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RENESAS Executive Summary

Question: Renesas executives believe an acquirement of a company is necessary for the company to grow. Impact
What company serves the best choice and why?

Current Issues and M&A Strategy[1]

- Weak global footprint: - Integrated Device Manufacturing risk:
36,263 million yen
Saved from total
- Pursue cooperation with - Pursue a fab-light if not fabless production cost
international companies. model
- IDT is a great example and - Acquire companies capable of
beneficial acquisition embedded system
1,325 million yen
[2]
Vision and Goal Current Worldwide Locations (With headquarters set in Tokyo, Japan)
Saved from general
and administrative
● Create a safe and costs
environmentally friendly
vehicle ecosystem
● Societal safety through
artificial intelligence
● Comfortable lifestyles 36,263 million yen
through IoT
● Make every endpoint Saved from total
intelligent production cost

Sources: [1] TGCC regional case study [2] Renesas.com

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Scope of Issue & Bottleneck Identify
Semiconductor Industry Overview Industry Key Growth Outlook Renesas Current Portfolio Overview
Top 3 Key Growth Drivers in the industry (modified
“Despite the global pandemic and resulting Renesas’ Current Portfolio by Application and
from Financial Express: Key growth drivers of the
economic downturn, the global semiconductor By-Product according to 2019 End Market
industry)[4]
(modified from Renesas TGCC: Renesas’ Current
industry remained resilient with revenue growth
2021 outlook 2020 outlook Portfolio by Application and By-Product)[1]
of 6.5% to reach the $440bn mark in 2020.”[3]
Internet of Things
Connected home,
smart cities 3.8 3.7
“The Worldwide semiconductor market is
expected to increase by 19.7 percent in 2021, Wireless
continuing to grow by 8.8 percent in 2022.”[4] communications
5g tech,smartphones, 3.8 3.8
3.7
& mobile phones
Market Growth from
2021 to 2022 is Automotive
3.6 3.5
19.7% (Global Semiconductor Industry Outlook rated
on a scale of 1-5 with 1= not at all important
and 5=Very Important)
Future Goal = Improve Network
Infrastructure

From these three trends, Renesas should focus on IoT, Wireless Communication, and Automotive.
Sources: [1] TGCC regional case study [3] wsts.org [4] eprimeffed.com

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Analysis of Solutions to Renesas’ Net Sale Decline
Tactics possible:
Sources: [2] Renesas.com
Executive Summary
Declining net sales trendline[2]
Analyzing Challenges Breaking Down Possibilities
Recruit skilled workers to improve current product quality
- How: Promote such positions with high wages.
- Why it’s a risk: Possibilities for skilled worker
employment and stable worker skills are slim.
Direct transfer of targeting market
- How: Invest primarily on other products, instead of
Renesas’ current major products: MCUs, MPUs, and
automotives.
- Why it’s a risk: High chance that such a solution will
worsen the decline in net sales due to lack of trust in
product quality.
Transfer of targeting market through new manufacturing
strategy and technology[5]
- How: Through inquiry of Himax, Renesas can begin a
gradual investment to the display market with reinforced
MPU technology to segway into another market.
- Why it’s a better choice: Through previous acquirements
of IDT and Intersil, Renesas has strengthened its MCU
and Automotive technology, and an acquirement of
Himax can take advantage of the stabilized product
system and bring about innovation.
Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Recent Purchases & Benefits ( Identify Case )

“The product portfolios of Renesas

Dialog
Renesas IDT and IDT are highly
Technology complementary. The combination
allows us to bring more innovative
and comprehensive portfolio of
products to the market, with a
MCU Based in
larger global footprint, sales force
Based in Based in
& Analog Analog and distribution network”
Europe USA UK
MPU

“Dialogue Semiconductor
Increase Business Increase Increase Product Strengthen Analog
Growth International Variety & Target Solution Product
acquisition allows Renesas to
Opportunities Recognition Audience Portfolio combine the technological
capabilities of Dialog Technologies
into their own products, including
$6204 $843 $200 low-power, connectivity, and
Million Expected Revenue
Oku-yen of Revenue in Million US Dollars of Growth from Solution Offerings
mixed-signals improvements”
2019 by Renesas Annual Sales by IDT by Dialog Technologies

Sources: [1] TGCC regional case study [2] Renesas.com

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Analyzing Possible Characteristic of Favorable Company
With an operating margin of 9.3%
in 2020, Renesas would logically
High
Fabless Margin
pursue a high margin company.
Reaching into less competitive
industries could raise product prices.

As manufacturer shifts their corporate

strategy. IDM companies has no
Global
Market IDM advantage on operational
expenditures and ASSP chip
production. So would not be consider.

Embedded Low
system Margin

Enable connected car project, and Recent M&A activity with IDT
save about $500 billion in accident 5G increase analog product by 16%.
avoidance annually. Three highly IoT Analog Furthermore, addition of Dialog has
Automotive
link project benefits Renesas IC expand its analog solution. Thus,
system. should focus more on 5G, IoT system.

