With new branding and feature strategies from auto OEMs, the ability to meet the demands of consumers to stay connected anywhere anytime is key to claiming the 'cutting-edge', leadership flag. The numbers are up for automotive semi content due to feature demands for infotainment, efficiency, safety, and electric vehicle penetration!
The next decade holds very impressive growth forecasts for automotive semi content, from sensors to audio systems and from smart-LED lighting to car Wi-Fi and Bluetooth. This forecast translates into growth for MEMS as well as a wide array of driver ICs, automotive MCUs, and a slew of electronically controlled powertrain components. Beyond new infotainment and efficiency features, however, is the coming-of-age for hybrid electric vehicles (HEV) and electric vehicles (EV). This next automotive revolution is forecasted to see a combined compound annual growth rate (CAGR) of 104% per year, according to some analysts.
Auto recovery on auto pilot?
Roughly 17 million cars were sold in 2007. This year, roughly 11.5 million cars will be sold, and continued growth is on track, albeit slower than most in governments and business would like to see, according to Nissan CEO Carlos Ghosn, in this interview with The Wall Street Journal. The slower state of growth, according to Ghosn, is causing some "impatience" as many wait anxiously for the breakout moment to occur. With governments and consumers alike demanding new design solutions, global automotive forecasts are solid for both personal and commercial vehicles.
The latest competitive options in the automotive market have focused on two main areas:
- In-car 'infotainment' capabilities that provide on-board diagnostics and monitoring, fuel efficiency aides, navigation, Wi-Fi, audio, video, hands-free calling, etc.; and
- Advanced Driver Assist Systems (ADAS) that provide on-board systems (software housed in new MCU and ECU) that integrate internal and external sensors to warn drivers, and that temporarily automate driving in order to reduce accidents. These systems are also used to improve fuel and battery efficiency levels, particularly in HEVs and EVs.
Mandated safety standards have been an important growth driver for MEMS sensor systems during the past few years. It is believed that China will follow South Korea and Japan in adopting the North American (NA), European (EU) and Australian safety and efficiency standards for cars, namely electronic stability control (ESC) and tire pressure monitoring systems (TPMS). These mandates are forecasted to then expand to become global standards and then move from private vehicles (PV) to include commercial vehicles (CV) (cf. this report on recent mandates by iSuppli). The expanded adoption of these standards equates to significant increases in the content of automotive semiconductors in vehicles; good news for MEMS sensors and IC sectors alike (cf. this forecast for Automotive MEMS by MEMS Industry Group).
Meanwhile, in North America and Europe, new standards to reduce accident rates due to distracted driving for private (PV) and commercial vehicles (CV) are in process (cf. this report about Advanced Driver Assist Systems (ADAS) and this report about EU programs from iSuppli). These new safety mechanisms rely on a wide array of automotive semis including cameras monitoring the driver's eye gaze and blink ratio, external cameras and sensors to improve lane and proximity warnings, multiple automotive MCUs governing the systems, and numerous driver ICs.
Beyond these safety features, automakers have also been working to improve and produce more hybrid electric vehicles (HEVs) and fully electric vehicles (EVs). To underscore the importance of the automotive semi sector for car makers, Nissan CEO Ghosn reiterated to WSJ that Nissan's US strategy in adding capacity was strategically focused on very specific product areas: "We are adding capacity in new technology. […] We are very selective by adding, in the US, the high-technology, high-value products." Nissan's strategic investments are in place because of the demand coming from governments and consumers alike; no longer is it a one-way street of the auto-manufacturers lobbying governments for support of innovative HEV/EV solutions, according to Ghosn in the same interview.
With these strong market demand conditions, the question is not so much will there be a positive automotive semi content forecast, but rather how are these drivers aligning for specific semiconductor component growth in the short- and long-term?
Infotainment driving consumers into new vehicles
The recent CE trends have not been lost on automotive OEMs. In response to the CE market, there has been a surge in the amount and variety of automotive electronics provided as both standard (by mandate) and as optional upgrades for consumers to choose from: safety and efficiency (both mandated and optional features); driver information (maintenance and navigation, especially); and in-car entertainment (audio, video, voice activated calling, etc.). With the proliferation of smart wireless devices (SWDs) and consumers' demands for anywhere, anytime connectivity, one of the latest automotive electronics design trends has been the incorporation of SWD features into the car environment.
Of all the features, in-car Wi-Fi is expected to see the highest growth rate for the upcoming decade, with iSuppli forecasting built-in systems "to soar by more than fortyfold by 2017. [… Rising] to 7.2 million units in 2017, up from just 174,000 in 2010." The reason for the strong forecast? "Whereas Wi-Fi was an aftermarket accessory in the past, OEMs now are touting it as a key offering," according to the same iSuppli report. The movement of Wi-Fi to a key feature is also the beginning of it becoming a standard feature, particularly in light of the wider CE demand trends affecting other semi market sectors (cf. this companion MarketWatch Quarterly article on the data storage sector).
