Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel,   BELGIË  
 
Tel: +32 229 -91111. Fax: +32 229 -64301. E -mail: COMP -MERGER -REGISTRY@ec.europa.eu .  EUROPEAN COMMISSION  
Brussels, 20.08.2019  
C(2019 ) 6169 final  
PUBLIC VERSION  
 
To the notifying party   
Subject : Case M.9330 – DENSO  / HIROSE  
Commission decision pursuant to Article 6(1)(b) of Council Regulation 
No 139/20041 and Article 57 of the Agreement on the European Economic 
Area2 
Dear Sir or Madam,  
(1) On 22 July 2019 , the European Commission received notification of a proposed 
concentration pursuant to Article 4 of the Merger Regulation by which Denso 
Corporation (“Denso”, Japan)  acquires within the meaning of Article 3(1)(b) of the 
Merger Regulation sole control of the whole of the Hirose Plant (Japan)  by way of 
purchase of assets (the “Transaction”) .3 Denso is designated hereinafter as the 
“Notifying Party”. The Hirose Pla nt is referred to as the “Target”. Denso and Hirose 
Plant are collectively referred to as the “Parties”.  
                                                 
1  OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009,  the Treaty on the 
Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of 
“Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will 
be used throughout this decision.  
2  OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).  
3  Publication in the Official Journal of the European Union No C 251 , 26.07.2019,  p. 6. 
In the published version of this decision, 
some information has been omitted 
pursuant to Article 17(2) of Council 
Regulation (EC) No 139/2004 
concerning non -disclosure of business 
secrets and other  confidential 
information. The omissions are shown 
thus […] . Where possible the 
information omitted has been replaced by 
ranges of figures or a general description.  
 
 
2 1. THE PARTIES  & THE OPERATION  
(2) Denso is a Japanese manufacturer and supplier of advanced automotive parts and 
components for automobile manufacturers, non-automotive consumer products and 
industrial products.  
(3) Denso develops, produces and sells: (i) engine control systems, hybrid and electric 
car drive systems, power supply and starting system parts; (ii) air -conditioning 
systems for cars, buses and truck s, air purifiers and cooling systems; (iii) products 
and services regarding information & safety of vehicles; (iv) electronics, sensors and 
engine control computers; (v) small motors such as windshield wiper systems, power 
steering and cooling fans; and (vi) non-automotive consumer products such as 
industrial robots and water heaters.  
(4) The Hirose Plant is a manufacturing facility, currently owned by the Toyota Motor 
Corporation4 (“Toyota ”), which produces semiconductors and electronic components 
for use in a utomobiles.  Toyota currently uses the entire output of the Hirose Plant 
exclusively for its own, captive production.  
(5) The proposed Transaction involves Denso’s acquisition of sole control over all the 
relevant assets used by the Hirose Plant to develop and manufacture electronic 
components for automobiles, including the land, factory, manufacturing equipment 
and intellectual property rights .5 
(6) The transferred assets also include all the necessary elements required to sell the 
products manufactured at the Hiro se Plant to third -party automobile manufacturers 
other than Toyota. Denso currently sells automobile components to a number of 
automobile manufacturers and has all the necessary capabilities (i.e., marketing 
teams, sales personnel, reputation, distribution network, etc.) to sell the products 
produced by the Hirose Plant to automobile manufacturers  other than Toyota . 
Following completion of t he proposed Transaction , the Notifying Party submits that 
it intends to use the Hirose Plant to produce products for sale to both Toyota and 
third parties.  
(7) The Transaction will be implemented through a Basic Agreement, executed on 
1 June 2018, pursuant to which Denso will acquire the Target. Post-Transaction, 
Denso  will have sole control over t he Target . The Transaction therefore constitutes a 
concentration pursuant to Article 3(1)(b) of the Merger Regulation.  
2. EU DIMENSION  
(8) The undertakings concerned have a combined aggregate world -wide turnover of 
more than EUR 5 000 million .6 Each of them has an EU -wide turnover in excess of 
EUR 250 million, but they do not achieve more than two -thirds of their aggregate 
EU-wide turnover within one and the same Member State . The notified operation 
therefore has an EU dimension.  
                                                 
4  Toyota is a Japanese automotive company engaged primarily in the design , manufacture, assembly and 
sale of passenger vehicles, minivans, commercial vehicles, related parts and accessories.  
5  During a transitional period, [Sensitive information regarding future human resources] . 
6  Turnover calculated in accordance with Artic le 5 of the Merger Regulation.  
 
