TOKYO -- Japanese chipmaker Renesas Electronics on Wednesday unveiled plans to raise its capacity to supply a key component in cars and electronics more than 50% by 2023, as some industry watchers predict a global chip shortage could last into next year and beyond.
In its updated production strategy starting this year, Renesas plans to boost its capacity for high-end microcontroller units by 50% to the equivalent of 40,000 200mm wafers a month, largely by securing more lines for outsourced production at chip foundries.
Microcontrollers are widely used in automobiles, making Renesas a key link in automakers' global supply chains. The company's importance as a suppler was underscored earlier this year by the disruption that followed a fire at a chip plant northeast of Tokyo.
The expansion comes as chip producers struggle to keep up with high demand, forcing automakers to idle assembly lines and disrupting production in other industries. Renesas' outstanding automotive orders have surged about 30% since the end of June.
"We have been increasing supply, but demand has also been strong as manufacturers make up for lost production time," said Takeshi Kataoka, Renesas' senior vice president and general manager of its automotive solution business unit.
"We haven't been able to narrow the gap," he added.
The company will also increase capacity for low-end microcontrollers by about 70% to over 30,000 wafers per month, mainly by expanding in-house facilities.
Renesas said it would spend over 80 billion yen ($715 million) on capital investments in 2021. Some will go toward repairs at its Naka plant, which was gutted by a fire in March, and to efforts to make its facilities more resilient. Another 60 billion yen in capital spending is planned for 2022.
Both figures represent a significant rise from the roughly 20 billion yen Renesas had been allocating for capital investments in recent years.
Robust demand has been a boon to Renesas' earnings. The company's gross margin is improving mainly in its industrial, infrastructure and connectivity-related operations. Combined with success from Dialog Semiconductor, its newly acquired British unit, Renesas now aims to achieve an operating profit margin of 25% to 30% over the long term, up from its previous goal of over 20%.
Renesas, which was rescued from a cash crunch in 2013 by a government-backed fund and a coalition of customers including Toyota Motor, also announced plans to start giving back to its shareholders as early as next year owing to its growing earnings power. President and CEO Hidetoshi Shibata said he hoped to begin shareholder rewards "in one or two years, preferably in 2022."
Renesas' predecessor, NEC Electronics, last paid dividends in March 2005. The company intends to start with share buybacks and to commence offering dividends once it is better situated to do so.