What are automotive semiconductors and why they are important for the future of mobility
Semiconductors are materials that have a conductivity between conductors (generally metals) and non-conductors or insulators (such as ceramics). They can be used to create electronic devices that can control the flow of electricity, such as transistors, diodes, sensors, microprocessors, memory chips, and integrated circuits. These devices are the building blocks of electronic systems that perform various functions, such as computing, sensing, processing, storing, transmitting, and displaying information.
Semiconductors are widely used in various industries and applications, such as computers, smartphones, televisions, medical devices, aerospace, and renewable energy. However, one of the fastest-growing and most demanding sectors for semiconductors is the automotive industry.
According to a report by Mordor Intelligence, the global automotive semiconductor market size was estimated at $43.6 billion in 2021 and is expected to surpass $115 billion by 2030, growing at a compound annual growth rate (CAGR) of 16.2%.
But why are semiconductors so important for cars? The answer is simple: they enable most of the innovations in vehicle development and are the catalyst for the growth which is driving consumer demand. They include different components, such as processors, sensors, memory devices, integrated circuits, and discrete power devices. They are used in vehicles with different fuel types, including diesel, gasoline, electric, and hybrid. They are essential for various automotive systems and applications. such as:
- Navigation Control: Semiconductors help perform efficiently, detect and classify objects, and alert the driver about the surroundings and road conditions.
- Infotainment Systems: Semiconductors enable the integration of GPS products, smartphone connectivity, and entertainment features in vehicles.
- Collision Detection Systems: Semiconductors enable the use of multichannel receivers and transmitters for radar solutions to help prevent crashes.
- Tire Pressure Monitoring Systems: Semiconductors enable the use of sensors, microcontrollers, and RF transmitters to measure and report tire pressure.
- Power Electronics: Semiconductors enable the conversion and control of electric power in hybrid and electric vehicles.
- Suspension Control: Semiconductors enable the use of sensors and actuators to adjust the suspension according to road conditions and driving preferences.
- Steering Control: Semiconductors enable the use of electric power steering (EPS) systems that reduce fuel consumption and improve steering performance.
- Braking Control: Semiconductors enable the use of anti-lock braking systems (ABS) and electronic stability control (ESC) systems that improve braking safety and stability.
How Automotive Semiconductors are Driving the Future of Mobility
Automotive semiconductors are electronic components that enable various functions and features in vehicles, such as electrification, automation, connectivity, and safety.
One of the major trends in the automotive industry is the shift from internal combustion engines (ICEs) to electric vehicles (EVs), which are powered by batteries or fuel cells. EVs offer several benefits over ICEs, such as lower emissions, higher efficiency, lower maintenance costs, and better performance. However, EVs also require more semiconductors than ICEs, as they need to control the electric motor, the battery management system, the power conversion system, and the charging system. According to a report by Mordor Intelligence, EVs use about three times more semiconductors than ICEs on average.
Some of the key semiconductor technologies and applications that enable electrification in vehicles are:
- Silicon carbide (SiC) and gallium nitride (GaN) power devices: These are advanced materials that can handle higher voltages, currents, temperatures, and frequencies than conventional silicon power devices. They can improve the efficiency and reliability of power conversion systems in EVs and reduce the size and weight of components.
- Battery management system (BMS) chips: These are integrated circuits that monitor and regulate the voltage, current, temperature, and state of charge of each battery cell in an EV. They can optimize the performance and lifespan of the battery pack and prevent overcharging or overheating.
- Wireless charging chips: These are integrated circuits that enable wireless power transfer between a charging pad and an EV. They can eliminate the need for cables and plugs and provide convenience and safety for EV users.
Another major trend in the automotive industry is the development of autonomous vehicles (AVs), which can drive themselves without human intervention. AVs have the potential to improve road safety, reduce traffic congestion, enhance mobility, and create new business models. However, AVs also require more semiconductors than conventional vehicles, as they need to process large amounts of data from various sensors, cameras, radars, lidars, and maps. According to a report by Statista, AVs use about ten times more semiconductors than conventional vehicles on average.
