Until recently, algorithmic efficiency wasn’t high on any car buyer’s checklist. But this is changing fast as traditional tire-kicking, zero-to-sixty performance considerations give way to a new type of differentiator in the automotive industry – technology. Drivers can’t get enough of it, and increasingly customer-centric automotive manufacturers are embracing it.

Why auto & tech are converging

Driven by tightening emissions and fuel economy standards as well as the need to meet changing consumer preferences, automotive OEMs and suppliers are evolving connected vehicles with a range of communications systems: vehicle-to-vehicle, vehicle-to-infrastructure, and vehicle-to-cloud systems. The automotive industry is moving ahead with a plethora of digital capabilities – vehicle and advanced driver systems, telematics, and security. As well as comprehensively crunching car data, the ultimate plan is to deliver fully autonomous vehicles. In fact, the value of the automation and robotics market in the automotive industry is expected to reach a staggering $21.66 billion by 2025.

Perhaps the all-singing, all-dancing vehicles of tomorrow will look more like ‘next-generation smart devices’. This is certainly what auto newcomer Byton has suggested while unveiling its first vehicle – a connected, high-tech ‘extension of everyday life’, a place where we can work, play, relax and – if we wish – drive.

New opportunities & challenges

For some time, of course, electronic components and functionalities have been important to car buyers. Now ‘important’ is becoming ‘essential’. On average, the typical car has more than 100 electronic control units containing around 6,000 semiconductors and, inevitably, this is changing operations in the automotive industry. Portfolio reviews are speeding up, new strategic investments are being made, tech-driven mergers are occurring at a surprising rate – everyone wants to ensure ongoing viability in this innovation race. The automotive industry and the technology industry are converging to enable more electrified, autonomous, and lightweight cars.

As my colleague Connor Charles blogged recently, the automotive industry is changing in an unprecedented and often unpredictable way, creating an increasingly dynamic and fluid market. Nowhere is this more evident than for semiconductor manufacturers in the automotive supply chain. Many semiconductor companies are aggressively pursuing automotive opportunities and forming new partnerships in the value chain – for example Aptiv, Ford, General Motors, and Magna International are among several large auto manufacturers to acquire or make investments in developers of Lidar sensors. Semiconductor technology is enabling profound innovations in the auto industry including vision-based capabilities, enhanced GPUs and application processors, and powerful new sensors.

Driving the semiconductor market

Security of supply is paramount in the automotive industry due to just-in-time manufacturing processes. Because of this, semiconductor manufacturers and the automotive supply chain must ensure an appropriately fast and agile response. This can be difficult at the best of times. As Dr. Thomas Kaufman, VP Supply Chain Automotive Division at Infineon pointed out during last year’s DHL Global Technology Conference, a radar sensor for distance warning requires 800 process steps and takes a year to manufacture and yet the auto industry requires security of supply for up to 20 years. Solutions to this dilemma are better supply chain integration and stronger collaboration across the entire value chain.

Another significant challenge is variation in ordering frequency. As hardware upgrades such as those related to automotive powertrains are decoupled from optional feature upgrades – for example, improvements to in-vehicle infotainment – auto OEMs and suppliers are calling on the supply chain to deliver some semiconductor products more often than others. Again, supply chain integration and collaboration provide the needed solutions.

The automotive industry is undoubtedly the strongest semiconductor driver and is likely to remain so for the next three years or more. With this huge market potential, technology companies should identify opportunities to bring complementary skills to automotive companies. They also need to decide which form of collaboration will work best – a merger, acquisition, joint venture, or partnership. With so much at stake, every tech company should also beware of highly disruptive smaller players in the semiconductor market – size matters much less than speed and agility in the race to the rewards of auto/tech convergence.

Wondering how the auto/tech convergence looks from the other side? Have a look at a recent blog by my colleague in DHL Automotive.

Published: July 2018

Image: shutterstock