Diversified companies are finding that far-flung businesses may be a secret weapon in developing new automotive technologies.
By developing products that work both inside the car business and outside of it, suppliers are able to spread the cost of r&d, tooling and production.
The strategy is allowing suppliers to serve an auto industry that needs expensive new technologies for connectivity and safety.
- Electronics giant Bosch is producing sensors for both autos and smartphones.
- U.S. chip maker Nvidia has adapted its video game graphics chips for use in self-driving cars.
- Harman is developing gadgetry suitable for both consumer electronics and connected cars.
Such cross-pollinating of industry sectors stands in contrast to the more recent trend among automotive supplier giants. A number of big suppliers, including Delphi Automotive, Visteon Corp. and Johnson Controls, have sold underperforming divisions to focus on a narrower range of products.
But a new counter trend is emerging: Diversified companies are finding that developments in one industry can make them more competitive in the auto industry.
Here's how they're doing it.
Robert Bosch GmbH spent $1.1 billion to open a "clean plant" in Reutlingen, Germany, six years ago to produce accelerometers, gyroscopes, yaw rate sensors and other electronic gadgetry.
These microelectromechanical systems, dubbed MEMs, are used to control airbags, engines, stability control systems and other key components. A vehicle might sport 50 or more sensors, but automakers alone didn't generate enough sales volume.
So Bosch found new uses in smartphones, tablets and video game consoles, which now account for 75 percent of the plant's output.
"We are leveraging the investments that we make," said Tim Frasier, president of Bosch's North American automotive electronics unit. "We wouldn't have made that investment if we didn't have access" to consumer electronics.
The Reutlingen facility's high price tag is attributable to the extreme measures required to make it a dust-free and vibration-free plant. To eliminate vibration from nearby road traffic, Bosch constructed a building within a building, with outer walls that are structurally separate from the inner rooms. Filters scrub the air clean of dust, and employees must pass through electronic sniffers that detect dirt.
Since it takes six weeks to produce the 8inch silicon wafers that constitute the sensors' raw material, Bosch keeps the plant running around the clock.
In 2014, Bosch's MEM sensors generated sales of $790 million, enough to dominate the industry segment, according to IHS Automotive.
Bosch expects to get another sales boost via the Internet of Things - that is, by supplying the components used in connected homes, appliances and other smart everyday objects.
"We're making investments in automotive," said Frasier, "but we're finding ways to make the business case work with applications elsewhere as well."