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Automotive Semi Penetration Increases Lure Industry Competitors


The automotive semiconductor sector has been showing growth trends for a number of quarters now, thanks to the continuous development of safety and efficiency solutions as well as the increase in infotainment (in-vehicle information and entertainment) offerings. Car makers have been offering both of these features for a number of years now, but the differences in offerings are becoming more nuanced and focused on the extent and sophistication of onboard electronic offerings. As a result, the market for automotive semi chips is forecasted to grow by 6.1% to US $27.9 billion this year, according to IHS as reported by Automotive News.

Auto semi gains and challenges

The increase in automotive electronics solutions is supporting global supply chain growth for the sector, from Bosch in Germany, to Texas Instruments in the US, and the expanding set of microelectromechanical system (MEMS) manufacturers, among others, continue to see significant increases in sales from automotive chip solutions. Embedded ICs as well as optoelectronics and MEMS sensor systems are particularly in demand, however the automotive semi chip manufacturers are fewer in number due to the significant safety and reliability standards.

While automotive, like markets in general, has experienced some see-sawing this year, the overall sales and growth trajectory continue, like many other markets, to show sustainable, steady increases and pull-backs continue to be viewed as short-lived. What this means is that chip manufacturers continue to look at diversifying into automotive as a strategic opportunity, but one that comes with serious changes to meet industry standards. As a result the initial wave of automotive semi opportunities for newer chip manufacturers to the sector is happening in the on-board auto-infotainment sector. Here we are already seeing Intel, Qualcomm, Nvidia and the like competing toe-to-toe for automotive solutions that can differentiate brands and models, as we've seen touted for the past couple of years at electronics shows.

Auto electronics diversification goes both ways

Interestingly though, it is not just the global chip manufacturers looking to "break into" automotive semi and participate in the growth seen in that sector. Longstanding auto semi and electronics firms, like Bosch and ZF Friedrichshafen AG, are branching out from their stronghold in automotive to include more technology holdings in anticipation of changes from smart cars and smart life IoT.

While these major acquisitions point directly to the growth opportunities seen (both ways) for automotive electronics, the question remains around opportunities for deep joint venture partnerships that could put both traditional IC manufacturers and automotive component manufacturers in mutually advantageous partnerships. The problem with automotive, which is similar to the barriers of entry for medical device electronics, is that it takes time to develop the solution capabilities appropriate and able to meet the strict safety and quality requirements in these industries.

However, given the significant growth opportunities for automotive (and health) the investment (through M&A or in-house R&D) in order to successfully diversify is going to increase. With Electronica 2014 Munich coming up in just over a month's time, we expect to see more automotive electronics solutions presented. The European automotive market continues to be a global leader, and the strength of EU automotive and semiconductor companies along with EU mandates for improving safety, fuel efficiencies, and emissions are going to support truly innovative solutions.

Lisa Ann Cairns, Ph.D.
Written on Friday, 26 September 2014 13:12 by Lisa Ann Cairns, Ph.D.

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