Japanese Semiconductor Company with 467% Stock Surge... "Market Cap of $100 Billion Possible"

'Top 3 Car Semiconductor Giants' Renesas
Stock Price Up 32% This Year, 467% Over 5 Years
Banker-Turned-CEO Focuses on Business Restructuring and M&A for 10 Years
Reducing Japan Dependence and Expanding Overseas Sales Efforts

In Japan, which is aiming for a revival of the semiconductor industry, semiconductor company Renesas is showing a remarkable upward trend. Established ambitiously in 2003 under the leadership of the Japanese government, the company initially thrived but faltered due to the great earthquake and economic downturn. Recently, however, it has been on the rise again, riding the semiconductor boom. Over the past decade, restructuring and business reorganization led by CEO Hidetoshi Shibata, a former banker, have borne fruit, and the company now aims to become a $100 billion (approximately 137.8 trillion KRW) market capitalization enterprise.

[Image source=Reuters Yonhap News]

In a recent interview with Bloomberg News, CEO Shibata stated that the goal is to increase Renesas' market capitalization from the current $35 billion to $100 billion by 2030. Having joined Renesas as CFO in 2013 and serving as CEO since 2019, he said, "(Renesas) must become a truly global player. Being a major player only in Japan is meaningless," adding, "I am determined to make this a reality."

Renesas' stock price rose 32% in the first half of this year alone. During its early years, Renesas experienced Japan's semiconductor industry boom, with its stock price surpassing 9,000 yen (about 77,000 KRW) in October 2003. However, it then declined, falling to the 400 yen range in 2009 and hitting a low in the 200 yen range in 2012. It showed no signs of recovery until the semiconductor industry gained attention amid the COVID-19 pandemic in 2020, when the stock price began to rise, surpassing 3,200 yen as of the 4th of this month. Renesas' stock price has increased by 467% over the past five years.

Shibata CEO is credited with driving Renesas' recovery. He joined Renesas in 2013, just after the company's stock price had bottomed out. A graduate of the University of Tokyo and Harvard Business School (MBA), he worked as a Merrill Lynch banker before serving as an investment executive at the Japan Industrial Innovation Organization, a public-private fund, where he became aware of Renesas' situation and decided to change jobs.

Joining Renesas, which was chronically unprofitable and practically failing, Shibata, then CFO, undertook large-scale restructuring and business reorganization. Originally, Renesas was formed by integrating the semiconductor divisions of Japan's three major companies?Hitachi, NEC, and Mitsubishi?and was burdened with various business segments, which he believed needed to be streamlined.

Based on this, Renesas focused on the automotive semiconductor sector, including microcontrollers (MCUs). As a result, it secured a strong market position in the automotive semiconductor market, ranking among the top three companies alongside the Netherlands' NXP and Germany's Infineon.

After streamlining existing business segments, CEO Shibata has been acquiring overseas companies to secure technology and expand into foreign markets. Renesas acquired U.S. semiconductor companies Integrated Device Technology and Intersil Corporation, as well as the UK-based Dialog Semiconductor, enhancing its technological capabilities. This year, it also announced plans to acquire Australian software company Altium for $6 billion.

CEO Shibata stated that the focus is on expanding beyond the domestic market into overseas territories. The share of Japan in Renesas' total sales decreased from 44% in 2016 to 26% last year. Meanwhile, sales proportions in Asia, Europe, and North America all expanded during this period.

The market Renesas is most focused on is India. Although India's current share is relatively small, the company aims to increase its sales proportion in India to at least 10% by 2030. Renesas plans to increase its Indian workforce twentyfold to 1,000 employees by 2025.

Bloomberg reported, "Renesas' growth aligns with Japan's aggressive efforts to transform the world's fourth-largest economy into a semiconductor powerhouse." In fact, the Japanese government has decided to invest a total of 4 trillion yen in semiconductor and advanced technology development, and Renesas is set to receive government subsidies of 15.9 billion yen to expand semiconductor factory production capacity.