Some of the key semiconductor technologies and applications that enable automation in vehicles are:
- Artificial intelligence (AI) chips: These are processors that can perform complex calculations and machine learning tasks at high speed and low power consumption. They can enable AVs to perceive their surroundings, plan their routes, make decisions, and communicate with other vehicles and infrastructure.
- Advanced driver assistance systems (ADAS) chips: These are integrated circuits that support various functions such as adaptive cruise control, lane keeping assist, blind spot detection, collision avoidance, parking assist, and driver monitoring. They can enhance the safety and comfort of drivers and passengers and pave the way for higher levels of automation.
- 3D mapping chips: These are integrated circuits that can create high-resolution 3D maps of the environment using data from lidars or cameras. They can provide accurate localization and navigation for AVs and enable them to cope with dynamic scenarios.
A third major trend in the automotive industry is the integration of connectivity features in vehicles, which allow them to communicate with other devices such as smartphones, tablets, laptops, smartwatches, or smart home appliances. Connectivity features can enhance the user experience, provide entertainment and information services, enable remote diagnostics and updates, and support new business models such as car sharing or ride-hailing. However, connectivity features also require more semiconductors than traditional features, as they need to support various wireless standards such as Bluetooth, Wi-Fi, cellular, and satellite.
Some of the key semiconductor technologies and applications that enable connectivity in vehicles are:
- Infotainment system chips: These are integrated circuits that control the display, audio, video, navigation, and voice recognition functions in a vehicle’s infotainment system. They can provide various services such as music, navigation, voice control, and smartphone integration. They can also support over-the-air updates and remote diagnostics for vehicles.
- Vehicle-to-everything (V2X) chips: These are integrated circuits that enable vehicles to communicate with other vehicles, infrastructure, pedestrians, devices, networks, and clouds using wireless standards such as DSRC or C-V2X. They can improve road safety, traffic efficiency, energy savings, and mass surveillance.
A fourth major trend in the automotive industry is the improvement of safety features in vehicles, which aim to protect the occupants and other road users from accidents and injuries. Safety features can be classified into two categories: passive safety and active safety. Passive safety features are designed to minimize the impact of a crash, such as airbags, seat belts, and crumple zones. Active safety features are designed to prevent or mitigate a crash, such as an anti-lock braking system (ABS), electronic stability control (ESC), and automatic emergency braking (AEB). However, safety features also require more semiconductors than traditional features, as they need to sense, process, and actuate various signals and commands.
Some of the key semiconductor technologies and applications that enable safety in vehicles are:
- Sensor chips: These are integrated circuits that can measure physical parameters such as pressure, temperature, acceleration, speed, distance, angle, or light. They can provide input for various safety functions such as airbag deployment, tire pressure monitoring, seat occupancy detection, or adaptive lighting.
- Radar chips: These are integrated circuits that can emit and receive radio waves to detect the presence, distance, speed, and direction of objects. They can support various safety functions such as adaptive cruise control, blind spot detection, lane change assist, or cross-traffic alert.
- Camera chips: These are integrated circuits that can capture and process images or videos. They can support various safety functions such as lane departure warnings, traffic sign recognition, pedestrian detection, or driver monitoring.
Challenges and Opportunities for the Automotive Semiconductor Industry
The automotive semiconductor industry is facing various challenges and opportunities in the current market environment, which is influenced by factors such as supply chain disruptions, competition, innovation, regulation, and sustainability. In this section, we will analyze how these factors affect the industry and how the industry is responding to them.
Supply Chain Disruptions
One of the major challenges that the automotive semiconductor industry is facing is the disruption of the global supply chain due to the COVID-19 pandemic, trade wars, natural disasters, and chip shortages. These factors have caused delays, shortages, price increases, and quality issues for automotive semiconductors, affecting the production and sales of vehicles and components. According to a report by IHS Markit, the global automotive semiconductor market declined by 8.4% in 2020 due to pandemic-induced lockdowns and factory closures.
Some of the strategies that the automotive semiconductor industry is adopting to cope with the supply chain disruptions are:
- Diversifying the sources of supply and increasing the inventory levels to reduce the dependence on a single supplier or region.
- Collaborating with customers and suppliers to improve demand forecasting and planning and to optimize production schedules and capacities.
