Renesas moves away from uncancellable contracts as inventory rises
Renesas Electronics is moving away from the ‘uncancellable contracts’ used during the chip shortage as it sees inventory rising and flat revenue.
Renesas saw revenue of ¥368.7bn ($2.6bn, €2.36bn) for the second quarter, up 2.5% on the previous quarter but down 2.2% on the same time last year. Profits of ¥129.1bn, ($900m) were up ten percent on a year ago. It expects the same revenue of ¥370 billion for Q3, down 4.5% year on year.
“The numbers for Q2, I do believe, is in line with our expectation. On the other hand, when we think about Q3 and onwards, I do believe that I mentioned that we want to be prepared for upsides,” said Hidetoshi Shibata, President and CEO.
“When we look at the large Tier 1 customers, the global customers, cash flow is really tight. In other words, we believe that everyone is really trying to control their inventory. And I think that’s what’s happening right now. And it seems like everyone’s really focusing on cash,” he said.
The company has paid half of the $2bn fee for its silicon carbide long term supply deal with Wolfspeed, with the remainder to be paid next year. The company recently announced the restart of its Kofu Factory to produce IGBTs, and establishment of a silicon carbide production line at its Takasaki Factory.
“The first $1 billion has already been paid and the other $1 billion is going to be paid next year and onwards. The source of this is our own cash,” he said.
Inventory
“When we look at the channel inventory and also in-house inventory in terms of level, we have identified a target. As of now, it is beneath the target. And as for the outlook ahead, if it is clear, we will be able to, of course, increase the inventories substantially. If the weak situation prolongs, or if there is a reversal, we hope to be able to increase our inventory.”
“We were looking at NCNR, non-cancellable orders. We have departed from that, and the lead time is also very short, which also means that, of course, we need to have ample inventory and, therefore, when orders come in from our clients, compared to the past, we find that the orders are coming in in a shorter span based on actual demand. And therefore, the current expectations as of now is that for new orders that will come in, as the orders are processed, we believe that the orders will begin to climb up.”
R-Car-S5
The company is working on a fifth generation R-Car system on chip (SoC) for automotive designs for 2027 with a chiplet architecture. The fourth generation R-Car S4 is sampling but not yet in production.
“Well, when we be able to have Gen-5 SoC? We can’t really say at this moment, but then it might be as early as 2027. And if it’s after that, it probably will be pushed out by two or three years. That’s how we imagine the pace will be as we prepare,” said Shibata.
“I don’t want to say too much, but then, of course, higher computation capability is one differentiation from G4 and G5, Gen-5, and, of course, that’s easy to understand. But then in addition to that, I think there are some other changes that we want to implement. For example, using chiplets, we’re hoping that we’d be able to seek more flexibility in responding to the needs of our customers.”
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“Another factor, for example, the past was like SoC versus MCU. From next generation, we want to have a crossover device. So high compute and the more traditional MCU, something in between is something that we’d like to have, and so that we’d be able to have a true, seamless situation.”
This is behind the drive to the high end ARM M85 core with AI acceleration.
“I guess it’s really those two factors, in other words, higher flexibility device and more scalability. We want to make a step further scalability than what we have been doing in the past.
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