November 18, 2015 / 10:20 AM / in 3 years

Renesas ready to spend billions to out-grow NXP-Freescale - CFO

TOKYO (Reuters) - Japanese automotive chip maker Renesas Electronics Corp has earmarked billions of dollars for acquisitions to defend an industry lead under threat from merging peers, its financial chief said on Wednesday.

A Renesas Electronics Corp's chip is pictured at the company's office in Tokyo in this March 21, 2013 file photo. REUTERS/Yuya Shino/Files

The comment marks a shift in focus for the chipmaker after five years of costly restructuring which culminated in its first net profit since its 2010 inception. It also comes at a time of automakers seeking to add increasingly sophisticated features.

Renesas holds 10.5 percent of a $30 billion market for chips that appear throughout vehicles, in critical areas such as engines to frills like assisted parking, according to Gartner. But it will be overtaken after NXP Semiconductors NV and Freescale Semiconductor Ltd merge.

“As the semiconductor industry consolidates in pursuit of scale, we want to be a proactive rather than a passive player,” Chief Financial Officer Hidetoshi Shibata said in an interview.

“We have over 300 billion yen ($2.43 billion) in cash to fund potential acquisitions and can also procure several hundred billion yen from the market or banks,” he said. “We are not thinking small.”

Renesas posted its first profit in the business year through March 2015 after restructuring that involved halving its workforce, shutting plants and selling non-core businesses to concentrate on the automotive sector.

“The combination (of NXP and Freescale) will be a threat to us, but we will also expand to exceed it in scale,” said Shibata.

Renesas has been widely seen as a possible acquisition target as its largest shareholder, government-backed fund Innovation Network Corp of Japan (INCJ), is no longer obliged to hold onto its shares.

INCJ rescued a cash-strapped Renesas in 2013 with a 150 billion yen investment giving it 69 percent of the chipmaker, with the proviso it hold onto the stake for two years. That lock-up expired at the end of September.

“Discussions (with INCJ) are always there,” Shibata said about whether, when and to whom INCJ will sell. Shibata was INCJ executive managing director before joining Renesas in 2013.

INCJ, under the terms of its 2009 establishment, will be dissolved by 2024.

Renesas was created in 2010 from a merger of NEC Corp’s chip division and Renesas Technology, which itself was established through a merger of the chip units of Hitachi Ltd and Mitsubishi Electric Corp.

Additional reporting by Reiji Murai; Editing by Christopher Cushing

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