Toyota and Denso have agreed to 'begin considerations toward consolidating the core electronic component operations of both Toyota and Denso within Denso'. The move comes as the auto industry grapples with challenges in advanced technologies for electrification, connectivity and autonomous drive - which increases the importance of electronic component systems. The aim is to enhance the competitive position of Toyota through the more efficient development and production of electronic components.

The move also reflects a cultural shift at Toyota, with the company moving away from a very high level of vertical integration to entrust more external sourcing in group companies where specialisations allow. The aim is "reconstructing the operations of the overall Toyota Group," President Akio Toyoda said in comments published last week. Toyota will divide its businesses into "home" operations that Toyota itself excels at and "away" enterprises in which group and partner companies have technological advantages. Eliminating overlap in group functions will allow Toyota to put more human resources into electrification technology. 

Currently, advanced development and mass-production development for Toyota's electronic components, as well as the production of such components, are conducted by both Toyota and Denso. The considerations to be made under the agreement are to focus on 'consolidating mass-production development and production within Denso'.

Denso has long independently developed and mass-produced semiconductors for onboard automotive applications, and it develops and produces various electronic components around the world. By consolidating mass-production development and production of electronic components of both Toyota and Denso within Denso, which has a high level of expertise in the field, Toyota and Denso aim to establish a speedy and competitive development and production structure. Doing so also aims to maximize resource utilisation, such as by shifting resources created by eliminating duplicate operations within the Toyota Group to new domains that will increase the value of future mobility, thus strengthening the competitiveness of the Toyota Group overall.

Transfer of production operations for electronic components

Discussions are to be held toward the transfer of production of electronic components from Toyota's Hirose Plant to Denso prospectively at the end of 2019. By strategically revamping its production and supply structure for electronic components, Denso aims to be a winner in the global competition of the electronic component market, as well as be able to apply the merits of mass production for supplying Toyota with higher-quality and more affordable electronic components.

Consolidation of mass-production development functions for electronic components

From 2022, mass-production functions for electronic components are to be consolidated within Denso. Considerations, such as for integrating development locations currently dispersed between Toyota and Denso, are to be made to enable the Toyota Group to establish a new organizational structure that unites operations ranging from development to production, leading to accelerated development speed.

The two companies said that 'details are to be discussed by Toyota and Denso going forward'.