Renesas Electronics Corp. announced Monday measures to turn around its business, with a government-backed fund and private-sector firms investing up to ¥200 billion in the embattled chipmaker to keep it afloat.
The state-backed Innovation Network Corp. of Japan and the chipmaker’s eight key clients, including Toyota Motor Corp. and Nissan Motor Co., will first invest a combined ¥150 billion in Renesas. The fund stands ready to invest or loan an additional ¥50 billion in the future if the chipmaker needs more money, it said.
Of the total amount of the first tranche, INCJ will shoulder around ¥138.4 billion, while Toyota and Nissan will put in ¥5 billion and ¥3 billion, respectively. Canon Inc., Panasonic Corp. and Nikon Corp. will each invest ¥500 million, according to INCJ.
Renesas is hoping the bailout will help enhance capital investment and the development of microcontrollers to shore up its financial footing.
Renesas will issue 1.25 billion new shares priced at ¥120 apiece through a third-party allocation, it said.
Among the three major shareholders, Mitsubishi Electric Corp. is absorb some of the employees who would otherwise be laid off in the rehabilitation process. Hitachi Ltd. and NEC Corp., meanwhile, will not take on any of the chipmaker’s staff but provide Renesas extra money for restructuring, according to people familiar with the matter.
Renesas President Yasushi Akao said at a press conference that nothing has been decided regarding the scale of the extra job cuts, but acknowledged the need to further streamline its business to increase its international competitiveness.
INCJ President Kimikazu Nomi, who also attended the press conference, said the fund aims to send some of its executives to Renesas so it “will have certain influence” on the restructuring process.
“After INCJ’s investment, the growth strategy should be promoted under strong leadership,” Nomi said.
Akao suggested that he might step down after completing the restructuring measures, saying he is willing to “take responsibility” for the slide in the chipmaker’s business performance. He did not elaborate.
The deal was put together to counter a bid by U.S. investment behemoth Kohlberg Kravis Roberts & Co., which wanted to invest around ¥100 billion in Renesas. Japanese manufacturers feared that the vital steam of components Renesas was providing would be jeopardized by allowing the company to fall under foreign control.
The capital will help Renesas, a supplier to Apple Inc. and Nintendo Co., boost spending to develop more advanced microcontrollers used in cars and TVs.
Japan’s chipmakers have struggled amid falling demand, the strong yen and competition from Samsung Electronics Co., causing Elpida Memory Inc. to file for bankruptcy protection in February before agreeing in July to be acquired by Micron Technology Inc.