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February 09, 2022 09:11 AM

Bosch says chip crunch, costs to weigh on automakers also in 2022

Bosch expects the semiconductor shortage and materials-cost increases that have weighed on automakers to continue hampering vehicle output this year.

Bloomberg
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    Bosch is investing heavily in chip production.

    BERLIN -- Robert Bosch expects the semiconductor shortage and materials-cost increases that have weighed on automakers to continue hampering vehicle output this year.

    The supplier expects global production to increase to around 85 million units in 2022, but that’s still about 8 percent below pre-pandemic levels.

    Bosch plans to spend 400 million euros ($457 million) to expand chip facilities in Germany and Malaysia to help ease the bottleneck.

    "There is great uncertainty," CEO Stefan Hartung said on a call with reporters on Wednesday.

    Bosch reported in preliminary data that its revenue in 2021 exceeded pre-pandemic levels, totaling 78.8 billion euros ($90 billion). Its EBIT margin was 4 percent, up from 2.8 percent a year earlier.

    Bosch expects to grow revenue again this year, provided there are “no major additional disturbances."

    Hartung, who took over as CEO at the start of the year, is pushing to make Bosch fit for the industry’s shift toward battery power and digital services.

    Last month, the supplier announced it's partnering with Volkswagen to develop a common software platform to bring hands-free driving functions to the carmaker’s entire fleet in a bid to catch up to Tesla.

    Hartung said Bosch must boost its software capabilities while limiting lay offs among the 80,000-odd workers in its 400,000-strong workforce whose jobs are intertwined with diesel technology.

    The company has invested 1 billion euros ($1.14 billion) in retraining programs in the past five years and will invest at least the same amount in the coming five, its HR chief Filiz Albrecht said.

    But its mobility solutions division, which comprises the automotive components segment bringing in most of Bosch's revenue, saw weaker growth in part due to the lack of chips.

    "Last year we felt very clearly that we did not have enough chips to meet demand. That will become better in 2022, significantly so in the second half," Hartung said.

    He said that even the machines to make chips needed chips to work, and so were in short supply. "Hopefully in 2023 we can work at the pace we want to."

    Bosch is not planning any further investments in its own chip production beyond the investment it has put into chip production sites in Dresden, Stuttgart, and Penang.

    The company predicted that 85 million cars would be produced globally this year, up from the 80-odd million made in 2021 but far below the 92 million which rolled off assembly lines in 2019.

    Bosch is ranked at No. 1 on the Automotive News Europe list of the top 100 global suppliers, with worldwide parts sales to automakers of $46.52 billion in 2020.

    Reuters contributed to this report

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