 
3 3. MARKET DEFINITION  
(9) The Parties activities  overlap horizontally and are vertically linked on a number of 
markets in the supply of automotive parts . 
(10) The following horizontal overlaps involve affected markets:7 
(a) Hybrid vehicle (“HV”) integrated electronic control units (“HV integrated 
ECUs”) at worldwide level;  
(b) Electric power steering electronic control units (“EPS -ECUs”) at worldwide 
level; and  
(c) Inverters at worldwide level.  
(11) The following vertical rela tionship involve s affected markets:8 
(a) Upstream : the market for the supply of c ooling systems for inverters at 
worldwide level, and  
(b) Downstream : the market for the  supply of inverters at worldwide level.  
(12) The Parties ' activities do not overlap in the EEA . This  is because  the Hirose Plant 
does not sell any products in the EEA apart from Valvematics and inverters to a 
Toyota subsidiary in the EEA , whereas Denso has no sales of inverters in the EEA 
and no production of Valvematics  or any functionally substitutable product.   
3.1. Product market definition  
3.1.1.  Electronic control units ( "ECUs ") 
(13) The Parties activities overlap on (i) HV integrated ECUs at worldwide level and (ii) 
EPS-ECUs at worldwide level.  
(14) The Notifying Party submits that each individual type of ECU constitutes a separate 
product market based on its specific technologies and non -substitutable applications.  
(15) In previous decisions, the Commission has distinguished between different types of 
ECU s,9 and this approach will be retained for the purposes of this case.  
                                                 
7  In addition, although the Parties’ activities overlap horizontally, the Transaction will not give rise to 
affected markets in the following markets where horizontal overlaps between the Parties are below 20%, 
namely: (i) the o il control valves market at worldwide level; (ii) the fuel saving (Eco -run) ECUs  market  at 
worldwide level; (iii) the e lectronic control fuel injection ECUs market at worldwide level; and (iv) the 
customized integrated circuits (“Custom ICs”) market at worldwide level. These markets will not be 
discussed further.  
8  In addition, although the Parties’ activities are vertically linked, the Transaction will not give rise to 
affected markets in the vertical link at worldwide level between brake -related ECU s produced by the 
Target which incorporate passive safety Custom ICs produced by both Parties, since the combined market 
shares of the Parties at either level are below 30%. This vertical link will not be discussed further.  
9  Commission decision of 12 Mar ch 2015, COMP/M.7420 – ZF/TWO , paragraph 9 ; Commission decision 
of 27 July 2012, COMP/M.6640 – Delphi/FCI MVL , paragraphs 34 -36; Commission decision of 29 
November 2007, COMP/M.4878 – Continental/Siemens VDO , paragraphs 11 -30. 
 
 
4 HV integrated ECUs  
(16) The HV integrated ECU is a device that contributes to fuel efficiency of the vehicle 
where it is mounted, by optimizing outputs of the engine of the vehicle according to 
load on the vehicle and driving conditions, and by controlling a function that stores 
driving energy in the battery as electricity when the vehicle slows down.10 
EPS-ECUs  
(17) The electric power steering electronic control unit (“EPS -ECU”) controls the 
electronic power steering system. EPS -ECU is an electronic component that 
generates the assist torque by the motor for steering operation and reduces the 
steering effort.11 
(18) In any event, for the purpose of this decision the Commission considers that the  
question of the exact market definition can be left open, as the Transaction does not 
give rise to serious doubts as to its compatibility with the internal market.  
3.1.2.  Inverters  
(19) Generation power control units (“PCUs”) manage the electric drive systems of HVs 
and electric vehicles (“ EVs”). They consist of inverters, which incorporate a cooling 
system, and converters. Inverters convert electricity derived from a direct current 
source into an alternating current (and vice versa) and converters adjust the electric al 
voltage appropriately. Inverters are an essential and unique component in every HV 
and EV  as they are used to manage the car’s electric drive system.12 
(20) The Notifying Party submits that inverters are not substitutable with any automotive 
component performing similar functions, and that the relevant product market is the 
market for inverters for hybrid and electric vehicles.  
(21) In previous decisions, the Commission has concluded that each individual 
automotive component constitutes a separate product ma rket.13 This approach will be 
retained  for the purposes of this case.  
(22) In any event, for the purpose of this decision the Commission considers that the 
question of the exact market definition can be left open, as the Transaction does not 
give rise to serious  doubts as to its compatibility with the internal market . 
3.1.3.  Cooling systems for inverters  
(23) As noted above , inverters incorporate a cooling system. These cooling systems are 
separate and functionally different from the radiator -based engine cooling system, 
and are not substitutable.14 
(24) Initially the cooling systems for PCUs (1st and 2nd generation PCUs) were radiator 
based  systems, in which a small cooling radiator was dedicated to cooling the 
                                                 