- Investing in new facilities and technologies to increase the production capacity and efficiency of automotive semiconductors.
Another challenge that the automotive semiconductor industry is facing is the intense competition from existing and new entrants in the market. The market is highly fragmented and consolidated, with a few dominant players such as Infineon, NXP, Renesas, STMicroelectronics, and Texas Instruments accounting for more than half of the market share. However, the market is also witnessing the entry of new players such as Qualcomm, Nvidia, Intel, Samsung, and Huawei, who are leveraging their expertise in wireless communication, artificial intelligence, cloud computing, and consumer electronics to offer innovative solutions for automotive applications.
Some of the strategies that the automotive semiconductor industry is adopting to deal with the competition are:
- Differentiating their products and services by focusing on quality, performance, reliability, and customer satisfaction.
- Expanding their product portfolio and customer base by entering new segments and regions and offering customized solutions for different vehicle types and applications.
- Pursuing mergers and acquisitions, partnerships, and alliances to gain access to new technologies, markets, and customers and to achieve economies of scale and synergies.
Regional Outlook of the Automotive Semiconductor Market
The automotive semiconductor market is not homogeneous across different regions of the world, as each region has its own characteristics, drivers, and challenges. In this section, we will compare and contrast the different regional markets for automotive semiconductors, such as North America, and Europe. We will also identify the key players, customers, and trends in each region and explain how they affect the global market.
North America is one of the largest and most advanced markets for automotive semiconductors, accounting for about 24% of the global market share in 2020. The region is home to some of the leading automakers such as General Motors, Ford, and Tesla, as well as some of the leading semiconductor manufacturers such as Texas Instruments, Qualcomm, Nvidia, and Intel. The region is also a pioneer in adopting new technologies such as electric vehicles, autonomous vehicles, and connected vehicles, which drive the demand for automotive semiconductors.
Some of the key trends and challenges in the North American automotive semiconductor market are:
- The supply chain disruptions caused by the global chip shortage, which affected the availability and prices of automotive semiconductors. The U.S. government has taken some measures to address this issue, such as issuing an executive order to review the semiconductor supply chain and proposing a $52 billion funding package to support domestic chip production.
- The increasing competition from Asian semiconductor manufacturers, especially from China, which are expanding their presence and capabilities in the automotive sector. The U.S. government has also taken some steps to counter this threat, such as imposing trade restrictions and sanctions on some Chinese companies and forming alliances with allies such as Japan and South Korea.
Europe is another major market for automotive semiconductors, accounting for about 23% of the global market share in 2020. The region is home to some of the leading automakers such as Volkswagen, BMW, Daimler, and Renault, as well as some of the leading semiconductor manufacturers such as Infineon, NXP, STMicroelectronics, and Bosch. The region is also a leader in implementing strict environmental and safety regulations, which drive the demand for automotive semiconductors.
Some of the key trends and challenges in the European automotive semiconductor market are:
- The impact of Brexit on the automotive industry, which created uncertainty and complexity for cross-border trade and investment between the UK and the EU. However, the trade deal reached in December 2020 has mitigated some of the negative effects by ensuring tariff-free and quota-free access for goods.
- The transition to electric vehicles, which is accelerated by the EU’s ambitious targets to reduce greenhouse gas emissions by 55% by 2030 and achieve climate neutrality by 2050. The EU has also introduced various incentives and policies to support the adoption of electric vehicles, such as subsidies, tax breaks, and charging infrastructure.
- The innovation in autonomous and connected vehicles, which is supported by the EU’s initiatives to foster research and development, collaboration, and standardization in this field. The EU has also launched several pilot projects to test and demonstrate various use cases of vehicle-to-everything (V2X) communication technologies.
The automotive semiconductor market is a dynamic and growing market that is influenced by various factors such as electrification, automation, connectivity, safety, supply chain, competition, innovation, regulation, and sustainability. The market is also diverse and heterogeneous across different regions of the world, such as North America, Europe, Asia-Pacific, Latin America, and Middle East and Africa. The future outlook of the market is promising and exciting, as new technologies and applications emerge and create new value for customers and stakeholders. However, the market also faces some challenges that require investment, innovation, and collaboration from the industry players.