Japan’s Denso Is Considering A US$3 Billion Chip Unit Spinoff To Tackle Shortages
By Dashveenjit Kaur
The company’s CTO shared that there may be a time they would need to consider a standalone chip unit to tackle shortages.
Nothing has been decided on a split as the company’s focus is currently on meeting internal chip demand.
Like many semiconductor players, Japan’s largest auto supplier Denso Corp too has been responding to chip shortages with a slew of partnership deals aimed at securing access to key components. The key supplier to Toyota Motor Corp in fact expects demand for auto chips to be around a third higher by 2025 than it was in 2020.
As the demand for semiconductors worldwide has been surpassing the supply capability of the industry, Denso is considering spinning off its US$3.1 billion chip business, the company’s chief technology officer shared last week. For context, the Japanese company is often dubbed as the world’s second-biggest auto-parts maker, as it gradually builds up a presence within the automotive chips industry.
However, over the last three years, Denso has accumulated semiconductor-related capital expenditures totaling around 160 billion yen, automatically placing it as the world’s fifth-largest supplier of automotive chips by sales. As McKinsey stated in a recent report in regards to the chip shortages, “given the ongoing instabilities in the semiconductor supply chain, the automotive industry should consider refining its strategy,” it said.
The report noted that companies can start by focusing on the implications of three critical activities that form the foundation for strategic shortage management: the creation of strong technology maps, reliable short-term demand planning, and guidance for long-term demand planning. Denso is mulling a possible long term strategy to tackle the chip shortages and burgeoning demand.
“We need to think about whether the time will come when we sell semiconductors, alone, externally. It’s worth looking into whether that kind of structure is possible,” CTO Yoshifumi Kato told Bloomberg in an interview. Currently, the chips Denso makes in-house goes into automotive parts that it then sells to carmakers or other suppliers. When examining the possibility of supplying semiconductors on their own, Kato said Denso will consider whether the division is better positioned outside of the company.
