* Unit of Renesas is key maker of iPhone display chips
* Other companies also in talks to buy business -sources
* Renesas shares surge to three-year high
(Rewrites first paragraph, adds context on global supply chain
in paragraph 3)
By Reiji Murai
TOKYO, April 2 Apple Inc, seeking to
secure its mobile supply chain, has opened discussions to buy
control of a Japanese venture that makes key microchips for its
iPhone screens, sources familiar with the matter say.
The talks on what would be a rare acquisition in Japan for
the U.S. technology giant come as competition heats up in the
smartphone industry, with pressure to produce larger, sharper
and less battery-draining screens.
Apple's once undisputed command of the global mobile
electronics supply chain has diminished in past years as Samsung
Electronics Co and other manufacturers that make
smartphones powered by Google Inc's Android began to
dominate the market.
That makes the advanced chips made by the Renesas
Electronics Corp division all the more valuable in
Renesas, a loss-making Japanese chipmaker that is
restructuring to focus on its core auto business, is also in
talks with other companies on selling its 55 percent stake in
the chip division, known as Renesas SP Driver, people familiar
with the matter said on Wednesday.
The people did not name the other companies, nor indicate
the current status of the talks.
Desire for control over a venture that makes all the display
control chips for the iPhone as Apple battles rival products
from the likes of Samsung makes a compelling case for Apple to
seek a deal, industry officials and analysts said.
Apple "certainly might not be happy that someone else might
want it (the venture)," said Damian Thong, analyst at Macquarie.
"Apple routinely buys in key technology components and
software which they feel are important for the development of
their products. It's not new. What is unusual is that they're
doing it in the context of a Japanese firm."
Renesas said on Wednesday it was considering selling the
Renesas SP Driver unit, but declined to comment further.
Apple did not respond to an email seeking comment.
The Nikkei business daily, which was first to report on the
talks, said Apple could buy the Renesas stake for 50 billion yen
($483 million) by summer. It added that Sharp Corp
could also sell its 25 percent stake if requested to do so by
Apple. Taiwan's Powerchip owns the remaining stake.
Shares of Renesas surged after the report by as much as 19
percent to 934 yen, their highest in more than three years. They
pared those gains to end up 6 percent at 831 yen, compared with
a 1 percent rise in the benchmark Nikkei average.
A deal by Apple would be a rare foray into a Japanese
technology industry that has suffered from aggressive
competition by ambitious rivals like Samsung in the last decade.
Renesas, formed from struggling chip units at conglomerates
Hitachi Ltd, Mitsubishi Electric Corp and NEC
Corp, has racked up nearly 650 billion yen ($6.28
billion) in net losses over the last eight years.
Sharp has also posted heavy losses in recent years.
Renesas SP Driver, the largest maker of chips used to
control mobile device screens, supplies all three of the
companies that make displays for the iPhone, industry sources
say: Sharp, Japan Display Inc and South Korea's LG
Display Co Ltd.
"There's no doubt that, for Apple, the question of who buys
Renesas SP is a matter of grave significance," said one Japanese
display industry source, who asked not to be identified due to
the sensitivity of the matter.
Control over the supply chain has become increasingly
crucial among smartphone makers. While up to now Apple has
relied on outside suppliers for many key parts, Samsung makes
vital parts for its Galaxy smartphones, from screens to chips to
capacitors, in-house. That gives it greater control over costs,
production schedules and specifications, as well as product
The business at the centre of the talks has its admirers,
industry watchers say,
"Renesas SP Driver is strong in technology for LCD (panel
drivers," said one industry analyst, who declined to be named.
"Other driver makers can't catch up to its technology," he said,
emphasising its strength in high resolution and power-saving
($1 = 103.5750 Japanese Yen)
(Additional reporting by Sophie Knight in Tokyo and Sruthi
Ramakrishnan in Bangalore; Writing by Edmund Klamann; Editing by
Kirti Pandey, Christopher Cushing, Kenneth Maxwell and Lisa