Renesas Electronics To Cut 5000 Jobs To Save $550 Million

Renesas Electronics Corp (TYO: 6723), a leading Japanese semiconductor manufacturer, Tuesday said that it was cutting 5,000 jobs in an effort to restructure the organization.

The reduction in workforce by 12 percent is part of its plan to save 43 billion yen ($550 million) annually. Renesas, whose majority shares are owned by NEC Corp, Hitachi Ltd and Mitsubishi Electric Corp, is also planning to sell or consolidate nearly ten plants. It is planning to concentrate resources on its core business of manufacturing microcontroller chips for cars.

Last month, it was reported that Renesas president Yasushi Akao was seeking funds from lenders and its major shareholders. It is expected that this would help achieve a capital injection of nearly 100 billion yen.

The company posted a net loss of 62.6 billion yen in the financial year ending March 31. The company has been severely affected by supply chain disruptions following earthquake and tsunami disasters in Japan and the floods in Thailand in 2011.

Renesas, which is facing stiff competition from rivals like Samsung Electronics, has seen its sales dropping as it cannot match the price of its competitors following strengthening of the Japanese yen and also increasing production costs.

The business of Renesas is also badly affected from the fact that some of its important customers like Sony Corp., Panasonic Corp. and Sharp Corp are not doing well in the present condition.

Job cuts are becoming a norm in Japan where firms are taking stringent action to trim costs and drastically refocus their businesses. NEC Corp said in January it was cutting 10,000 jobs, Sumco Corp said in February 1,300 jobs would be cut and Sony Corp said in April that around 10,000 jobs would be cut.

The continuing crisis in Europe, the weakness in the US market and the strengthening of Japanese yen have hampered the growth of Japan's export-focused companies.

Shares of Renesas were trading at 348 yen, up 9.78 percent at closing Tuesday.