Prodded by a stagnant home market and fast-moving rivals, Japanese suppliers are buying up foreign companies to gain quick access to new technology, customers and markets.
At least three major Japanese suppliers—Denso Corp., Toyoda Gosei Co. and Tokai Rubber Industries—have made acquisitions in recent months.
It's a brave new world for some Japanese suppliers, which traditionally have favored in-house product development. Acquisitions previously were viewed as attempts to buy market share, often with short-term benefits.
In early June, Denso snapped up Ease Simulation Inc., a telematics startup near Pittsburgh that provides remote vehicle diagnostics for commercial fleet owners.
That deal followed Denso's acquisition in September 2013 of a 50-percent stake in Adasens Automotive GmbH, a German developer of image-recognition technology that allows onboard cameras to identify road obstacles.
Denso, No. 2 on Automotive News' list of the Top 100 global suppliers, appears to be taking the trend a step further by channeling Silicon Valley's do-it-now ethos.
Automotive News is a sister publication of Rubber & Plastics News.
On May 29, the company announced plans to beef up its think tank in Silicon Valley to “aggressively pursue investments” in startups and entrepreneurs.
Denso said its Silicon Valley operation will focus on cybersecurity, big data and autonomous driving—all major growth industries as auto makers race to improve their collision avoidance technology.
The Japanese megasupplier is trying to keep pace with foreign rivals such as Robert Bosch GmbH, Continental A.G. and Delphi Automotive, each of which has opened an office in Silicon Valley.
Japanese suppliers long have favored in-house growth. But homegrown expertise takes time in fields such as vehicle diagnostics, collision avoidance and infotainment. Acquisitions and licensing are popular tactics for companies that need to improve their technology quickly, said Egil Juliussen, an analyst for the consulting firm IHS Automotive.
Auto makers and suppliers “must become more proficient to manage software and update it,” Juliussen said. “There will be new skills required.”
Ease, a 14-employee startup near Pittsburgh, has a cloud-based database that covers 90 percent of vehicles on the road. The Ease acquisition could enable Denso to enter the realm of remote vehicle diagnostics for commercial fleet owners and dealerships.
“We're talking to a number of different companies,” said Richard Shiozaki, a Denso senior vice president. “We are not only here to sell products but to offer services, and telematics fits right in with our growth plan.”
While dealer diagnostics looks like a profitable niche, collision avoidance could be a huge revenue generator for Denso and other megasuppliers.
Denso, like its German rivals, has developed a broad array of technology—such as radar, lidar, vision sensors, lane-keeping assist and adaptive cruise control—that are needed for collision avoidance.
The company is developing a vehicle-to-vehicle communication system to help prevent collisions at intersections.