Renesas axes 12 percent of its staff -

Japanese chipmaker Renesas plans to slash 12 percent of its workforce and sell off half of its 19 domestic plants within three years.

The company said that it cannot compete with Korean and Taiwanese companies, which can make chips smaller and cheaper.

Renesas was created by merging the chip divisions of major shareholders Mitsubishi, Hitachi and NEC. It said that the job cuts would save the company $541.97 million a year.

According to Reuters the outfit reported huge losses in the last financial year. It is terrified of going the way of fellow Japanese chipmaker Elpida which filed for bankruptcy protection in February.

The job cuts might not be the answer, analysts fear. While Renesas will stop losing money, it will not have enough staff and infrastructure to move forward.

Toshiyuki Kanayama, a Tokyo-based senior market analyst at Monex told Reuters that the challenges are what comes after the painful restructuring.

Renesas, which presented the restructuring plan to its unions, said it was thinking of selling or consolidating nine out of 19 plants as well as two so-called front-end wafer fabrication lines. The plants under consideration include a system chip unit in northern Japan.