10  Form CO, paragraph 58.  
11  Form CO, paragraph 62.  
12  Form CO, paragraph 54.  
13  Commission decision of 12 March 2015, COMP/M.7420 – ZF/TWO , paragraph 9 . 
14  Form CO, paragraphs 97 and 98.  
 
 
5 inverter. However,  these less energy -efficient cooling systems are no longer used, 
and could not be used, for newer inverters with higher performance. Instead, current 
HV and EV models incorporate either a 3rd generation PCU (incorporating a 3rd 
generation cooling system) o r, less frequently, a 4th generation PCU (incorporating a 
4th generation cooling system).15 
(25) The Notifying Party submits that the relevant product market is the market for 
cooling systems for 4th generation PCUs as these cooling systems are not 
substitutable  with other PCU cooling systems (or engine cooling systems).  
(26) The Notifying Party submits that there is significant differences between the 4th 
generation cooling systems and the 3rd generation cooling systems, including their 
design and technology. Moreov er, a 3rd generation PCU cooling system cannot be 
incorporated in a vehicle with a 4th generation PCU and vice versa. Given the 
different manufacturing processes and know -how required to produce 3rd generation 
and 4th generation PCU cooling systems, there is no supply -side substitutability. 
However, the Notifying Party argues that the exact product market definition can be 
left open as the Transaction would not raise any competition concerns regardless of 
whether the relevant product market is comprised of 4th generation PCU cooling 
systems alone, or comprised of both 3rd and 4th generation PCU cooling systems . 
(27) In previous decisions, the Commission has concluded that each individual 
automotive component constitutes a separate product market.16 This approach will be 
retained for the purposes of this case and cooling systems for inverters for 4th 
generation PCUs  will be considered as a separate product market.17 
(28) In any event, for the purpose of this decision the Commission considers that the 
question of the exact market definition can be left open, as the Transaction does not 
give rise to serious doubts as to its compatibility with the internal market . 
3.2. Geographic market definition  
3.2.1.  ECUs  (HV integrated ECUs and EPS -ECUs)  
(29) The Parties activities o verlap on (i) HV integrated ECUs at worldwide level and (ii) 
EPS-ECUs at worldwide level.  
(30) The Notifying Party submits that the relevant market s for HV integrated ECUs and 
EPS-ECUs are  at least EEA -wide.   
(31) In previous decisions, the Commission has left open whether the geographic market 
for different types of ECUs is to be considered EEA -wide or worldwide.18 
                                                 
15  Form CO, paragraph 99.  
16  Commission decision of 12 March 2015, COMP/M.7420 – ZF/TRW , paragraph  44. 
17  Form CO, paragraph 27 and footnote 42: Denso does not produce Valvematics or any product functionally 
substitutable with Valvematics. Denso is Toyota’s  only supplier of cooling systems for 4th generation 
PCUs. Moreover, Toyota is Denso’s only customer and Denso does not sell 3rd generation PCU cooling 
systems.  Therefore, only cooling systems for inverters for 4th generation PCUs constitute the relevant 
market.  
18  Commission decision of 12 March 2015, COMP/M.7420 – ZF/TRW , paragraph  44. 
 
