What will drive semiconductor business in 2021? What will be the impact of Covid-19 and semiconductor players strategies in the post-pandemic era? Industrial, infrastructure and IoT segments would enjoy a stronger tailwind due to COVID-19 according to Renesas’ CEO, Hidetoshi Shibata. To further understand Renesas’ ahead strategies and focuses, the legacy of innovations, technical know-how and megatrends, Niloy from BIS gets alongside Sailesh Chittipeddi, Executive Vice President and General Manager, IoT & Infrastructure Business Unit, Renesas Electronics Corporation.
- Given today’s scenario, what are the key focuses of Renesas and according to the company which sectors are the new drivers for the semiconductor biz?
To answer these questions, let’s look back at Renesas Electronics’ Q3 2020 financial results announced on October 29, 2020. As of September 30, 2020, 3Q revenue was 178.7 billion JPY, +7.2% QoQ, with gross margin at 47.5% and operating margin at 20.4% (Non-GAAP).
All Renesas revenue, growth margin and operating margin beat the guidance provided three months earlier. The key reason was mainly driven by the recovery in the automotive market – Renesas’ agile production resulted in tighter manufacturing costs and better inventory management.
In addition, we can all agree that 2020 has been a unique year for all people and manufacturers around the world. The COVID-19 pandemic challenged the way people live, and the way industry and business operate. However, as Renesas’ CEO, Hidetoshi Shibata, mentioned at the Renesas Strategy Update meeting, all the applications in industrial, infrastructure and IoT segments would enjoy a stronger tailwind due to COVID-19. The areas Renesas experienced growth were the result of increased demand for network bandwidth, laptops, PCs and tablets, together with Renesas devices for healthcare and air quality monitoring applications. 5G was the other area where Renesas also experienced a good tailwind. And the surveillance and voice user interfaces (VUI) are starting to take on more importance because touch is becoming less important, especially in this environment, where people are a little bit more sensitive.
- Can you elaborate about the technical and technological know-how of Renesas’ in the IoT business and key offerings to cater the digital-crony market?
With an estimated 14 billion devices connected to the Internet today and an estimated 50 billion connected devices by the end of 2023, the Internet of Things (IoT) offers a tremendous market opportunity. But it also presents a major security risk. Fortunately, technical standards and regulatory thinking concerning cybersecurity issues seem to be converging and maturing. With security now deeply embedded in the regulatory process, everyone must address the issue directly and effectively. Therefore, planning for compliance and implementing best practices must proceed hand-in-hand. Security regulations and guidelines establish basic security principles. These principles include:
Design for Security
There are many existing design processes for embedded systems, all of which establish threat analysis, security requirements, secure design, implementation, test/verification for security, and a response plan in the event of any issues following the release of the product.
Multiple Protection Layers (Defense in Depth)
In security applications, protection is most often implemented in multiple layers to prevent different types of attacks and provide redundancy and traceability.
Protection across the Product Life Cycle
Lifecycle management is vital to an OEM’s ability to maintain the security and integrity of their products from production, to shipment, to deployment, and ultimately to their end-of-life.
Roots of Trust (RoT) are the foundation of assuring the trustworthiness of a device. As such, RoT is security primitives composed of hardware, firmware, and/or software that provide a set of trusted, security-critical functions (NIST SP800-164, Hardware Roots of Trust).
While the principles outlined above guide our security principles, our customers benefit from several other features. These include: hardware-accelerated cryptography, hardwareenforced isolation, secure key handling, immutable program Flash, JTAG and programmer protection, which protects our MCU and MPU memories from external access.
- How Renesas is empowering the post-COVID-19 workplaces, types of application and User Scenarios if any?
The megatrends described at the beginning of the year, which are driving growth for the Infrastructure and IoT Business unit, are still valid, and COVID-19 has not changed that. All these trends were about data movement from the core to the end-point. The first trend is the disaggregation of data centers, with the hardware and software being broken up into memory clusters and processing clusters and interconnects. Then there is the 5G ramp-up trend, followed by the trend of more and more intelligence migrating to the endpoints. These three trends are still valid today.
In data centers, we at Renesas are not talking about memory or the processors, but about interconnect components for the data flow between memory and CPU, i.e. memory interface products. These components account for a large share of our sales in the infrastructure sector, plus components for digital power, timing, and optical components. The 5G ramp-up currently only refers to sub-6 GHz, but for this, we have RF, timing, and optical components. In addition, this year, we will be launching ICs aimed at 5G power applications. And when it comes to artificial intelligence (AI) at the edge and endpoint, our MCUs and MPUs are the core of our business. Therefore, we have realigned our MCU/MPU roadmap. At the end of last year, for example, we launched ARM-based microcontrollers from the RA family. In addition, there are MPUs with which we can cover everything from motor control to graphics and surveillance camera applications. The RZ family, especially the RZ/V2M, is primarily used in video applications, where these products are characterized by the lowest power consumption. This means the developer gets a product with GPU-level processing power, but at a fraction of the cost and with a fraction of the power consumption.
