Ito: Focus is on adding value
Denso Corp.’s bold plan to transform itself over the next decade will result in products and services it currently doesn’t sell. But an equal challenge awaits Japan’s biggest supplier: what to do with all of its old products.
Denso produces a bulging catalog of auto parts, including many that are not part of the industry vision of electrified, autonomous vehicles — such as spark plugs, oil filters, starters, oxygen sensors, fuel pumps and crankshaft sensors.
The company realizes that many of those will decline in significance or slowly disappear in the coming world of electric vehicles.
Kenichiro Ito, CEO of Denso International America, says the company must be prepared to shift its product-development spending away from the old products, based on customer needs, but at the same time find ways to make some of Denso’s core 20th-century parts more important to 21st-century vehicles.
“Our question is how we can transform our commodity products by adding value,” Ito told Automotive News. “For example, the air conditioner. As it is today, it could become simply a commodity. But in the future, instead, it could be combined with safety functions to add value, or combined with the functions of autonomous driving.
“We are focused on finding new value.”
A year later
Ito addressed the question as Denso marked one year of progress on its transformation campaign. The company has declared that it will be “evolving from hardware-based to software-based solutions” in the coming decade. To do that, it has formed partnerships and alliances with companies in research fields that are new to Denso, including artificial intelligence, autonomous driving, cybersecurity and electrification.
Its new partners include Plug and Play, NRI SecureTechnologies, Dellfer, InfiniteKey and the University of Michigan.
Denso is collaborating with Ridecell to get its foot in the door on car-sharing and ride-hailing technologies.
It has invested in ThinCI to have greater access to semiconductor devices with deep learning capabilities. It has formed a joint venture with fellow Japanese suppliers Aisin Seiki Co., Advics Co. and JTEKT Corp. to develop integrated software for automated driving.
It also has invested in cloud solutions and open software providers to tackle new opportunities in connectivity.
Those pursuits are far from Denso’s history in spark plugs and engine parts. But Ito said Denso has to move quickly in transforming itself.
“In the past, our customers gave us specifications, and we would know how to react and what to propose based on what they asked for,” he said.
“But from now on, we will have to propose the specifications to the customer, and do it faster than they can.”
Ito said he believes Denso now has adequate technical expertise to tackle the areas it intends to pursue, thanks to its growing list of partners.
New U.S. offices
In the coming weeks, Denso also plans to announce new satellite r&d offices in North America. One will focus on cloud computing, the other on artificial intelligence.
Denso has appointed a new North American-based executive, starting in January, to be in charge of both North American and European engineering, but also global r&d for mobility. Denso wants the executive to be based here because it believes the U.S. will lead the world in emerging mobility technologies, said Bill Foy, Denso’s senior vice president of engineering.
Foy said even as Denso moves into new fields, it will not abandon the many product areas that have been — and still are — critical for automakers. He said product development funds already have been invested in moving many of those commodity products to the next level, even though disruption awaits them.
“For the majority of our product lines that we see being disrupted in the future, we still have one next-generation level that’s already in development,” he said. “We’re not stopping that. That next leapfrog is still yet to come in that 2022-2025 timeframe. That’s something we’ve been working on.”
What happens after 2025, as more automakers transition into electrified products, is less clear. Instrument clusters, another important Denso product area today, could become obsolete in an era when fleets of autonomous vehicles are no longer guided and managed by the occupants.
“A second leapfrog for those products might not be required,” Foy said. “That’s where we’re using the opportunity to divert some research funding. We’re starting to divert some of that funding toward the true disruption that we see coming.”