Renesas Falls Most in 15 Years on Sluggish Industrial Demand

Yuki Furukawa and Mayumi Negishi
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(Bloomberg) -- Renesas Electronics Corp.’s stock fell the most in more than 15 years, hit by a broader tech selloff and investor disappointment over the Japanese chipmaker’s profit miss.

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Renesas’ stock fell about 14% on Thursday. The company, which supplies Toyota Motor Corp. and Honda Motor Co., reported underwhelming operating profit in its mainstay industrial segment, which includes factory, Internet-of-Things and infrastructure-related chips.

“We were too optimistic in our outlook in the first quarter,” Renesas Chief Executive Officer Hidetoshi Shibata told reporters on Thursday. The company expects sales of its industrial-use chips to fall in the current quarter, as it adjusts inventories, but revenue will recover in the following quarter, Shibata said.

Demand for power semiconductors to run alongside artificial intelligence-training chips will gain momentum from the end of 2024, he said. “We have no intention to slow down our spending on R&D.”

The company has been on an acquisition spree as it seeks to expand its customer base beyond automakers. Renesas earlier this year announced a deal to buy Australia-listed software firm Altium Ltd. to move upstream in product development and electronics design. That deal will likely be completed next week, Shibata said.

The Tokyo-based company previously bought UK-based Dialog Semiconductor Plc, San Jose-based Integrated Device Technology Inc. and Milpitas, California-based Intersil Corp.

Investors had cheered those deals, lifting the company’s shares to a record high earlier this month. But the company’s market value has plunged since then, as concerns grow about the longevity of AI-related spending.

Formed out of the chip arms that originated from NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp., Renesas has made inroads into embedded semiconductors, or chips designed to work with other processors within systems such as cars and robots. Its ambition is to tap growing demand from customers grappling with increasingly complex and interconnected electronics.

What Bloomberg Intelligence Says

Renesas’ sales could finish 3Q sequentially lower, underperforming peer NXP Semiconductors’ own internal guidance for sequential growth. The industrial segment’s 19% year-on-year sales decline in 2Q, announced today, is also in marked contrast to NXP’s 7% growth, signaling a widening market share gap between both competitors.

- Masahiro Wakasugi, senior industry analyst

Click here for the research.

(Updates with closing shares in the second paragraph. An earlier version was corrected to remove a wrong results date.)

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