- Renesas technical support, partner ecosystem design in support for your solutions?
Renesas is enabling a comprehensive partner ecosystem to deliver an array of software and hardware building blocks that will work out-of-the-box with Renesas RA Family MCUs. The Renesas RA ecosystem will help accelerate the development of IoT applications, including core technologies such as security, safety, connectivity, and human-machine interface (HMI) among others. The RA MCU ecosystem has over 50 partners today with more planned. Each partner’s building block solution carries the “RA Ready” badge and is designed to solve real-world customer problems. RA Ready solutions accelerate time to market by providing plug and play options that enable a variety of IoT capabilities like security, connectivity, AI, machine learning (ML), and HMI.
- How is Renesas creating products that are in sync with new realities?
In the new normal, AI, building & industrial automation, and smart home technologies will play an important role, as the human presence will be less owing to new guidelines post lockdown. We are ready to help our customers in the new normal with Renesas MPUs and MCUs and a wide range of analog, power, mixed-signal and connectivity products. We provide scalable computer processing solutions to our customers ranging from general-purpose MCUs to AI integrated microprocessors. The range comes with predictive analytics that can help our customers further in making business decisions. Similarly, our products have motor control that ranges from low-end suitable for home appliances to the high-end addressing robotics on the factory floor and other business environments. So, in nutshell, I can say that we are ready to face whatever challenge that the new normal throws at us.
- Major focus and roadmap of RENESAS to escalate growth further in 2021?
According to Invest India, the Indian electronics market is expected to reach 400B by 2025 and per capita disposable income and private consumption have doubled in the past seven years. As a result, India has emerged as one of the world’s largest markets for electronic products. The MEITY’s Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components, and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) have the potential to position India as a global hub for Electronics System Design and Manufacturing (ESDM).
We plan to be a part of the growth journey that India expects to enjoy. The IoT, mobility, medical, consumer, infrastructure and industrial sectors are emerging as winners in the postCOVID era. Bio-sensing is also an important application due to the coronavirus because getting inexpensive healthcare and air-quality monitoring to people is going to become much more important.
IoT, Industrial and consumer electronics provide stable growth possibilities as the country develops towards first-world capabilities. We are leveraging our scale by going deeper with existing customers, especially in industrial smart meters, motor control and voice user interfaces applied to smart devices and intelligent appliances.
Using winning combination solutions, product cross-selling, and product extensions–through the integration of Renesas, Intersil and IDT product lines–has widened our customer base. We are also deepening our engagements with existing customers. All of these steps are fundamental to our go-to-market strategy.
- Given your leadership position, what will be the strategic approach of Renesas in coming years and alongside trends you envision to shape the semiconductor industry?
According to reports from the Semiconductor Industry Association (SIA), worldwide sales of semiconductors reached $39.0 billion for the month of October 2020, an increase of 6.0 per cent compared to the October 2019 total of $36.8 billion and 3.1 per cent more than the September 2020 total of $37.9 billion. Monthly sales are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average. Additionally, a newly released WSTS industry forecast projects annual global sales will increase by 5.1 per cent in 2020, followed by an increase of 8.4 per cent in 2021. Projections for both years are higher than they were in the previous WSTS forecast released in July. SIA represents 98 per cent of the U.S. semiconductor industry by revenue and nearly two-thirds of non-U.S. chip firms. Industry forecast revised upward now projects moderate growth in 2020 followed by stronger growth in 2021.
Beyond 2021, semiconductor companies may have more difficulty predicting demand because even greater uncertainty abounds about healthcare and business developments. As companies create long term plans and evaluate potential scenarios, trends in two areas deserve particular attention.
Over the past few months, people around the world have experimented with new ways of working, studying, and communicating through videoconferencing and other technologies. Such trends could have a lasting impact on semiconductor demand and open new possibilities for existing products and services. For example, as online collaboration grows, demand could increase for semiconductors that enable servers, connectivity, and cloud usage. Semiconductors may also be in high demand for products and services like contactless solutions, including touch screen and elevator buttons, assisted-living devices, including sensors that help elderly and chronically ill patients remain in their homes, rather than moving to traditional assisted-living facilities.
Also, automated-delivery solutions for the last mile, such as robots and drones will play a major role in assisting people. We’ve learned that we all need to embrace uncertainty as part of our operating model, and we must become agile and learn to adapt quickly in order to get through the coronavirus. As in previous downturns, those semiconductor companies that were agile and acted quickly emerged stronger. Modest CAPEX cuts, a focus on R&D innovation, and a pragmatic approach to M&A can help companies capture growth and create cutting-edge technologies that will be in high demand as the global economy recovers.
To close on a slightly different note, our ability to provide excellent support and service from engineering design all the way to parts shipments to our customer in the midst of any crisis will determine the trust and longevity of our partnerships. As long as, Renesas can outperform our competitors in this area, I am confident that we will emerge much stronger from this pandemic over time.