Other automotive infotainment demands and competitive options are already available in the luxury car market and on the near horizon for the general market. Specifically, the ability to continue to leverage Bluetooth capabilities by syncing consumers' SWDs to the car, is a sought after capability for automotive OEMs, and a demanded feature by consumers. However, these features require the resolution of a critical problem: the widely divergent cycle-times for CE devices versus those for automobiles.
Consumers have come to expect the features they enjoy from their SWDs to be ubiquitous (cf. this report from iSuppli on social networking while driving). Beyond simple calling capabilities and navigation for routing, consumers expect to be able to continue their social networking, texting, and real-time updates for weather, traffic, and audio/video streaming. On their SWDs, these real-time infotainment features are accessed by consumers through cloud computing services (cf. this report from iSuppli about the cloud and auto-infotainment). The challenge for automotive engineers is to include vehicles in the array of devices capable of accessing the cloud. But with short cycle times for CE devices and the related software applications (apps), how does a 'device' with a long cycle time, such as a vehicle, fit into this new network that changes so rapidly?
Previously, on-board automotive electronics were designed with the car as the server and the repository of data, capabilities, features, etc. With the rapid replacement cycle time for CE devices and the ability to have real-time information and media updates via cloud computing, came the question of how to keep the car experience relevant. Perhaps the most successful answer is in rethinking the relationship of the car and the SWD itself. No longer viewing the vehicle as the server, automotive engineers are redesigning the vehicle as the client to the SWD-server (cf. this detailed report as an example of mobile connectivity solutions from QNX Software Systems in EETimes). This new client-server device relationship allows for the ability to readily upgrade platforms, to provide new and additional services, as well as to stream the information available in the cloud to the driver via their SWD that is synced to the vehicle. As these design approaches move to standards, the door opens for software apps to be translated for appropriate viewing and accessing through the car's user interfaces (UIs) when the car is connected to the SWD (cf. this article from CNET for some of the application and design transfers between SWDs and vehicles).
Safety in numbers for automotive semis
The obvious, critical issue to be resolved by inviting these infotainment options into the vehicle is that of 'distracted driving,' a leading cause of accidents today. Automotive OEMs’ ability to balance infotainment demands with safety is a challenge that must be met. An array of solutions exists and some are already in place in vehicles. One current, available solution to distracted driving is two-way voice capabilities for drivers to interact with car functions and smart phones without having to avert their eyes from the road. By having embedded controls that leverage smart phone Bluetooth capabilities with on-board 'headset' capabilities, not only is a viable solution reached, but also one that leverages the on-board features to performing other car functions (such as temperature and audio controls) which have also long contributed to distracted driving accidents (cf. this article from iSuppli).
Also on the safety feature horizon are automated driver assist systems (ADAS). These systems are being touted by transportation administrations. Automotive OEMs see ADAS as competitive features that distinguish vehicles from each other and provide upgrade options (cf. this recent ADAS report by iSuppli). ADAS systems include an array of new safety capabilities, all based on complex electronic system designs. Some examples of these new features include the following:
- Adaptive cruise control: sensors automatically adjust speed to match optimum distance from vehicles in front and provide lane departure warnings (side and front cameras and sensors alert the driver when lane departure has occurred (cf. this article from EETimes Europe Automotive and this report from iSuppli)).
- Side and rear object detection: sensors and multiple cameras provide alerts when a side object has been located and cameras and/or sensors provide visual and audio information about objects behind the car, particularly for reversing, turning and lane departure (cf. this article on new FPGA solutions in EETimes Europe Automotive).
- Intelligent LED headlights: individual LED driver ICs are controlled by an ECU mounted in the rearview mirror and automatically adjust brightness, beam array, and color of the headlights based on road and driving conditions (cf. this article on LED driver ICs and this article on LED lighting applications in EETimes Europe Automotive).
- Driver warning systems: in-dash cameras and sensors record eye movement and blink ratios to determine driver fatigue and attention; alerts warn drivers of unsafe driving behaviors. These monitors and sensors coordinate as a system and send data to the on-board MCUs that engage a vehicle's temporary auto pilot (TAP) system. TAP systems then share the control of the vehicle with the driver and the automated system until safe conditions have returned (cf. this report on Volkswagen's TAP systems, and this report on Xilinx's FPGA platform solutions, both from EETimes Europe Automotive).
- Electronic stability control (ESC) and tire pressure monitoring systems (TPMS): these systems are already standard in most North American, European and Australian vehicles due to government mandates. These systems improve safety and fuel efficiency (cf. this report from iSuppli).
As is obvious from the above summary of just some of the new ADAS systems, the content growth of automotive semiconductors is significant. This growth is not only in unit volume but importantly also in sophistication of semi content, meaning more advanced electronics are being required to provide the infotainment and safety features demanded. Finally, because of the critical nature of the accuracy of these ADAS systems, redundant systems and on-board fail-safe testing capabilities of the automotive MCUs are also necessary (cf. this discussion of Renesas Electronics automotive MCUs). Couple these numbers for safety features with the anticipated penetration rates for HEV and EVs, plus the rapid expansion of the on-board Wi-Fi and infotainment features, and the growth of the automotive semiconductor market is likely unparalleled during the next five to ten years.
