Bosch poised to spend US$3 billion to help resolve chip needs

Bosch plans to invest more than $3 billion (all figures in USD) in its growing semiconductor business by 2026 in a bid to power its way clear of the world's gnarled supply chain of chips.

The investment will address a range of semiconductor industry needs, including the addition of testing centres, research into new kinds of chips and, most important, new chip-production capacity in Germany.

Over the past 18 months, a shortage of microchips has caused automakers around the world to cancel 13 million vehicles from production schedules, according to AutoForecast Solutions LLC.

But the bad news inside Bosch's aggressive plan: The investment won't all go to automobiles.

Bosch, the world's biggest auto parts supplier, has hundreds of mouths to feed in its sprawling global portfolio of electronic products, ranging from coffee makers and toasters to home security systems, power tools, video surveillance products and air conditioning units — on top of $49.14 billion in sales of increasingly sophisticated parts to automakers last year.

"Microelectronics is the future and is vital to the success of all areas of Bosch business," Bosch Chairman Stefan Hartung said in a statement released Wednesday in conjunction with Bosch Tech Day in Dresden, Germany. "We hold a master key to tomorrow's mobility."

The supplier wants to solve not only its own yawning demand for more microchips, but also Europe's. The investment will be made in response to the European Chips Act, with the European Union and German federal government providing some of the funding to foster investment to spur on the European microelectronics industry.

European government leaders hope to double Europe's slice of global semiconductor production from 10 per cent now to 20 per cent by the end of the decade.

"Europe can and must capitalize on its own strengths in the semiconductor industry," Hartung said in the statement. "More than ever, the goal must be to produce chips for the specific needs of European industry."

But additional production anywhere in the world is certain to help alleviate the global scramble for chips.

The chip shortage started in the first months of the COVID-19 pandemic, when many industrial customers canceled longterm purchase orders from chip producers on the belief that auto plants would stay closed for months and house-bound consumers would have no interest in buying new cars.

But that same year, consumer demand for vehicles rocketed back to high levels, despite the pandemic, catching automakers and suppliers without enough chips to respond adequately.

In the resulting melee, the auto industry has been competing with giant consumer electronics companies to buy back chip allocations.

Bosch has been steadily investing to produce its own chips.

One year ago, Bosch opened new semiconductor wafer production capacity in Dresden at a cost of $1 billion, representing the largest single investment in the company's history. And between now and 2025, Bosch said, it will invest another $400 million to expand chip capacity in Reutlingen, Germany.