OVERVIEW OF RENESAS ELECTRONICS CREDIT SUISSE 21ST ANNUAL TMT CONFERENCE HIDETOSHI SHIBATA EXECUTIVE VICE PRESIDENT AND CFO RENESAS ELECTRONICS CORPORATION 2017 Renesas Electronics Corporation. All rights reserved.
Focus on High Growth Semiconductor End Markets CAGR 21/17 Comparison by End Market * 1 Renesas Sales Breakdown by Application (FY17 1-3Q) Industrial Automotive 8% 8% Broad-Based Approx. 20% Automotive Approx. 50% Consumer 5% Data Processing 4% Communication 4% Total Total Semiconductor *2 *2 5% 0% 2% 4% 6% 8% 10% Industrial Approx. 30% *1: Graph created by RENESAS based on Gartner Research, Source: "Semiconductor Forecast Database, Worldwide, 3Q17 Update 28 September 2017 *2: Total (Semiconductor) market growth including DRAM, NAND flash memory, microprocessors and non-optical sensors 2017 Renesas Electronics Corporation. All rights reserved. Page 2
FY17 Revenue *1 Breakdown (Including Intersil consolidation) Automotive Industrial Broad-based, etc. Total MCUs Approx. 65% Approx. 50% Approx. 55% SoCs Approx. 10% Analog & Mixed Signal Approx. 10% Power Discrete, Others Approx. 15% Approx. 50% Approx. 20% Approx. 30% Approx. 30% Approx. 20% Approx. 15% Approx. 20% Approx. 10% 100% *1: Results for the calendar year (Jan- Dec 2017 *Oct-Dec 2017(forecast)) 2017 Renesas Electronics Corporation. All rights reserved. Page 3
Steep Topline Recovery from Restructuring Phase Along with Improving Margin Past (FY2012)* 1 FY17est *2 (Yen, bn) Transition of Renesas non-gaap Financial Results Revenue Gross Margin Operating Margin 744 B yen 772 B yen 31% 46% -4% 16% 40.1% 744 767 746 693 639 30.8% 35.8% *1: Fiscal year through 2015 is Apr. to Mar. *2: Fiscal year from 2017 is Jan. to Dec. *3: Calculated on a calendar-year basis (Jan.-Dec. 2016) by adding FY15/4Q (Jan-Mar 2016) to FY16 (Apr Dec 2016) 900 800 700 600 500 400 300 200 100 0 43.7% 43.6% 46.3% 772 12.0% 14.6% 12.2% 15.5% 6.5% FY2012 FY2013 FY2014 FY2015 CY2016*3 FY2017est -4.3% Revenue GM(RHS) OM(RHS) 50% 40% 30% 20% 10% 0% 2017 Renesas Electronics Corporation. All rights reserved. Page 4
Significant Margin Expansion Resulting from Our Successful Restructuring -50% the # of Factories Business Rationalization -30% pts Non-core Business 34% 5% Exposure *1*2-40% the # of Employees Front-End: 14 Back-End: 8 33,840 8 3 18,884 Strategic M&A to strengthen financial structure Maintained R&D to enforce core competence Introduction of Meritocracy to promote high-performance culture Growth Initiatives 17% *4 FY 13/3 CY 16 *3 Intersil Acquisition Bonus Portion *6 : 16% 35% 16% *4 Bonus payment (% of base salary): High performer *5 = Approx. 2x Ave. performer *5 Business Process Overhaul Operational Excellence HR/Compensation Scheme Overhaul Global Operation Optimization *1: Breakdown based on Renesas managerial accounting *2: Non-core business defined as either: 1) Non-core business divisions or subsidiaries that have been divested, or have been slated for divestiture (LTE Modem Business, Renesas SP Driver, etc.), or 2) Individual EOL (end of life) products, which, following a predetermined period of production, are slated to be discontinued *3: Calculated on a calendar-year basis (Jan-Dec 2016) by adding FY2016/3 4Q (3 months) to FY2016/12 (9 months) *4: As a percentage of net sales *5: High performer and Average Class represents Grade 5 and Grade 3 respectively under Renesas compensation system (Grade exist from 1-5) *6: Represents change of bonus portion for non-managerial employee categorized at Grade 3 from 2012 under prior system to 2016 under current system. # of employees categorized at Grade 3 represents approximately 90% and 50% of our total employee under our prior and current systems, respectively *7: Non-GAAP items 2017 Renesas Electronics Corporation. All rights reserved. Page 5
Clear Path to Long-Term Financial Targets FY17 est. Long-term Target *2 (Announced in 2016/11) Visible Path for Profitable Business Base Revenue 772 B yen 2x SAM *3 Growth Rate Execution Challenge Gross Margin 46% 50% Topline Growth (Operating Leverage through Increased Scale) Acceleration of R&D Investment R&D Margin SG&A Margin 17% 14% 16-18% 12-14% Cost Reduction Better Product Mix Near-term Increase of D&A Operating Margin 16% Over 20% Intersil Consolidation Industry Consolidation *1: Calculated on a calendar-year basis (Jan.-Dec. 2016) by adding FY15/4Q (Jan-Mar 2016) to FY16 (Apr Dec 2016) *2: Long-term target reflects non-gaap adjustments to exclude amortization of goodwill and intangible assets, noncash expenses such as stockbased compensation expenses and one-time expenses *3: Served Available Market 2017 Renesas Electronics Corporation. All rights reserved. Page 6
Combination of Organic and Inorganic Growth Organic Inorganic Automotive Industrial Broad-Based MCUs Intensive R&D Inorganic + Organic Approaches SoCs Strategic Partnerships and Alliances Analog & Mixed Signal Strategic Investment including Further Acquisitions (Acquired for $ 3.2B in Feb 2017) Power Discrete Selective Investment 2017 Renesas Electronics Corporation. All rights reserved. Page 7
2017 Renesas Electronics Corporation. All rights reserved.