Apple eyes 55% stake in Renesas SP Drivers
Renesas SP Drivers is a Japanese company that globally supplies small- and mid-size driver chips for LCDs, including those used by manufacturers of display screens for the iPhone.
Renesas Electronics' decision to sell its stake is part of a restructuring strategy that involves leaving the LCD business completely, according to Nikkei Asian Review.
Renasas Electronics did not offer further details, while Apple declined to comment.
Two days after the the Nikkei Asian Review report, Renasas SP Drivers issued a terse, non-denial statement: "There were media reports regarding Renesas SP Drivers, which were published in certain media. The reports were not based on Renesas's announcement and Renesas SP Drivers' announcement and they cannot be confirmed or regarded as fact at this time."
Today, Renesas SP Drivers issued an identical response.
Apple's interest in Renasas SP Drivers would be to further consolidate control over quality and cost in its supply chain as the smartphone market gets more crowded.
Rather than sourcing from several companies, as it usually does, Apple was caught having only one supplier for its iPhone LCD driver chips, according to Nikkei. It isn't clear if Apple's motivation for such a deal would be to keep from losing control of the supplier to a possible competitor or to take control of the manufacturing process in order to improve the quality of its iPhone displays.
LCD driver chips are the key component in determining the quality of a display's quality and energy efficiency; displays account for about 10 per cent of total energy use.
Apple has offered Renesas Electronics $479 million for its 55 per cent stake, according to Nikkei Asian Review, which estimates the LCD driver subsidiary's annual income at $577 million with a profit margin of 10 per cent.
Apple's most likely competitors for this deal would be Sharp, which owns a quarter of Renesas SP Drivers, and the Taiwanese chipmaking consortium Powerchip, which holds 20 per cent.
The market for small and midsized driver chips for LCDs is expanding as smartphone sales rise, according to Nikkei Asian Review. Renesas SP Drivers holds the largest marketshare at about 30 per cent, but close competition with Korean and Chinese companies has driven prices down.
Despite profit expectations of close to 10 per cent for the SP driver unit, Renasas Electronics is selling it to focus on its core business of automotive and industrial chips and restructure its way out of losses it has suffered since the 2010 merger of Renasas Technology Corp. and NEC's semiconductor business. Since the merger, the company has shed more than 11,000 workers, according to Japan Times.
The publicity drove Renesas Electronics shares up 10 per cent Wednesday but didn't please all the experts. Hideyuki Ishiguro, an investment analyst at Okasan Securities, told Nikkei Asian Review that, even after shedding many of its peripheral businesses to focus on car and industrial chips, Renasas Electronics has a lot to lose if it gets rid of a company in as pivotal a position as Renasas SP Drivers.
"It's one of their core technologies," Ishiguro said. "I think it's actually too good to sell."
- Kevin Fogarty
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