Oki transfers 95% of semiconductor business to Rohm

Oki will create a new semiconductor company focused on LSIs and transfer 95% of the shares to Rohm.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 7/30/2008

Further shaking up Japan’s chip industry, Kyoto-based Rohm Co Ltd will take control of Tokyo-based Oki Electric Industry Co Ltd’s semiconductor operations.

In doing so, Oki will create a new semiconductor company, Oki Semiconductor Co Ltd, and transfer 95% of the shares to Rohm. The new company will be established through an incorporation-type company split, effective October 1; will manufacture and sell system LSIs, logic LSIs, memory LSIs, and high-speed optical communication devices, and offer foundry services; and will start with $18.5 million (20 billion yen) in capital. the companies did not detail the financial aspects of the transfer.

The agreement between the two Japan-based competitors was first announced in May when Oki stated it would spin-off of its semiconductor business through a company split and signed a basic agreement with Rohm. Since then, the two companies have been holding talks to reach a definitive agreement, which was inked on July 24.

“We are pleased to reach and sign the definitive agreement with Rohm,” said Katsumasa Shinozuka, president and CEO at Oki, in a statement today. “Because the product overlap between Oki and Rohm is relatively low, we believe by transferring shares of the new company, the Oki-nurtured semiconductor business will continue to grow under Rohm and maximize strengths of both companies.”

For more background on Japan's chip industry, see: Japan on the rebound Targeting Japan

Due to a mix of cultural factors and the rise of countries like China, many semiconductor industry companies based in Japan post its electronics boom have been reevaluating their standing in the chip market. Following that trend, Oki has been implementing company-wide initiatives to revamp its business structure as competition has become more global and fiercer.

As part of Oki’s initiatives, the company has been discussing how to expand its semiconductor business. Meanwhile, Rohm has been looking for opportunities to improve its corporate value and advance as an IDM (integrated device manufacturer) semiconductor company with a broad product portfolio having a competitive edge.

The deal will see Oki Semiconductor leverage Oki’s advantages in low power consumption, high-voltage processing, digital/analog mixed processing and small-size packaging technologies, as well as maximizing its manufacturing capabilities. Newer products, such as system LSIs and logic LSIs, which have been manufactured at outside foundries, will now be manufactured using Rohm’s production process, the companies said.

In addition, the new company is expected to increase its sales capabilities by leveraging the sales networks, technologies, and quality support networks of Oki and Rohm in Japan and overseas.