Tokyo-backed fund to rescue Renesas An investment fund controlled by Japan's government has agreed to rescue Renesas Electronics by buying a majority stake in the lossmaking chipmaker for about Y180bn ($2.2bn), people familiar with the deal said on Monday. The bailout would thwart a rival bid for Renesas by KKR, the US private equity group, and is backed by blue-chip Japanese manufacturing companies including Toyota and Panasonic. The companies, eight in total, plan to add a combined Y10bn in financing to the rescue in return for small stakes in Renesas, which they consider to be a crucial supplier. Shares in Renesas jumped 17 per cent on reports of the tentative deal, which is expected to be announced next week pending approval by the participating companies" boards. None of the companies involved would comment publicly on Monday. Renesas has not made a net profit in seven years and needs fresh capital to avoid the fate of Elpida Memory, a related Japanese chipmaker that is being bought by Micron of the US after it filed for bankruptcy this year. Both companies were offshoots of Hitachi, NEC and Mitsubishi Electric, which created them over the past decade by combining their own underperforming semiconductor businesses. Renesas makes chips that do everything from processing flatscreen television images to controlling the power steering in many automakers" cars. It dominates at least one important niche - automotive microcontrollers - but falling demand from the consumer electronics industry and competition from cheaper foreign producers have left it unable to turn a profit. Renesas has agreed to 5,000 fresh job cuts as part of the rescue deal, the people with knowledge of the matter said. About 7,500 employees, or 20 per cent of its workforce, took early retirement in October as part of a previous round of cuts. The decision to stake taxpayer funds on reviving Renesas when a private foreign buyer was available could draw international criticism, as an example of insular Japanese business practices. Masatoshi Nishimoto, an analyst at IHS Automotive, said Renesas's customers in the technology and automotive sectors would have been uncomfortable with the idea of a leading supplier falling into the hands of a foreign private equity fund. "They want to be involved in things like cost and quality control, so they want to keep management in the hands of people they know," he said. The government-backed investment fund, the Innovation Network Corporation of Japan, was created in 2009 with the goal of supporting small companies and start-ups, but recently it has poured more of its resources into struggling national champions. Last year it became the majority owner of Japan Display, a company created by Sony, Toshiba and Hitachi that makes small liquid-crystal displays. The INCJ is technically a public-private partnership, with about 20 corporate co-owners from the finance, transport and manufacturing sectors, but some 90 per cent of its funding is provided by the state.