Merging the semiconductor subsidiary NEC Electronics with Renesas Technology (2009)

The decision to let go of a founding business

At the heart of this decision is the fact that the semiconductors NEC had built for itself through vertical integration were released on the logic of scale. NEC had made everything in-house — from communications equipment to computers to semiconductors — and in the C&C era of fusing computers and communications, those home-grown semiconductors had underpinned the whole company’s strength. The post-Lehman loss made plain that the cost of maintaining that strength had outrun the company’s stamina. The third-place-in-the-world scale that the merger brought was a rational outcome; yet the fact that a founding business which had once contended alone for the world’s top spot now moved to the side that shares it with another company shows the weight of selection and concentration.

That said, whether letting go was the right answer remains hard to judge, even from the years that followed. The Renesas that NEC left behind was rebuilt with public funds and turned into a highly profitable company, keeping the world’s top position in microcontrollers. Whether NEC could have carried that revival had it held the business itself, or whether the two would have gone down together, cannot be known. Now that the reshaping of Japan’s semiconductor industry is once again spoken of as national policy, this merger — which rebound a founding business on the grounds of scale — appears to leave quietly open the question of who should carry a business, and how much of it should be held in-house.