Meeting all of the characteristics, Broadcom, unfortunately, has a higher market value than Renesas and has been acquired by Avago Technologies,
making it an unrealistic company to merge with. Therefore, Himax stands out as a FAVORABLE choice to Renesas with multiple benefits

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Acquisition Recommendation Background: Himax[5][6]
Himax Technologies, Inc. is one of the top options to acquire,
Identity and System
considering its identity as a fabless semiconductor solution
provider. The Company is a worldwide market leader engaged in
display driver integrated circuits (IC) and timing controllers, which H
fits favorably with Renesas’ M&A strategy. In addition, revenue for
the small and medium-sized driver IC business is expected to In non-driver areas, the Company is pushing hard towards promoting

I
increase by low teens sequentially, with demand much higher than WiseEye ultralow-power AI sensing solution, which has seen
supply. Capacity shortage is expected to continue across all business widespread adoption for numerous AIoT applications. The
segments in this area. Company’s 3D decoder IC is also already ramping in volume.
Nonetheless, Himax continues to lead the high-end monitor market by
Skill and Technology providing advanced driver ICs and Tcons in partnership with

M
leading panel makers and end customers. The acquisition of Himax
delivers a higher level of semiconductor skills, which elaborate on
more robust automotive, IoT businesses.
With the rapid growth of 5G and high-performance computing, there
is a noticeable increase in demand for semiconductors dedicated to
advanced processes. The trend towards a more connected digital world
drives higher needs for mature nodes, unique demands from display A Innovation and Change
driver IC, power management IC, CMOS image sensor, automotive
industry, and various IoT devices that are already all around us and

X
still increasing rapidly in numbers. Himax employs around 2,000 people from three Taiwan-based offices
in Tainan, Hsinchu, and Taipei and country offices in China, Korea,
Japan, 12 Israel, and the US. Himax has 3,012 patents granted and 534
Global Company Size patents pending approval worldwide as of March 31st, 2021. It retained
its top display imaging processing semiconductor solution provider to
consumer electronics brands worldwide.

Sources: [5] Himax.com [6] Entrepreneur.com

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Analysis of Himax’s financial statistics[5]
P/E ratio:[7]
- Price to Earnings ratio: (Market value per share) / (Earnings
per share)
- High P/E ratio:
- Investors trust the company and are willing to
contribute to the stock
- Suggests that the stock may be potentially overrated
- Himax stocks currently hold a price to earnings ratio of 10.24,
while the industry average stands at 20.08
- Suggests that the company may be underrated,
considering the other financial ratios
Sources: [5] Himax.com [7] Investopedia.com [8] trade.education.com
Executive Summary Analyzing Challenges Breaking Down Possibilities
P/B ratio:[7]
- Price to Book ratio: (Market price per share)(Total outstanding shares)/Total
shareholder equity - Preferred Equity)
- Low P/B ratio:
- Suggests that the stock may be potentially undervalued
- Himax stocks currently hold a price to book ratio of 3.49, while the industry
average stands at 9
P/S ratio:[7]
- Price to Sales ratio: (Price) / (Sales)
- P/S ratio:
- Generally considered good if the P/S ratio falls between 1 and 2
- P/S ratios lower than 1 is considered exceptionally good
- Low P/S ratio suggests a more favorable investment for investors
- Himax stocks currently hold a price to sales ratio of 1.84, while the industry
average stands at 3.68
- Suggests that the company offers more considering investments
P/CF ratio:[8]
- Price to Cash Flow ratio: (Stock price per share) / (Operating cash flow per
share)
- Low P/CF ratio:
- Indicates that the company is generating excess revenue that is not yet
considered in the share price
- Suggests that the company is currently generating profit
- Himax stocks currently hold a price to cash flow of 14.45, while the industry
average stands at 25.79
- Suggests that the company is a positively growing company
Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
 Purpose of Acquisition
Embedded System Manufacturing Reinforced microprocessor background
Himax Display Tech
- Large display driver IC Renesas’ original technology
- TDDI single chips +
- Emza NIR Himax’s task-specific microprocessor technology
=
- LCoS displays STRENGTHENED MARKET POSITION
= Automotive Heads Up Displays
= Automotive touch screen monitor + ADAS[1]

A More Complete Product System Market Control and Influence

- HiMOS software 2019
- Better image quality Display driver IC
- WiseEye AI microprocessor market share = 7%
- Multiple third-party software partners 2021
- Renesas Analog Device[2] Within two years, 7% of
market share experience
Software + Hardware a 23% growth to 30%[2]
= COMPLETE PRODUCTION

Sources: [2] Himax.com [7] Investopedia.com [8] trade.education.com

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Final Choice Evaluation

Strengths Weaknesses
- 5g Software Technology - Less international competitiveness & recognition
- Transition to Embedded Systems - Himax’s unknown potential to reach a high
- Fabless Model: Flexibility ↑, Risk ↓ margin profile
- Reinforced MCU technology - Not the most sizable company in the market
- Introduction to renewed market - Unfamiliar and inexperienced product category

Opportunity Threats
- Increased Resource to Create More Innovative - Possible market oversaturation
Products - Competitors may create similar products
- Product Variation ↑; Appealing to more Audience - Minor changes in revenue, may result in more
- More Adaptive to the Recent Changes in the payment for taxes
Semiconductor Industry - May lose overall market competitiveness

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Strategy Execution[9][10]
Financial predictions assuming:
- Both companies’ operating margins remain the same and the total revenue of 2021 follows the trend set by the first half of the year
- Official acquiry of Himax occurs in January 2022
- Financial costs generally remain at constant ratios and percentages
Considered factors:
Revenue synergies:
- Sharing
expertise/combining
strengths
- Appeal to bigger
market
- Access to customer
list
Cost synergies:
- Increased bargaining
power
- Lower marketing cost
- Reduce headcount
- Merged facilities

Start connection between display technology and Start production of newly

Renesas’ semiconductor design developed product system

Strategic
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
timeline
Acquire Time investment in transition to Arrange more development and
Sources: [9] Renesas 2020 financial report
[10] Himax 202 financial report
Himax embedded system design innovation regarding the transition

Executive Summary Analyzing Challenges Breaking Down Possibilities Introducing Strategy Financial Analysis SWOT evaluation Strategy Execution
Thank You For Listening
Appendix 1
Appendix 2
Appendix 3