Auto chip giant says Covid outbreaks will become ‘business as usual’

Semiconductors updates

The global semiconductor industry needs to adjust its operations and supply chains to a world where resurgences in Covid-19 are “business as usual”, according to the chief executive of Renesas Electronics.

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Hidetoshi Shibata, who heads one of the world’s largest suppliers of automotive chips, told the Financial Times that new outbreaks of the pandemic had also posed a challenge for the Japanese group’s €4.9bn takeover of Dialog Semiconductor: he has yet to physically meet or visit any of the Apple supplier’s executives and offices since reaching a deal virtually in February.

“We’re busy as things stand now so frankly there is probably a feeling of integration on top of all of this,” Shibata said.

The rapid spread of Covid-19 in south-east Asia has wreaked havoc across global supply chains, prompting Toyota, the world’s largest carmaker, to slash global production in September by 40 per cent. Industries have been hit by a worldwide shortage of semiconductor components, with Shibata warning that normalisation of the situation was “considerably far off”.

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“We need to think about how we are going to live with Covid,” he said. “That means doing things differently instead of shutting down operations and doing quarantines each time there is a rise in new cases as we are currently witnessing in Malaysia and Vietnam.”

The disruptions have come as Renesas is tasked with integrating Dialog — its third big acquisition in four years — while facing heavy travel restrictions. “I’m both excited and worried,” Shibata said. “We acquired Dialog without even visiting the company once so I want to go soon and make sure that there are real offices and people.”

Other Japanese companies face a similar challenge, with many eager to resume their hunt for overseas acquisitions after the pandemic limited their ability to perform hands-on due diligence.

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Despite the disruption, Renesas presented 39 types of new products combining the technologies of the two companies when it completed the acquisition of Dialog last week. The deal is part of Shibata’s attempt to expand the group’s portfolio beyond automotive chips and widen its geographical footprint as trade tensions between the US and China create geopolitical complexity.

“We feel that intense efforts from the start could result in faster-than-targeted generation of sales synergies in the industrial, infrastructure and ‘internet of things’ arenas,” JPMorgan analyst Masashi Itaya said following Renesas’s presentation last week.

The Dialog deal will also allow Renesas to inject fresh blood into its automotive chip business and adopt new engineering tools to adjust its products to the digital age. As part of that, Shibata has appointed Vivek Bhan, Dialog’s former senior vice-president, as the second most senior executive of Renesas’s automotive solution business.

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“Until now, our automotive division had been mainly run by the traditional Renesas, but we want to accelerate from here to modernise the automotive side as well,” he added.

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