When Robert Bosch, a company with a consolidated revenue of more than 78 billion euros, makes the single-largest investment in its history, then it's time to have a closer look at the business in question -- especially when it does not make a profit.
Bosch is pouring 1 billion euros into a new semiconductor plant called Wafer Fab RB300 in Dresden, eastern Germany, to bolster its growing automotive electronics business.
Although the first chips will not be ready for another two years, Bosch is preparing for a not-too-distant future when every device it manufacturers will ideally be intelligent. The company wants its products to each be a node in the broader Internet of Things, with the automobile as one of the core actors in this new data-driven economy.
"We are the only ones that have the expertise both on the automotive as well as on the electronics side, allowing us to understand what physically transpires on a chip in order to better integrate that into the system," Bosch Automotive Electronics Executive Vice President Jens Fabrowsky told reporters during a trip to the construction site for the Dresden plant, which will be roughly the size of 14 soccer fields.
Bosch is the sixth-largest supplier in the $38 billion automotive semiconductor market, according to Strategy Analytics. Its portfolio includes sensory chips called microelectronic mechanical systems (MEMS) that transmit a wealth of data and are also used in everything from smartphones to wearables and virtual reality headsets.
The massive investment in its core automotive chip operations stands in sharp contrast with the relatively modest 2 billion euros worth of business it conducts annually. In fact these semiconductors don't even contribute directly to profits. "Our chips are mainly for internal use, so unlike a competitor, we don't add a margin on top. Rather we pass on our chips at cost," Fabrowsky said.
The Dresden plant will focus on producing application-specific integrated circuits (ASICs), which function like the part of our nervous system responsible for reflexes. Decisions are made almost instantaneously before a signal ever reaches the brain.
ASICs embedded in a passive safety control unit, for example, can determine in milliseconds from sensor data which airbags to deploy in the event of a crash far more swiftly and efficiently than a microcontroller while using less electricity. Up to 1,000 ASICs fit on one 300mm wafer, enabling considerably higher economies of scale compared with the current 200mm technology Bosch employs in its Reutlingen chip fab near Stuttgart.
Bosch estimates that on average it already supplies nine out of the 50 chips built into the average car, but as the number of lines of code found in a modern automobile continues to grow, the more circuitry is needed to make sense out of the increasing complexity.
Its experts cite studies suggesting the value of semiconductor chips could surge from an average of $370 per car today to $1,900 or more for a fully connected autonomous electric vehicle.
At the heart of the new factory, in conditions far more demanding than those found in a car plant's paint shop, is a 10,000-square-meter clean room. Here photolithography machines painstakingly print layer after layer of raw materials onto thin wafers sliced out of pure silicon ingots. After about a dozen weeks miniature circuitry elements emerge that can be as small as a few atoms in size.
The facility, which Bosch announced it would build in June 2017, is due to be completed this year, but it will not be ready to produce chips until the end of 2021. Since it is the first time Bosch will use 300mm technology, the semiconductors require extensive artificial aging procedures to determine whether the ASICs qualify for automotive-grade usage.
Bosch executive board member Harald Kroeger justified the supplier's enormous investment of time and money by saying: "This is not about making a profit. It's about creating a better end product with a more competitive cost position, an airbag system, for example, which benefits the automobile manufacturer and by extension the consumer."