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Renesas seeks synergies in budding fields with IDT deal

CEOs see connected cars and wireless charging as areas for cooperation

The success of Renesas' 2017 purchase of U.S. semiconductor company Intersil was a factor in IDT's decision to accept the buyout offer.   © Reuters

PALO ALTO, U.S. -- In buying U.S.-based Integrated Device Technology for $6.7 billion, Renesas Electronics envisioned partnerships in fields that could produce synergies through complementary technologies, such as connected cars and wireless charging, the companies' chiefs told Nikkei on Thursday.

The speed with which the companies agreed to the acquisition -- after just three months of talks starting in June -- can be attributed to Renesas' clear vision for a combined entity, IDT CEO Gregory Waters said in an interview at his company's San Jose headquarters. He was joined by Renesas CEO Bunsei Kure. 

"IDT and Renesas have the same target market -- automotive, industrial, data centers -- but the products are very different. If we can combine these products and technologies in a better way, we have a better company," Waters said. "Renesas had studied this very thoroughly."

In particular, IDT anticipates synergies with Renesas' customer base in the auto industry. Although Tokyo-based Renesas is a leader in automotive semiconductors, this alone will be insufficient to capitalize on rising demand for connected cars.

"IDT is the overwhelming leader in wireless power, smartphones and also early automotive. Wireless power is coming to almost every car in the future," Waters said. "I think this is an elegant and almost easy way to expand business."

Renesas also purchased U.S. semiconductor company Intersil in 2017, the success of which was a factor in IDT's decision to accept the buyout offer.

"I believe the [Intersil acquisition] is viewed by everybody to be quite successful," Waters said. "It is a Silicon Valley company that is 15 km from here."

Renesas CEO Bunsei Kure, left, with Integrated Device Technology CEO Gregory Waters. (Photo by Hiromi Sato)

Waters also believes that Intersil's power management capabilities are exciting for the future, adding that such analog technologies give Renesas a menu of fields in which it can compete, such as automobiles and industrial "internet of things" devices.

IDT and Renesas, however, are dwarfed by larger competitors. The semiconductor segments of market leader Samsung Electronics and second-ranked Intel each generate sales of over $60 billion, while the combined revenue of IDT and Renesas do not even reach $9 billion.

Yet Waters does not view this as an issue, saying that while companies handling microprocessors such as Intel and memory manufacturers like Samsung and SK Hynix need to be large, those competing below them can be much smaller and still compete on a global scale. "Renesas is already at this size without IDT," he added.

Technology acquisitions have been under increased scrutiny of late. U.S. President Donald Trump blocked in March the acquisition of American chipmaker Qualcomm by Broadcom -- based in Singapore at the time, but since moved to San Jose -- while Qualcomm's acquisition of the Netherlands' NXP Semiconductors was grounded by Chinese authorities in July. But Renesas believes that there are few political risks with its deal.

"We have a precedent in Intersil. Technically speaking, the hurdle for Intersil was higher. For IDT we see lower hurdles," said Renesas CEO Kure. "We have made a thorough analysis."

There are also trade risks, with semiconductor products included in the second round of U.S. tariffs on Chinese products enacted last month. There is concern that the impact would not only hurt the two companies' businesses, but also the global economy. 

"The impact has been small," said Kure, but he added that everybody loses if the friction escalates.

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