In a bold and startling move, Apple Inc. (NASDAQ:AAPL) offered close to half a billion dollars today for a 55% controlling interest in Renesas SP Driver. The dramatic bid was tendered to the current holder of the stock, parent company Renesas Electronics, a Japanese firm. If the offer is accepted, Apple will gain effective power over one of the companies that quietly supplies it with crucial components for its iPhone smartphones.
Buying out Renesas Electronics’ portion of the stock could well prove the springboard towards an even more overwhelming majority of ownership, and perhaps a 100% share in Renesas SP Driver. According to Nikkei Asian Review, the remaining 45% ownership share in Renesas SP is divided between Sharp and the Taiwanese firm Powerchip, the former possessing 25% of the enterprise and the latter 20%. Sharp has already announced that if Renesas Electronics sells to Apple Inc. (AAPL), it will follow suit, giving the Cupertino firm an 80% interest in the chipmaker.
Renesas SP is a very important supplier from Apple’s standpoint, manufacturing every single liquid crystal display chip used in all iPhone models. Though it is not a high profile company from the public’s standpoint, it is key to successful production of iPhones. The controller and driver chips it fabricates provide image quality and high refresh rates to iPhone screens, as well as being able to strongly affect energy efficiency, lowering electricity expenditure rate by as much as 10% through careful juggling of resources.
Controlling this firm makes strategic sense for Apple (AAPL), ensuring that at no point will the company fall short of supplying the chips needed for ongoing iPhone production. The timing of the purchase is suggestive, also, with a larger iPhone model on the horizon. Bringing production in-house would, for example, be a good move if an innovative new technology was about to be rolled out, providing sharp, crisp graphics to the enlarged iPhone screen.
Owning Renesas SP could prevent or at least delay release of trade secrets related to chip engineering to the tech firm’s competitors. Though pure speculation, such an idea could explain Apple’s swift decision to buy and the hefty amount of cash it is willing to offer in order to rapidly seal the deal, at 50 billion yen or $479 million. Another possibility is simply that Apple wants to take over the company’s entire production schedule to make a gigantic run of chips larger than any made in previous years, ahead of the iPhone 6 rollout.
