Renesas Electronics, Japan's leading semiconductor manufacturer, has unveiled plans to lay off several hundred employees globally and postpone annual wage increases as it confronts declining demand in the chip industry.

The company, known for its microcontrollers, analog ICs, and power management chips, employs approximately 21,000 people worldwide. The layoffs, representing nearly 5% of its workforce, were communicated to affected employees by the end of 2024. This follows earlier layoffs in 2024, which impacted 1–2% of the workforce, marking consecutive years of cost-cutting measures.

Renesas has also decided to cancel its regular spring wage hikes, a decision that applies to employees and executives alike. This move aims to manage personnel costs and brace for potentially prolonged weak demand across its key sectors, including automotive, industrial machinery, and consumer electronics.

Market Challenges

Renesas has projected a 9% year-over-year revenue decline for 2024, estimating total sales of JPY 1.33 trillion (approximately USD 8.4 billion). The operating margin is expected to drop by 5 percentage points, settling at 28.9%.

Factory utilization rates have also suffered significantly, falling from 40% in Q3 2024 (July to September) to around 30% in Q4 2024 (October to December).

Production Delays and Strategic Adjustments

The company had originally planned to begin mass production of power semiconductors for automotive and industrial applications at its Kofu plant in Japan's Yamanashi Prefecture by early 2025. However, this production plan has been shelved due to market conditions.

Renesas is shifting its focus toward positioning itself for future opportunities. The company is increasing investments in automotive chips and industrial power semiconductors to capitalize on a market recovery expected in the second half of 2025.

Broader Industry Impact

A Japanese semiconductor distributor commented, “The market may not see a turnaround until late 2025.” This sentiment underscores the challenges faced by the global semiconductor industry, which is grappling with weakened demand and slowing economic growth.

Renesas' efforts to cut costs, optimize operations, and enhance its technology portfolio reflect its strategy to navigate current difficulties while laying the groundwork for long-term growth in a fiercely competitive market.