Bosch Plans Connectivity Push to Challenge Google’s Lead

Robert Bosch GmbH, the world’s largest car-parts maker and a producer of dishwashers and medical-device components, is plotting inroads into the world of Google Inc. with possible acquisitions.

Bosch technology such as door sensors that help regulate room temperature or utility-control networks in Monaco are just the start as the overlap between the information-technology and mechanical-hardware industries increases, Chief Executive Officer Volkmar Denner, 57, said in an interview.

“It’s no longer a question whether networked things are coming,” Denner said at company headquarters near Stuttgart, Germany. “It’s a fact, and we want to be one of the leading players.”

Web-enabled household items and industrial equipment for remote control, monitoring or communications -- dubbed the Internet of Things -- may generate $8.9 trillion in product and service revenue by 2020, almost double the $4.8 trillion market in 2012, according to research company IDC. General Electric Co. and International Business Machines Corp. are among five high-tech companies that founded the Industrial Internet Consortium in March to set technical standards for the sector.

“It’s not a proper market yet, but it will come,” said Manuel Backhaus, a Dusseldorf, Germany-based managing partner at AlixPartners consulting company. “Many manufacturers are still very reluctant about the concrete implementation because of possible risks to their supply chain.”

Google Thermostats

The industry got a boost with Google’s acquisition in February of digital-thermostat maker Nest Labs Inc. for $3.2 billion, a transaction that helped push up shares of competing networking manufacturers such as Control4 Corp., SilverSpring Networks Inc. and Echelon Corp. While Google’s Android is becoming the standard operating system outside the phone and computer markets, the Nest takeover increased competition with iPhone maker Apple Inc. in producing connected devices.

“Companies like Google have recognized that they need to move into things, but we’re already there,” Bosch’s Denner said. “It’s not certain that an IT company will win the race” in developing product connectivity.

Industrywide demand for smart sensors and software may rise exponentially, as “many companies in Europe haven’t even begun to think about what this means for them,” Nick Jones, an analyst at consulting company Gartner Inc., said by phone. “The information you can collect with smart devices will be a key element. It will lead to new types of products and services.”

Century’s History

Founded in 1886 as a workshop for precision mechanics and electrical engineering, Bosch offers a lineup today that includes automotive spark plugs, starter motors and fuel systems as well as dishwashers, washing machines and components for medical equipment such as moving parts for X-ray devices.

Online-focused businesses include Bosch Healthcare, which specializes in remote monitoring of medical patients in their homes, and Bosch Connected Devices & Solutions GmbH, a unit set up last year that supplies compact electronics and software for residential, transport and logistics use.

Bosch has the resources for acquisitions to add technology, with a cash pile at the end of 2012 of 12.6 billion euros ($17.3 billion). The company, which generated 46.4 billion euros in revenue last year, is scheduled to release full 2013 figures at the end of April. It’s targeting a profit increase in 2014 after getting rid of solar-energy operations.

Global Competitors

Competitors in automotive electronics include Hanover, Germany-based car-parts manufacturer Continental AG and Van Buren Township, Michigan-based Visteon Corp., which is expanding its presence in the industry with the planned purchase of the driver-information, body-electronics and infotainment unit of Johnson Controls Inc.

Continental, which ranks second to Bosch in Europe’s auto-parts industry, is working on wireless data transmission for cars, including a project on integrating a remote-key system into smartphones, Andreas Wolf, head of body and security operations at the interiors division, said in an e-mail.

German Chancellor Angela Merkel is pushing the country’s car, engineering and chemicals industries to adopt digital and network technologies into their manufacturing processes to safeguard their competitiveness. “We need to make sure Germany is top of the world in this area,” she said last year.

Denner, who spent two decades in development posts at Bosch prior to becoming CEO in 2012, has often told fellow engineers that all electronic products the company makes will need to be Internet-ready. In addition to establishing Bosch Connected Devices, he has created cross-divisional teams reporting to the management board that are designed to act as internal start-ups.

“We’re looking at all potential targets, but I’m also a big fan of developing things in-house,” Denner said.

Before it's here, it's on the Bloomberg Terminal.