Renesas to Boost Modem Sales on Nokia Unit Purchase

 Renesas Electronics Corp., the Japanese chipmaker that’s buying Nokia Oyj’s wireless modem business, plans to quadruple sales of chips used to connect wireless devices to phone networks and the Internet by 2015.

The $200 million purchase of Nokia’s wireless modem business announced on July 6 will help the company’s wireless division boost sales fourfold to $4.5 billion in five years, Senior Vice President Hideaki Chaki said in a July 13 interview in Tokyo. The acquisition will pay for itself by 2013, he said.

Renesas is challenging industry leader Qualcomm Inc. to tap a modem market that is growing as portable devices such as smartphones and car-navigation systems proliferate. The acquisition of Nokia’s business, to be finished by the end of the year, gives Renesas 1,100 of the Espoo, Finland-based company’s engineers and at least 35 percent of the market, Chaki said.

“If we had tried to build those markets from zero it would have taken years and the investment would have been huge,” he said. “We’re getting it overnight.”

Renesas fell 3.6 percent to close at 835 yen on the Tokyo Stock Exchange, while the benchmark Nikkei 225 Stock Average dropped 1.1 percent.

The company, which came from a merger of chipmakers NEC Electronics Corp. and Renesas Technologies Corp. and started business on April 1, has risen 10 percent since the Nokia unit acquisition was announced.

Supplying Chips

Nokia in 2009 supplied almost 29 percent of the modem chip- sets used inside so-called 3G handsets, phones and other wireless devices that allow users to access the internet, a 5 percentage point decline from a year earlier, according to Tokyo-based Techno Systems Research Co.

San Diego, California Qualcomm supplied 36 percent of the market, up from 27.4 percent from the previous year, the research firm said.

Renesas, which specializes in making semiconductors that control products ranging from air bags to DVD players, will be profitable on an operating basis in the 12 months ending March 31, and post net income the following year, the company said on May 11.

Combining the two Japanese chipmakers would help them raise overseas sales to 60 percent of the total, compared with 44 percent last fiscal year, helped by demand from emerging markets, the company said.

“If you’re doing business globally, you need more than Japanese engineers,” Chaki said. “You have to branch out.”

--Editors: Jonathan Annells, Dave McCombs
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Mikako Nakajima in Tokyo at mikako@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.

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