Bosch builds new wafer fab: the world's largest automotive Tier 1 decides on "chip freedom"

Bosch Group, the world's largest driver of the automotive industry, announced in June 2021 that its Dresden wafer fab had officially started production.

This digital factory is so large that the data generated every day would require 22,000 tons of paper to be printed on it. It has truly become the largest single investment in the 130-year history of the Bosch Group: 1 billion euros, equivalent to approximately 7.8 billion yuan.

The importance of semiconductors to the Bosch Group is self-evident. According to 2020 data, the consumer sensor products of Bosch Sensortec, a wholly-owned subsidiary of the Bosch Group, have shipped more than 2 billion units in China alone. At the same time, Bosch is the world's largest supplier of millimeter-wave radars, of which range radars (mainly 77GHz) have dominated the Chinese market for many years.

"The laptops, tablets, or smartphones we use today may have some chips from Bosch's wafer factory in Reutlingen," said Dr. Denner. "The demand for semiconductors is greater than ever before. We expect global demand for semiconductors to grow by 11% in 2021, exceeding 400 billion euros. Semiconductors are the foundation of digitalization. Without them, no electronic system can operate. Bosch needs to ensure that this demand continues."

The commissioning of the Dresden fab indicates that the semiconductor business of this "giant" will reduce its dependence on other fabs to a certain extent. In the context of the globalization of the automotive industry, Bosch can therefore gain a higher voice in the crowded competition.

Interestingly, the Dresden wafer factory makes extensive use of digital twin technology and has completely realized a digital factory. In this way, even if the wafer factory has doubled in size and number of equipment, it only requires an engineering team of less than 1,000 people to maintain operation.

"All data from equipment, sensors and products in the wafer factory is recorded in a central database. The production data generated every second is equivalent to 500 pages of text. In just one day, the data exceeds 42 million pages." At present, we have learned that the Dresden wafer factory will adopt a fully digital production process, and the entire factory with a construction area of ​​​​72,000 square meters will eventually only require 700 experienced engineers to operate.

How many chips do you need to produce to make back the investment of such a large-scale wafer fab? Why would you dare to invest so much to build your own factory in the context of the globalization of the chip industry? TechWeb learned in the questioning session:

"The Dresden fab must reach a very large production scale to cover costs. The semiconductor fab invested in 2010 was also Bosch's largest single investment at the time, at 600 million euros. Both investments are major strategic decisions for Bosch and will have a positive impact on Bosch in the long run."

In a sense, the Dresden fab built against the backdrop of this year's chip shortage has brought Bosch a new profit growth point. One of the main reasons is the upgrade from 8-inch to 12-inch. "An 8-inch wafer can etch 15,000 to 27,000 chips, while a 12-inch wafer can etch 35,000 chips, almost doubling the number," said Dr. Marek Jakowatz.

Competition in the chip industry has become fierce in recent years. Bosch saw the cyclical nature of the industry and began to deploy new wafer fab investment projects in 2017. So far, this decision is correct. Whether it is automotive chips or consumer MEMS, Bosch can find market demand for them. However, in the context of the epidemic and chip shortages, will the rapidly growing wafer production capacity be oversupplied at the end of the cycle? Dr. Denner responded that in the long run, semiconductor technology is the core key technology, and we hope to have semiconductor technology and production capabilities. Production capacity and demand increase and decrease together, and factories will deploy and purchase machines according to the growth in demand. In the short term, Bosch chose to expand production capacity to meet its own needs while filling the gap in market demand.

The problem of overcapacity is not groundless. As of the press conference on June 7, Bosch's Dresden wafer fab's automotive chip production line had been put into production three months ahead of schedule, and power tool chips were put into production six months ahead of schedule. According to Bosch, the "clean room" area of ​​the Dresden wafer fab is twice that of the previous Reutlingen wafer fab; although Bosch did not disclose the actual production capacity of the former, the market conservatively estimates that the new wafer fab can at least double the group's chip production capacity.

The only thing that can explain Bosch's black hole-like demand for chips is the exponential growth in the number of on-board chips as cars become more intelligent.

In 2019, Fabrowski, then executive vice president of Bosch Automotive Electronics, predicted that this number would double or even triple in the next five years or so. "In 2016, the average number of Bosch chips installed in every car rolling off the production line worldwide was more than 9."

At the same time, as the market demand for automatic (assisted) driving functions grows, the number, types and performance of sensors have increased significantly. At the same time, the electrification trend has accelerated the installation of chips including power semiconductors, MCUs and sensors.

As of press time in mid-June 2021, automotive semiconductors in China and even the world are still in unprecedented shortage and crisis.

In May, my country's automobile production and sales reached 2.04 million and 2.128 million units, down 8.7% and 5.5% month-on-month, and down 6.8% and 3.1% year-on-year, respectively; FAW-Volkswagen plans to reduce production by 30% in the second quarter of this year; Great Wall Motors' production in the first quarter of 2021 decreased by 94,000 units month-on-month...

The price increase effect of reduced automobile production will eventually be passed on to consumers, and the smooth expansion of production by semiconductor manufacturers such as Bosch will undoubtedly benefit the general public.