Smart move

Bosch powers the chip boost in cars — and iPhones

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Who's smarter? Source: obs / Robert Bosch GmbH

As one research firm put it last year: “Bosch completely crushed the competition.” The German car parts maker won a contract to supply Apple with motion sensors, the semicoductor chips that detect whether a device is held horizontally or vertically and sense movements. The Bosch semiconductors are now part of Apple’s iPhone X and enable people to play mobile games and use augmented reality.

The Apple contract, a defeat for Silicon Valley-based InvenSense, crowned Bosche’s rise as a leading chip maker. The foundation-owned company already operates two chip factories in Germany, which produce the technology to control airbags, park your car automatically and measure how many miles you’ve jogged. More than half of all smartphones worldwide contain sensors made by the Bosch subsidiary Sensortech.

Bosch, founded in 1886 as a mechanics and electrical engineering workshop, could raise this market share even further: Last month, it launched the construction of a third chip factory, which required a €1 billion ($1.2 billion) investment. The plant, based in Germany’s semiconductor capital Dresden, is scheduled to start churning out chips in 2021. It will compete with NXP, Texas Instruments and ST Microelectronics. Currently, Bosch ranks sixth in the world for semiconductors for the car industry and is the world’s biggest manufacturer of car sensors (see graphics below).

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“We’re seeing a boom in semiconductors. Their importance will increase with electric mobility and automated driving functions,” Dirk Hoheisel, head of the group’s chip division, told Handelsblatt.

Figures confirm his point: Hybrid and electric cars already contain around $700 worth of semiconductors, twice as many as in conventional cars. And some very advanced electric cars, like the Chinese-made Nio ES8, have $900 worth of chips on board. With every step towards automation, cars will need more chips. A total of $38 billion of auto-related semiconductors were sold last year and the market is set to grow at an average of 7 percent per year through 2021, according to market research firm IHS. That means car-chip sales are growing twice as fast as the entire semiconductor market.

Bosch’s new plant in Dresden will tap into the expected boom, making sensors that track a car’s acceleration, engine revolutions and the outside world. Their job is to make cars so intelligent that they’ll be able to drive themselves one day.

Bosch, which also makes dishwashers, power tools and packaging machines, is bucking the trend among major industrial companies like IBM, Siemens and Philips that have offloaded their semiconductor units. The German company also follows a different route than its two biggest German car-parts rivals, Continental and ZF, which buy their chips from specialists such as Infineon, Renesas or Melexis.

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“We see it as a major advantage to have in-house semiconductor know-how,” Mr. Hoheisel said. It is also easier and more secure to protect the technology when Bosch produces its own chips, he added.

Though the new Dresden plant will initially focus on making car chips, it will later start producing movement sensors, just like the ones Bosch supplies to Apple. It will fit in well in the capital of the state of Lower Saxony, which brands itself as ‘Silicon Saxony,’ and is already home to factories run by Infineon and Intel rival Globalfoundries. And if the market evolves as expected, Bosch may be opening another plant in seven or eight years, Mr. Hoheisel said.

Martin-Werner Buchenau reports from Stuttgart as Handelsblatt’s Baden-Württemberg correspondent. Joachim Hofer covers the sports, leisure and IT sectors for Handelsblatt. Gilbert Kreijger, an editor with Handelsblatt Global, contributed to this article. To contact the authors: buchenau@handelsblatt.comhofer@handelsblatt.com and kreijger@handelsblatt.com

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