Case 4 - Case Brief: Renesas Electronics and the Automotive Microcontroller Supply Chain

Case Brief: Renesas Electronics and the Automotive Microcontroller Supply Chain 1. Problem Statement How can Renesas Electronics best manage disruption vulnerability and ensure resilience when unforeseen events take place in their Japanese customer’s automotive microcontroller supply chain? 2. Situation Analysis In March of 2011 a magnitude 9.0 earthquake hit off the east coast of Japan leaving Renesas Naka Fabrication facility (“fab”) with substantial damage. Naka is one of ten Renesas fabs across the country and the sole source of engine microcontroller chips for two Japanese automakers. Although these customers represent a small percent of total production at the Naka facility, each with a fragmented mix of parts and recipes, their supply chain is extremely dependent on the facility. The current supply chain strategy Renesas uses to manufacture the automakers chips leaves them vulnerable and unable to recover from disruption quickly. One alternative to ensure a steady supply of automaker microcontrollers is to have a multi-local strategy and develop a “two fab system.” This system would split the production of chips from Naka with another production line consisting of the the same production tools (mask sets) within its network of ten fabs across Japan. Although this would reduce the automakers supply chain vulnerability, the costs for Renesas would be around $6 million for the mask sets and $1.6B for the production line. The fragmented mix of parts and recipes from the automakers result in low utilization rates