 
6 (32) In any event, for the purpose of this decision the Commission considers that the 
question of the exact geographic market definition can be left open, as t he 
Transaction does not give rise to serious doubts as to its compatibility with the 
internal market . 
3.2.2.  Inverters  
(33) The Notifying Party submits that the market for inverters is at least EEA -wide.  
(34) In its decisional practice, the Commission has left open the que stion whether the 
relevant geographic market for automotive components is EEA or worldwide in 
scope.19 
(35) In any event, for the purpose of this decision the Commission considers that the 
question of the exact geographic market definition can be left open, as t he 
Transaction does not give rise to serious doubts as to its compatibility with the 
internal market . 
3.2.3.  Cooling systems for inverters  
(36) The Notifying Party submits that the market for cooling systems for inverters is at 
least EEA -wide.  
(37) In its decisional practice, the Commission has left open the question whether the 
relevant geographic market for automotive components is EEA or worldwide in 
scope.20 
(38) In any event, for the purpose of this decision the Commission considers that the 
question of the exact geogr aphic market definition can be left open, as the 
Transaction does not give rise to serious doubts as to its compatibility with the 
internal market . 
4. COMPETITIVE ASSESSMEN T 
4.1. Horizontal non -coordinated effects  
(39) By way of introduction, it should be noted that, a s explained in paragraph (4), 
Toyota currently uses the entire output of the Hirose Plant exclusively for its own, 
captive production. The Transaction provides the N otifying Party with the ability to 
open this output to third parties and the Notifying Party explained it consider s such 
opportunity  to sell the Target's products to the market.   
(40) In that sense, the Transaction could result in adding  the output to third parties on the 
various relevant markets.  Even in a scenario where the Notifying Party would 
continue using the entire Target's output to the Toyota Group, the Transaction would 
appear neutral.  
                                                 
19  Commission decision of 12 March 2015, COMP/M.7420 – ZF/TRW , paragraph  44. 
20  Commission decision of 12 March 2015, COMP/M.7420 – ZF/TRW , paragraph  44. 
 
 
7 4.1.1.  HV integrated ECUs  
(41) The combined market share of the Parties on the market for HV integrated ECUs in 
2018 amounted to [30-40]%  (Denso [20-30]% and Hirose Plant [0-5]%) at 
worldwide level.21 
(42) Given the limited increment brought by the Transaction , the Commission considers 
that the Transaction does not give rise to serious doubts as to its compatibility with 
the internal market in relation to the market for HV integrated ECUs at worldwide 
level.   
4.1.2.  EPS-ECUs  
(43) The combined market share of the Parties on the market for EPS -ECUs in 2018  
amounted to [20-30]% (Denso [20-30]% and Hirose Plant [0-5]%) at worldwide 
level.22 
(44) Given the moderate market position of the Parties post -Transaction and the marginal  
increment brought by the Transaction, the Commission considers that the 
Transaction does  not give rise to serious doubts as to its compatibility with the 
internal market in relation to the market for EPS -ECUs at worldwide level.  
4.1.3.  Inverters  
(45) The combined market share of the Parties on the market for inverters in 201723 
excluding vertically integrated competitors but including the volumes currently used 
internally by Toyota and produced by the Target amounted to [40-50]% (Denso [20-
30]% and Hirose Plant [20-30]%) at worldwide level.24 
(46) However, Toyota is currently using th e entire inverter output of the Hirose Plant 
exclusively for its own, captive production. As explained by the Parties, pre-
Transaction, Toyota had no incentive to sell inverters to third parties and had no 
intention or plan to do so. Therefore, there is cu rrently no customer to the Hirose 
plant that could be harmed by a potential price increase or any other anti -competitive 
effects post -Transaction.  
(47) [Future sales strategy] , [Sensitive information and future sales strategy] .25 [Future 
sales strategy] . Such cu stomers would then benefit from an increase in production 
capacity to serve the demand for such products  on the merchant market . 
                                                 
