beyondbrics

The recent dust-up between China and Japan suggested how neighbours can have incompatible interests. But in business, things are often rather different. In one example, China’s emergence as a producer of sophisticated technology is helping strengthen one of the few big microchip businesses left in Japan.

Renesas, which was created in April in a merger of two loss-making chipmakers, says it expects to increase sales to China by 50 per cent by fiscal year 2012 and to double its Chinese staff in the same period.

Not long ago Japan led the world in microchip production, but its industry has been undercut by cheaper competition from South Korea and Taiwan. NEC, the company that once made more chips than any other, was
one of the two companies to fold its remaining operations into Renesas.

Chipmaking is also a notoriously volatile business. However, producers are currently enjoying a cyclical upswing, on strong demand for everything from personal computers to flat-screen TVs and smartphones. Fewer of those devices are made in Japan these days either – many Japanese brands have moved production abroad, in many cases to China.

In the new environment, Renesas’s strategy has had to adapt. It announced 5,000 layoffs in July, and is targeting new growth areas. This year it agreed to buy Nokia’s wireless modem business for $200m, and is looking to quadruple sales of chips used to connect wireless devices to phone networks and the internet by 2015.

There’s life in Japan’s high-tech players yet.

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