Matthew Trowbridge, chairman, Renesas

Over the last decade or so, consolidation has been one of the themes running through the electronics industry. That consolidation has come through a number of routes, including the physical integration of companies and the pooling of research budgets. One of the last big mergers in the semiconductor world took place in 2003, when Hitachi and Mitsubishi joined forces to create Renesas Technology. Now, Renesas is on the merger trail again as it looks to join forces with NEC Electronics. If all goes according to plan, the new company – Renesas Electronics – will see the light of day in April 2010. And Matthew Trowbridge, chairman of Renesas Technology Europe, has been involved in both of these mergers. Why is this merger being undertaken, when both companies are already top 10 global semiconductor companies? "We have both been affected by the unprecedented economic downturn," said Trowbridge. "Both companies, as well as our parent companies and major shareholders, have been evaluating how to strengthen our corporate foundations. However, this integration doesn't imply that we couldn't survive as independent companies. We decided to integrate our businesses based on a belief that it will benefit both our customers and our shareholders." When the new company is finally established – shareholder approval is anticipated to be in place in February 2010 – it will be well funded. Hitachi and Mitsubishi are investing ¥78billion before the merger completes and both companies, along with NEC, will be adding a further ¥122bn once the merger completes, giving Renesas Electronics a working capital of ¥200bn; around $2bn. The new venture will not be starting out from a position of weakness. Using current figures, Renesas Electronics will occupy the number two slot in the world semiconductor company listings, with revenues approaching $13bn. Not only that, it will hold the number one position in the microcontroller market with a 31% share. Trowbridge observed: "When the world's leading mcu companies join forces, the resulting company will possess a product line up that is strongly competitive. In SoC, Renesas is strong in the mobile phone and automotive fields, while NEC Electronics excels in the digital home electronics field. Together, we form a complementary pair."We believe we will be able to achieve significant synergies in product design, manufacturing and sales." Both merging companies are independent device manufacturers: IDMs. They have a range of production facilities and a hefty product portfolio. And each has its own sales force. But putting together two companies with sales of $13bn isn't likely to be easy. Diplomatically, Trowbridge noted: "I am confident that the challenges of integration will be overcome and we will soon realise the benefits of the merger." Rationalisation of production lines is already underway. At the end of March this year, the two companies had 15 sites and 25 lines in operation. By April 2010, that number will be reduced to 10 sites and 16 lines. "This rationalisation happens in the normal course of affairs," Trowbridge said, "but the process has been accelerated by the merger and the new company will have a consolidated manufacturing base." Some older facilities have been, or will be, shut and a couple will be sold. Meanwhile, progress will be made in moving to advanced process nodes, including 28nm. "We are committed to building products on the advanced process technologies being developed jointly with Panasonic," Trowbridge noted. "And mass production of the SH-Mobile G3E has already started at 45nm." The 28nm development process is well underway. "We have developed interconnect technologies that use ultra low k materials and have completed development of an sram cell that uses a metal/high-k gate stack structure," he said. "Renesas has started operation of its 28nm process development line and plans to start mass production of 28nm products, including SoC devices for mobile applications, in 2011." But it appears that, unlike other major manufacturers, Renesas Electronics will not be making much use of foundries, although it does have a relationship with TSMC. "Our approach to 22nm and beyond is still open," Trowbridge accepted, "but Renesas places a high importance on its ability to make what it designs and to design what it can make. This will have a strong influence on the discussions and decisions still to be made." On the face of it, both companies will maintain independent sales organisations for the short term. But how quickly will this be unified? "We will aim to meet the expectations of our customers as soon as we can, but the details still have to be worked out," said Trowbridge. It might be expected that both companies would want to rationalise their product lines, but that's not the case, said Trowbridge. "We have no intention to 'rationalise' existing products or those under development precisely because of our commitments to customers. "Renesas Electronics will be formed by the merger of two large semiconductor companies with existing product lines. There will not be 'too many' products! On the contrary, customers are asking us to develop more varieties of product and we expect synergies in product design to help us here." Trowbridge pointed out the 'upside'. "NEC has significant strength in Mpeg and that could be applied to other SoCs with the ability to process graphics at high speed. In the automotive industry, two medium players will become one important company more committed to the sector." But the new company has wide ambitions. "Renesas Electronics aims to become a company with competitive products in the global market," Trowbridge highlighted. "One important area with a very large global market – and one in which we are already a top supplier in many areas –is discrete products. Building on its mcu business, the new company will strengthen its SoC and discretes operations." Power components will be an important part of this approach. "Power components are a critical area of business today and will become even more so in the future," he noted. "The global drive to reduce energy consumption means ever more sophisticated power control is required to minimise energy usage and wastage." Although it will be capitalising on its share of the mcu market and building on its SoC expertise, Renesas Electronics will be looking to grow its sales, not only by volume, but also geographically. "We need to increase the proportion of sales made outside of Japan," Trowbridge admitted, "so the objective is not only overall sales growth, but also getting design wins, getting commitment and ramping volumes." While a lot of growth is expected to come from China, Trowbridge continued: "A lot of design is done in North America and Europe, so these areas have an important role to play." Merging two companies such as Renesas and NEC Electronics isn't being undertaken for the fun of it: expectations of the new operation are high. "There will be no excuses for the new company's management," Trowbridge concluded, "because it will be on a sound financial footing." Matthew Trowbridge Matthew Trowbridge was named as chairman of Renesas Technology Europe in April 2009, following six years as the company's chief executive officer. Before that, he led the merger of Hitachi Semiconductor with Mitsubishi Semiconductor in Europe to form Renesas Technology Europe in 2003. Trowbridge joined Hitachi in 1983, helping to create – and then lead –Hitachi's European semiconductor organisation. He also served as chairman of the Board of SuperH, the joint venture between Hitachi and STMicroelectronics.