Denso's $3bn Investment in Semiconductors Amid EV Disruption

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【Summary】Toyota supplier Denso plans to invest $3 billion in semiconductor materials as it aims to triple its chip production by 2030. The move comes as automotive manufacturers face disruption from the electrification of vehicles. Denso's investment will help ensure a stable supply of materials and forge strategic partnerships with other companies.

FutureCar Staff Oct 26, 2023 4:19 PM PT

Denso's $3bn Investment in Semiconductors Amid EV Disruption

Automotive manufacturers are facing disruption as they strive to keep up with the electrification trend. Denso, a Japanese Toyota supplier, has announced plans to invest $3bn into semiconductor materials and transition employees into semiconductor roles. The company's president, Shinnosuke Hayashi, made this announcement at the Japan Mobility Show. Denso aims to triple its chips production by 2030 and will forge strategic partnerships with various companies to ensure stable material procurement.

In February 2022, Denso acquired a minority stake in a TSMC-owned semiconductor manufacturing plant in Japan. TSMC CEO Dr CC Wei expressed his appreciation for Denso's partnership and anticipated a significant increase in semiconductor demand as connected and electric cars become more prevalent.

According to GlobalData's 2023 thematic intelligence report on electric vehicles (EVs), the transition to electrification has caused unprecedented disruption in the automotive industry. Original equipment manufacturers, including Denso, which has been in operation since 1949, are at risk of falling behind and incurring substantial costs to retool their factories. Car manufacturers traditionally lack expertise in EVs and connected cars, leading to a surge in EV startups to meet the growing demand.

China currently leads in EV production, surpassing Japan, the US, and Europe. GlobalData attributes China's early lead to government incentives and shorter commutes that make EVs suitable for consumer needs. Dr Rebecca Henderson, an economist and lecturer at Harvard, expressed concern about China's dominance in green technology and EVs during a keynote speech at the Nordic Business Forum. She warned that the US may be falling behind and emphasized the importance of not letting an autocratic state control such important changes.

GlobalData acknowledges that the semiconductor market is influenced by geopolitics and artificial intelligence, making its supply chain vulnerable to conflicts and events like the Covid-19 pandemic. However, the analyst predicts that by 2030, 80% of a vehicle's value will lie in its software and content, with AI significantly impacting a car's capabilities.

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