Denso Corp., the main supplier of chips for Toyota Motor Corp., is considering spinning off its semiconductor business.
"We need to think about whether the time will come when we sell semiconductors, alone, externally," Yoshifumi Kato, Denso's chief technology officer, told Bloomberg in a new report.
While this is unlikely to happen any time soon and nothing concrete has been decided on the split, the company is currently focusing on meeting internal chip demand.
Kato told Bloomberg that automotive semiconductors are expected to be about a third higher by 2025 from the level of 2020. The automotive chips are used in fossil-fuel cars, electric vehicles (EVs) and autonomous vehicles.
The chip shortage has caused many automotive OEMs to cut production repeatedly since the shortage began in late 2020, which in turn caused these companies to update revenue forecasts as well. This has been the case across the board with automotive OEMs from Toyota to Ford to General Motors and everyone in-between.
To reduce supply chain problems in the future, automotive OEMs and chipmakers are turning to deepening relationships with semiconductor manufacturers to ensure capacity if problems crop up again. This includes reaching out to pure play foundries directly or setting up joint ventures to enable a secure supply of semiconductors in the medium to long term.
TSMC fab venture
No doubt, if Denso spins off its chip business, it will have a major impact on its recent investment in Taiwan Semiconductor Manufacturing Co. (TSMC)’s Japanese fab in which Denso is a major investor.
Denso took a minority stake in Japan Advanced Semiconductor Manufacturing Inc. (JASM), a TSMC subsidiary that also has investments from Sony Semiconductor Solutions Corp., in February with a $350 million investment for 10% equity stake.
The construction of JASM has already begun with production targeted by the end of 2024. Denso said the reason for the investment was the ongoing chip shortage that is impacting the supply chain and hitting specifically the automotive industry hard. The goal is to create a stable supply of semiconductors over the medium and long term for its automotive suppliers, such as Toyota.
It is likely that any spin off of the chip business will include this investment of the JASM fab.