HEV and EV meet new demands
The present outlook for HEVs and EVs, has reached a turning point bringing these vehicle types into the realm of notable penetration during the 2011-2015 period. The question of why now is well addressed by Nissan CEO Carlos Ghosn, from this Wall Street Journal interview about the viability of EVs including Nissan's Leaf:
[…] you obviously adapt to the market trends and the consumer demands. In the last 10 years there has been a change in these demands. […] Consumers want affordable cars that do not hurt the environment.
Viability is a question of scale. We are starting our production, and reaching one million cars and one million batteries. […] The time frame is the next 4-5 years. I can bet that all manufacturers will come with electric cars.
While Nissan has begun roll-out of its EV, the Leaf, and reservations for the initial 20,000 have been met, many still question the ability of these vehicles to reach reasonable penetration rates. As Ghosn stated above, "viability is a question of scale," and this scale is seen as being reasonable and able to be met within a few years' time. In support of the question of competition in the EV market, GM has also begun roll-out phases for its EV, the Chevy Volt (cf. this commentary from EETimes).
Perhaps surprisingly to many, HEVs and EVs are enjoying good sales in the light commercial vehicle (CV) market. The lure? Overall cost incentives. While the CV market pushes the price of an HEV or EV to roughly US $30,000 more than a diesel engine, the improved repair and operating costs over even short time frames has many companies such as Staples, Frito-Lay, and FedEx, already adopting these vehicles for their light to medium-sized trucks, as reported in this WSJ.com article.
The importance of the truck fleet adoption is the increased volume of HEVs and EVs on the road, thereby increasing the demand for the still needed battery recharging and swapping infrastructure. To date, one of the hindrances for wider EV adoption has been the ability to go beyond the roughly 125 mile radius before the battery would need recharging. With new fuel-efficiency standards for CVs to begin in 2015, it is very likely that Mr. Ghosn's forecast of a 4-5 year timeframe for EV penetration may be perfectly on target as corporations alongside consumers will demand recharging infrastructures (cf. this article on EV penetration and the EV business model shift in the Financial Times).
Does geography matter? Yes and no. While mature economies see the demand for EVs coming particularly from the more environmentally concerned consumers, willing to pay more for smaller footprints, it is short-sighted to believe that similar drivers are not also promoting demand globally. Emerging economies will most likely leapfrog automotive technologies, as has been the case with consumer electronics, and therewith promote the adoption of the latest automotive technologies in response to a combination of public and government support. Emerging economy governments will want and need to reduce their reliance on fossil fuels while being mindful of environmental regulations. Keen to meet these national and international needs, government support of EV infrastructure is likely to promote the penetration of EVs. Emerging economy consumers are already demanding affordable and reliable cars that meet the needs of their busy, urban cities; feature demands that are likely best met by the HEV and EV sectors (cf. this EETimes interview with Rainer Kallenbach, board member for automotive supplier Robert Bosch GmbH).
China, the world's largest vehicle market, is a prime example of this combined market phenomenon, as government financial support for infrastructure and research and development of EV has been announced (cf. this report from Automotive News on China as an EV leader). While China's EV timeline is likely to stretch longer than Mr. Ghosn's 4-5 year mark for Nissan in NA, Japan and EU, the opportunities are significant once the strategic framework is in place for successful adoption.
Certainly, there is much to be said about the technology and engineering involved in the HEV and EV market; particularly as these vehicles are so heavily reliant on automotive semiconductors in order to meet performance requirements of the entire vehicle's systems. However, such a discussion is beyond the present scope, and must, therefore, be tabled.
Fast lanes for automotive semis ahead
In short, the forecasts for short- and long-term growth for the automotive semiconductor market are strong. As global HEV and EV penetration rates increase, particularly with the support of CV fuel efficiency mandates and recharging infrastructure development, so do both the volume and the diversity of automotive electronic components. Couple the future HEV/EV growth rates with the immediate demands for automotive infotainment and ADAS features, and demand by private and corporate consumers is strong enough to hit double digit CAGR per year in automotive semi content, per vehicle. Finally, were these market forces not significant enough, the globalization of safety standards is already well underway, and translates into mandated increases in semi content per vehicle.
The forecast for car sales is strong, and with those numbers we find growth for automotive semiconductor market. Presently, for the US market alone, 14 million sales are forecasted for 2011 (cf. this report from Automotive News), add to that the forecast of roughly 20 million vehicle sales in China for 2011 (cf. this article from The Wall Street Journal). Then recognize that these numbers cover just two countries, and you quickly realize the global volume and sales opportunities for automotive semis not just for the next year, but for the next decade is sizable indeed.