Japan Power Chip Sector Undergoing Realignment

Tokyo, April 6 (Jiji Press)–The Japanese industry of power semiconductors, used in electric vehicles and other products, is undergoing realignment, with manufacturers seeking consolidation to compete with foreign rivals. Rohm Co., Toshiba Corp. and Mitsubishi Electric Corp. launched discussions on integrating their power chip operations after auto parts supplier Denso Corp. offered to acquire Rohm. Although Japanese makers comprise a sizable combined share of the global power chip market, the country has many manufacturers, each operating on a relatively small scale. Faced with the rise of Chinese manufacturers, companies have recognized the need for market reorganization, with Mitsubishi Electric President Kei Uruma saying that firms should “work together and develop chips that can compete with China and other countries.” Still, negotiations had been stalled partly due to headwinds caused by a sharp drop in EV demand in recent years. Denso President Shinnosuke Hayashi said at a business plan briefing in Tokyo on Tuesday that the company’s proposed buyout would produce substantial synergies. Value for customers would increase by bringing together the technologies and sales channels of Denso, which is strengthening its chip business for car electrification and for artificial intelligence, and Rohm, which has a major market presence in industrial equipment and in-vehicle chips, Hayashi added. Denso’s offer to acquire Rohm revived negotiations among chipmakers. Rohm President Katsumi Azuma likened Denso’s offer to the 1853 arrival near Edo, now Tokyo, of then U.S. Navy Commodore Matthew Perry’s steamships, which ushered in the opening of Japan to the world and rapid modernization. Prompted by Denso’s move, Rohm accelerated talks with Toshiba, with which it has a capital alliance, and Mitsubishi Electric joined them. If the three firms are able to integrate their power chip operations, they will become the second largest business in the sector globally, behind Germany’s Infineon Technologies AG. Rohm has set up a special committee comprising its outside board members to consider Denso’s proposal. By joining Denso, part of the Toyota Motor Corp. group, it can expect steady growth mainly in its in-vehicle chip operations. Meanwhile, joining forces with Toshiba and Mitsubishi Electric can offer Rohm a certain degree of independence to compete with global rivals including in chips for AI-related use, which are expected to see higher demand. Acquiring Rohm is expected to cost more than 1 trillion yen, but Denso Executive Vice President Yasushi Matsui said that the auto parts maker has “2 trillion to 4 trillion yen to spend on strategic investments and share buybacks.” Despite Denso’s financial strength, Rohm is believed to be reluctant to be swallowed up by the massive Toyota group. Realizing the Rohm-Toshiba-Mitsubishi Electric alliance is also seen as challenging because it will not be easy to coordinate the three firms’ interests. Rohm’s Azuma said that the companies should not repeat the same mistake as the former Elpida Memory Inc., which was formed through the merger of the chip operations of NEC Corp. and Hitachi Ltd. but later went bankrupt. He said that Rohm will first seek to strike an integration agreement with Toshiba by summer. END [Copyright The Jiji Press, Ltd.]