21  The Parties’ activities in HV integrated ECUs do not overlap in the EEA.  
22  The Parties’ activities in EPS -ECUs do not overlap in the EEA.  
23  The Notifying Party estimates that the market shares have not materially changed in 2018.  
24  Form CO, paragraph 125: it should be noted that , pre -Transaction,  all of Toyota’s inverters produced in 
the Hirose Plant are supplied internally; Toyota does not sell inverters to any third parties in the EEA or 
anywhere else in the world. Additionally, Denso does not sell any inverters in  the EEA. Thus, the 
combined party market share and the market share “increment” are merely nominal, i.e. the “increment” is 
entirely linked to Toyota’s previously internal demand for inverters becoming part of the merchant market 
as a result of the Transa ction without any  elimination of competition.  
25  Form CO, footnote 61: [Future sales strategy] . Rather, they expect the consolidation of the production to 
result in greater production efficiencies.  
 
 
8 (48) Moreover, there are a n important  number of competitors supplying inverters. S uch 
competitors include large corporations, active  at worldwide level such as  Mitsubishi 
Electric, Hyundai Mobis, Bosch, Hitachi Automotive Systems, Calsonic Kansei and 
others, active on this market and related markets for other automotive  components. It 
is therefore unlikely that the merger would hinder entry or expansion by other 
market players.  
(49) In view of the above, the Commission considers that the Transaction does not give 
rise to serious doubts as to its compatibility with the internal market in relation to the 
market for inverters at worldwide level . 
4.1.4.  Conclusion  
(50) In view of the above, the Commission considers that the Transaction does not raise 
serious doubts as to its compatibility with the internal market as a result of horizontal 
effects . The market investigation also supported this conclusion.26  
4.2. Non-horizontal overlaps  
(51) The Transaction will give rise to a vertically affected relationship between the 
markets for cooling systems for inverters (upstream) and inverters (downstream) at 
worldwide level.  
(52) Denso is Hirose Plant’s sole supplier of cooling sy stems for 4th generation PCUs  
which are used to manage the electric drive systems of HVs and EVs, and comprise 
the inverter, which incorporates a cooling system, and converters to adjust voltage.  
(53) For the Hirose Plant’s 4th generation PCUs, the Hirose Plant  uses cooling systems 
specifically produced by Denso for use in Toyota’s 4th generation PCUs. Denso does 
not sell these types of cooling systems, which are developed for Toyota’s 4th 
generation PCUs, to third parties anywhere else in the world, [Future sal es 
strategy] .27 Therefore, the Commission considers that input foreclosure is not likely 
to arise.  
(54) The Hirose Plant sources cooling systems for 4th generation PCUs only from Denso. 
For the inverters  of these 4th generation PCUs , the Hirose Plant has never acquired 
cooling systems from other manufacturers [Future supply sources] , particularly 
because the cooling systems are specifically made by Denso for the Hirose Plant’s 
4th generation PCUs.28 Therefore, the Commission considers  that customer 
foreclosure is not likely to arise.  
(55) Even if the market would comprise 3rd and 4th generation PCU cooling systems,  
because Denso supplies only cooling systems for 4th generation PCUs, its share in a 
market comprising 3rd generation and 4th generation PCU cooling systems would be 
very limited, and not materially exceed [10-20]% in 2018 . Therefore, the 
Commission considers  that it would not be profitable for the merged entity to engage 
in a foreclosure strategy.  
                                                 
26  E-mails of customers and competitors of 24, 26, 29 and 30 July and 7 August 2019.  
27  Form CO, paragraph 106.  
28  Form CO, paragraph 107.  
 
 
9 (56) In view of the above, the Comm ission considers that the Transaction does not raise 
serious doubts as to its compatibility with the internal market as a result of non -
horizontal effects. The market investigation also supported this conclusion.29 
5. CONCLUSION  
(57) For the above reasons, the European Commission has decided not to oppose the 
notified operation and to declare it compatible with the internal market and with the 
EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the 
Merger Regulation and Article 57 of the  EEA Agreement.   
For the Commission  
 
 
(Signed)  
Margrethe VESTAGER  
Member of the Commission  
 
 
                                                 
29  E-mails of customers and competitors of 24, 26, 29 and 30 July and 7 August 2019.