Renesas Electronics And The Automotive Microcontroller Supply Chain

Customer Demands for Renesas Products

1.How would you characterize customer demands for Renesas products? Does the automobile industry place unique demands on Renesas, compared to others like consumer electronics?

2.Why is Renesas product portfolio so fragmented?

3.How different are the economics of serving company A vs Company B?

4.What alternatives should Renesas consider to reduce its vulnerability to future disruptions?

1.Customer demands for Renesas products are very high given that the company supplies 30% and 40% of microcontroller and auto microcontroller chips respectively across the world. In particular, Naka, one of Renesas’s facilities was very important for Japanese automakers because it was their only source of engine microcontrollers for their car models (Shih & Pierson, 2012). The automobile industry places unique demands on Renesas unlike for instance the consumer electronics industry. As such, automobiles chips require long design-in cycles which is then followed by model lifetimes that can take five years or more (Shih & Pierson, 2012). A design-in cycle is termed as the process of choosing a component, subsequently testing it to determine whether it will attain performance as well as lifetime requirements, and then finally performing the engineering process to integrate it into a product design (Shih & Pierson, 2012)

2.Fragmentation refers to the use of several component manufacturers during the production process of a product (Chryssochoidis, 2015). This means that different companies will produce component parts as opposed to the finished product, and the components will subsequently be assembled to form one complete product elsewhere (Chryssochoidis, 2015). Renesas employed three process types when creating flash microcontrollers. An example of fragmentation in Renesas involved the use of Super flash technology from Silicon Storage Technology for low-end chips (Shih and Pierson) (Shih & Pierson, 2012). Other process types for several products came from Hitachi (Super H), NEC Electronics (V850) and the Mitsubishi (HND). A customer often took two years to ascertain whether a microcontroller was compatible with a new vehicle program while production took almost five years to complete after initial shipment (Shih and Pierson, 2012). Consequently, Renesas had to cope with substantial product variety it had inherited from the companies it merged with. 

3.Fulfilling short-term needs of company A and company B after Naka fab was damaged was the biggest challenge. Both solely depended on Naka for microcontrollers. Company A was a large consumer of H8SX/15xx microcontrollers and H8SX/17xx parts. Company B on the other hand majorly consumed SH-2/SH-2A microcontrollers (Shih & Pierson, 2012). Consequently, the economics of serving A were higher compared to B because A purchased more units compared to B. Company B might have been purchasing microcontrollers for various part numbers such as engines, car audio and car navigation systems but still purchased smaller units compared to A.

4.To ensure business continuity, Renesas had already begun creating a “Two fab system” before Naka was wrecked by the Earthquake (Shih & Pierson, 2012).  Although it is expensive, it is a possible alternative which the company should continue pushing for as it implies some products will have a second fab in the company’s network which is a second source of chips that may aid in disaster recovery. Preferably, the second fab can be set up in a country where the probability of interruptions witnessed before occurring is low or none at all (Park et al., 2013).

References

Chryssochoidis, G. M. (2015). Product/Market Portfolio, Extent of Access to Distribution  Channels and  Branding in Export Success Factors Research an Exploratory Study.  In Proceedings of the 1993 World Marketing Congress (pp. 218-222). Springer International Publishing.

Park, Y., Hong, P., & Roh, J. J. (2013). Supply chain lessons from the catastrophic natural disaster in Japan. Business Horizons, 56(1), 75-85.

Shih, W., & Pierson, M. (2012). Renesas Electronics and the Automotive Microcontroller Supply Chain (A). For the exclusive use of K. Ratushniak, 2017, 1-16