world’s biggest contract chipmaker, to keep costs under control.

Renesas is already a client of both TSMC and rival United Microelectronics Corp, the No.2 contract chipmaker.

While a rising yen squeezes margins at its plants in Japan, Renesas, the world’s biggest supplier of microcontroller chips for automobiles, is under constant pressure to spend heavily on a technological arms race with emerging overseas rivals to produce smaller and more powerful chips at lower prices. But it has run out of capital to do that.

Renesas posted a 62.6 billion yen net loss in the financial year to March 31 after last year’s natural disasters in Japan and Thailand forced it to shut eight factories and encouraged domestic automakers to diversify their supplies.

With its state of the art foundry manufacturing, TSMC is able to provide next-generation chip manufacturing as a service, dramatically reducing the cost of new chip development.