• Of China — for the design of products tailored for the Chinese market and the creation of opportunities to expand sales
• By China — to actively recruit and promote the vitality and know-how of the Chinese people
• For China — to establish a fully fledged value chain in China with lower costs.

To further expand sales in the Chinese market, which is expected to experience continuing growth, it is important that we integrate the operations of design, manufacturing, and sales. Employees in all areas must work together effectively to deliver products, technologies and services to Chinese customers.

The Chinese market moves very quickly, so it is critical that we be able to make fast decisions. We established RCC to create an environment in which decisions could be made rapidly, one in which China-based design, manufacturing, and sales activities are optimized to achieve high levels of customer satisfaction.

Please give us a summary of the Chinese market.
Mr. Ogura: First, I reconfirmed the fact that the Chinese market is huge. China has 1.3 billion people and 340 million households. These numbers are approximately ten times those of Japan and three times those of the USA. Also, as you would expect from the country known as the “world’s factory”, key products such as home appliances, mobile phones, other types of communication equipment, and PCs are produced in very large volumes in China for export to the world.

Future growth in the Chinese market is likely to exceed the growth in world semiconductor demand, and the size of the market is expected to surpass that of Japan in 2005. It is no exaggeration to say that the future of Renesas depends to a considerable extent on the share of the huge Chinese market we can secure.

Although China has a strong labor force with high productivity, there are areas where its ability to develop technology is still limited. This makes it necessary to approach the Chinese market in a very thoughtful way. In particular, it is critical that Renesas better understand the applications and systems used in the production of consumer electronics, communication equipment, and other types of products in China, then deliver total solutions that match local needs.

Please explain your strategy for increasing your market share in China.
Mr. Ogura: Currently we are thinking in terms of three strategies. The first is a market strategy that we call "of China". This is based around the idea I mentioned earlier of providing total solutions, especially the development of products that match the needs of the Chinese market, and the creation of opportunities that can increase our Chinese sales. In the area of product development, we are actively working to make our device designers in Japan aware of the latest conditions and situations in China so can work from a common understanding to develop the best possible products.

I believe that forging relationships with independent design houses (IDHs) is very important for creating RCC sales opportunities. IDHs are development companies that build and test boards that use semiconductors. More than 200 such companies are said to exist in China and the numbers are growing. We are working hard to build strong relationships with these IDHs because, as partners, they can act as helpful intermediaries between Renesas and Chinese customers on technical issues.

The second strategy is to make active use of the excellent skills of Chinese engineers. We call this strategy "by China."

Every year nearly 300,000 students leave Chinese universities to enter the workplace, having studied semiconductor related subjects. Added to these are approximately 100,000 students who graduate from foreign universities and then enter the Chinese semiconductor industry. We intend to utilize these young, highly skilled engineers, who are also familiar with the Chinese marketplace in the development of new products.

The third strategy, which we call "for China," is to reduce costs and deliver products based on a cost structure appropriate to the Chinese market. This involves, for example, reducing costs by taking advantage of the lower labor costs in China, thereby preserving our competitiveness.

By combining these three strategies, RCC will be able to create a place for itself in the Chinese market as a contributor to industry and society.

What sort of organizational structure are you planning to build?
Mr. Ogura: We intend to build an organization that can conduct business reliably by using RCC as a hub to link together the ten different design, manufacturing, and sales companies based in the China region.

The organization we have established at RCC is made up of four sections that can work closely together. We have a department responsible for planning and establishing strategy in China, a department responsible for sales, a department that handles commercial and technical issues, and a department that deals with design and manufacturing. By using this structure to integrate support for activities from design and manufacturing through to sales, we are building a business that delivers solutions customers can rely on.