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With mobile phone semiconductor demand cooling, automotive chips are red-hot

Republished By Plato
Republished By Plato

Date:

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Increased numbers of more-powerful chips will be
required in the next wave of electrified and automated vehicles,
and companies like Qualcomm are set to pounce.

Vehicle electrification and the increasing complexity of
infotainment, advanced safety, and vehicle autonomy systems will
propel the value of automotive semiconductors installed in vehicles
from its 2020 level of $500 per car to $1,400 by 2028, according to
an analysis by S&P Global Mobility.

This will result in a massive growth curve in the automotive
semiconductors market – already seen with a 28% year-over-year
growth in 2022 to $69 billion. The long-term forecast for growth
from 2022-2029 is strongly positive, with continued double-digit
market growth predicted.

Of note, the supply chain shortage is easing somewhat. Before
the pandemic, the lead time from order to shipment of chips was
three to four months; during the pandemic in 2001 and 2002, that
wait grew to a year or longer. But with other industries – such as
mobile phones and PCs – seeing cooling demand, automotive
semiconductor demand is increasing. Some chip manufacturers are
pivoting to address that need, although the types of chips for
automotive-grade use vs. communications equipment often are not the
same.

The demand for chips is also driven by the consolidation of
electronics in cars, as domain controllers and central computers
have been replacing some Electronics Control Units (ECU). It might
seem that, with fewer ECUs, there would be less demand for
semiconductors. But in reality, the more powerful domain
controllers and central computers need many chips – and more
powerful ones at that.


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Another profound change affects the design of the controllers.
In the future, S&P Global Mobility forecasts less usage of
ASICS or ASSP chips – custom chips specific for one single
application. In other words, if a specific chip is missing, you
don’t have the flexibility to replace it with another chip. Future
domain controllers will likely see more usage of standardized chips
as well as codesigned chips.

To combat the chip shortage, OEMs have been looking at new ways
to get chips. They have been working with distributors, brokers,
and even the foundries to get chips directly. Might other OEMs
follow Tesla’s example and manufacture their chips? (Tesla has
announced that the microcontrollers for their Next Gen Vehicles
will be 100% designed in-house.) Some vertically integrated ones
may – such as Toyota and Denso establishing Mirise in 2020 to make
and buy semiconductors, while Hyundai has been exploring the design
of its chips through its Mobis supplier subsidiary.

However, in-house chip design has not yet become a general trend
across traditional OEMs – as full-line portfolios have a much
broader variety of requirements for their vehicles compared to
Tesla. Also, it is difficult to build semiconductor design
expertise from scratch; a co-design model like the one adopted by
GM with Qualcomm, Infineon, NXP, and Global Foundries to reduce the
number of custom chips is a more likely trend.

Fast mover: Qualcomm

The automotive segment was traditionally only a small, but
stable, part of the semiconductor industry. Now mobile-phone-chip
companies like Qualcomm and Samsung have pivoted toward the
automotive segment with the rise of electric, connected, and
semi-autonomous cars. Other major semiconductor companies may
follow suit, as last quarter’s financials were down for most
sectors apart from the automotive segment.

This may allow a company like Qualcomm to experience
considerable market share gains. In 2022, the top 5 semiconductor
suppliers (ranked by revenue) were Infineon, NXP, Renesas,
STMicroelectronics, and Texas Instruments. Qualcomm came in at
number 13. But we are expecting them to climb to the top rungs of
the list within the next 10 years.

Ten years ago, Qualcomm was a bit player in automotive, with
more than 95% of their business in mobile phones. With this pivot,
Qualcomm has become a significant threat to historic semiconductor
leaders like Texas Instruments. Qualcomm has been growing
incredibly fast, with its automotive pipeline at more than UD$30
billion, and with projected auto-sector revenue by 2031 projected
at more than $9 billion – larger than what No. 1 Infineon is making
today.

China’s Response to the US chip ban

In October last year, the United States banned Mainland Chinese
companies from buying advanced chips and chipmaking equipment from
the US. This was a huge blow to Mainland China’s autonomous driving
industry – an important part of its economic growth plan – as
autonomous cars need advanced processors to be their
brainpower.

However, we believe this to be a short-term setback that will
accelerate the development of a domestic ecosystem for chips in
cars in Mainland China. For example, during the Shanghai Auto Show
this April, Horizon Robotics unveiled an alternative to Mobileeye’s
SoC applications for autonomous vehicles. (A system-on-chip or SoC
is an integrated circuit that integrates the components of an
electronic system). Black Sesame also showed off its new chipset,
the C1200, which can be used as an autonomous vehicle’s central
computer. The upshot: We are already seeing some very strong
domestic Chinese suppliers emerging to combat the US chip ban.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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