Renesas to target JPY 110 bln in cost reductions

Semiconductor maker Renesas Electronics unveiled a major restructuring plan aimed at cutting JPY 110 billion in costs and pushing the company to a 7-10 percent CAGR for chip sales over the period to March 2013. The company targets JPY 40 billion in savings to 2013 from completing integration of the NEC semiconductor activities. Another JPY 70 billion will come from changing its production strategy to rely more on outside foundries. The latter change will lead to impairment charges of JPY 33.1 billion this year on existing prodcution facilities. The restrucing plan will lead to 5,000 job losses at the company, mostly in the current fiscal year to March 2011. In terms of strategy, Renesas plans to focus more on overseas sales, particularly in China, and keep its product portfolio centred on the "advanced information-communications area", targeting areas such as cloud computing, smart home and smart grid technologies, auto electronics, consumer electronics and the mobile activities acquired from Nokia. The restructuring came alongside fiscal Q1 results showing a net loss of JPY 33.1 billion on sales of JPY 292 billion. For the full year, Renesas raised its sales outlook slightly by JPY 20 billion to JPY 1.19 trillion, amid expected growth in all three of its product divisions thanks to the overall market recovery. Semiconductor sales are forecast up 16 percent year-on-year on a pro forma basis. The group forecast a small operating profit of JPY 7 billion for the year, while the net loss is estimated at JPY 80 billion, including the planned impairment charges.