Monday, August 1, 2011

Renesas: Rebuilt and revitalized

An update on Renesas' rebuilding efforts following the March 11 disaster offer an example in courage, teamwork, dedication, and learning from adversity -- sometimes with unexpected benefits.

The March 11 earthquake/tsunami disaster caused great destruction and disruption across every imaginable plane (most significantly on the human side). Thanks to frequent and valuable reporting from Takeshi Hattori, readers of SST had immediate and first-hand information and insights about damage assessments, availability of resources, and recovery efforts. From a macro perspective, Japan's response to the March 11 disaster has been nothing short of inspiring; the spirit of Kizuna, of bonding together, has many examples.

A semiconductor industry example of both corporate and human inspiration is Renesas Electronics. Only five of Renesas' domestic sites across Japan (10 wafer fab plants and 11 assembly/test facilities) were impacted; the worst was at its Naka factory in Ibaraki Prefrecture, home to 200mm and 300mm facilities (wafer fabrication and test/packaging). Initial messages from Naka suggested there was concern whether the site would be salvageable at all (structure, infrastructure, equipment). But after intense efforts, recovery is about 30% ahead of schedule for restoring operations at Naka to pre-earthquake levels, with both 200mm and 300mm lines now up and running, with projected return to 100% capacity in September. See below/after damage photos below.

Ali Sebt, COO of Renesas Electronics America, related the Japanese company's rebuilding efforts to SST, citing the quick recovery to effective planning, teamwork, help from partners and customers, and overall a monumental effort of dedication, sacrifice (e.g. carpooling, or even buying bicycles for a 4+hr commute) and communication. Eighty thousand people contributed to the company's recovery on a global basis, including 2500 external employees -- all of whom, from the beginning, "shared a sense of urgency, and also optimism," he emphasized.

From a conversation with Sebt, several themes emerged:

Great challenges offer great opportunities. The March 11 disaster offered lessons in ways to change the way things are done, and generated a "renewed and reenergized" focus across multiple planes: customer interaction, manufacturing redundancy, reemphasis on quality and reliability, Sebt explained. "We're a different company now." Renesas was already in the process of flipping its customer landscape from a 60%/40% domestic vs. overseas dependence (about 50/50 in micros) to a 40%/60% globalized ratio, Sebt noted.

It also gave customers a new concern too. Now they're talking about continuity of supply commitments, dual-sourcing, and responding to new RFQs with new stipulations about risk mitigation plans. This, Sebt said, is "healthy for the industry and overall economy."

JIT revisited. Some have argued that, while recovery efforts have been commendable, the real savior was "luck" in the form of an unrelated inventory overhang built up for several quarters, which softened the blow to the supply chain. "We were fortunate" in this regard, Sebt agreed. "Had we come into this quake from an allocation period, it would have been disastrous." That inventory overhang only kept until the May-ish timeframe, he noted, so credit must also go to resiliency and determination of the company's staff and partners.

The March 11 disaster has put a critical spotlight on the just-in-time (JIT) delivery method. In JIT, inventories are kept to a minimum, and the redundancy of building a given device in more than one location can mean additional cost, the antithesis of a lean environment. "Absolutely there is a broader rethinking" of JIT, Sebt acknowledged. Major customers who categorize components into strategic buckets (e.g. sole-source, proprietary architecture) vs. commodities are taking a closer look at how to manage their inventory. And for smaller and midsize customers who have completely outsourced their manufacturing and components, this has been "an awakening for them" that they have very little visibility to security and continuity of supply.

"JIT delivery was the pride of the whole ecosystem," Sebt said. Now, having inventory is "not such an evil thing;" now they see it as a good thing. "All feel it's too risky to be in an inventory-less situation all the time," he said.

Globalization of manufacturing. Part of a bigger companywide strategic examination (a "100-day plan") was to take account of how Renesas tapped a worldwide network of fabs and its supply chain. Now, there's a new emphasis on why that balance of internal/external fab network is crucial. Including the company's external fab network (which has been a 5%-10% boost in capacity), Renesas will "continue to do beyond 100% capacity," Sebt noted. GlobalFoundries' site in Singapore was originally a Hitachi fab, and Renesas has maintained some production there; TSMC, meanwhile, has been a partner since and through the 65nm node. "Once we're back online 100%, we don't intend to stop using external fab networks," Sebt explained; "we will continue those relationships as a business continuity measure." And that increase in outsourcing means Renesas can continue to grow without additional capital investment, he pointed out.

Before and after

These before/after photos were taken on April 11, nineteen calendar days after the March 11 disaster -- that's less than three weeks. And this doesn't show the "third dimension" of rebuilding beyond the visible equipment and room itself: e.g., gases, connection to servers, water/electricity, etc. Initial damage assessments had to be done via flashlights; damage "was very heavy," Sebt said.

Notice even the building's air ducts -- not terribly strong structurally -- many of them stayed intact.

The involvement of partners in rebuilding was particularly visible in rebuilding the cleanroom operations. The president of one equipment supplier personally visited Naka, bringing lunch for his employees, Sebt noted. In other cases, suppliers' other customers deferred equipment (e.g. gas indicators) to help. Renesas also borrowed spare parts from US and other operations that had them in stock.

There's also been an unexpected benefit to rebuilding the Naka cleanrooms and facilities. Putting in new or reconditioned/cleaned equipment has, in some cases, raised yields, Sebt noted.

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