Semiconductor industry loves automotive - but carmakers bet on more software

European midrange and luxury cars currently are in extremely high demand in emerging markets, in particular in China. This suggests that this is the market sector with the best growth expectations for cars and thus for automotive electronics. However, the sweet spot for electronics supplier will be somewhere else, explained Richard Robinson, top automotive analyst for market researcher Strategy Analytics. While the overall market for vehicle electronics is expected to grow at a pace of 8 percent annually through 2018, the demand for ECUs designed for economy cars will add 18 percent per year.

This growth however will take place not in Europe or North America but in Asia: Examples for brands on the winning side are Wuling Sunshine, Maruti Alto and, with Dacia Logan, at least one European. At the end of this process, economy vehicles will have doubled their share of the total automotive market to 18 percent - at the expense of mainstream cars (down 1 percent to 74 percent), and in the first place of premium cars whose market share will be reduced from 16 percent now to 9 percent in 2018, said Robinson.

Broken down by product segments, power train applications will be the clear winner. The market value for ECUs used in power trains will grow 18 percent annually in a global scale, the researcher calculated. Safety applications, driven by the trend to advanced safety systems, are expected to sport a growth rate of 11.2 percent, followed by driver information, body and chassis applications with about 8 percent each. With 6.8 percent growth rate, security applications will be at the bottom of the ranking.

One of the major technology challenges for the industry is the integration of consumer devices into cars, currently one of the major design trends. Robinson hinted that user expectations, based on what they are used to have access to in their homes, could overstretch the capabilities of the automotive industry.

In any case, the value of semiconductors in cars will continue to grow beyond 2018 but it will likely come to a saturation, explained Valentin von Tils, Vice President ASIC development at electronics supplier and semiconductor manufacturer Robert Bosch GmbH. Currently, cars in average contain chips, diodes and power transistors at a value of some $320. This value is expected to grow to $550 by 2020, von Tils said.

From his perspective, the power train will be the largest semiconductor sink for many years to come - and not because Electric and Hybrid electric vehicles would gain market share. Instead, the process of electrifying all ancillary aggregates around the motor and the gearbox will drive demand for electronic parts much stronger than the slowly growing acceptance for electric cars.

Volkswagen electronics development executive Andreas Titze provided some insight into the plans of the industry. With regard to the disruptions in the supply chain after the earthquake in Japan, he called for a better supply chain structure. "We need a second source for semiconductor production as well as for design", he said.

In this context, Titze called for more transparency in the value chain. "Already years ago we established contacts to the semiconductor industry but found that communications was running toughly", he criticized. "Also the distribution channel is not very transparent".

Still an issue for the automotive camp is the consumer electronics integration. [In order to successfully integrate consumer electronics functions into vehicles], "the quality requirements have to be met", Titze said.

The key challenge for Volkswagen electronics mastermind is the complexity - not only of the value chain but also of the technology integration process. In this context, he joined the growing number of those calling for standardization in all aspects, including software. The Autosar introduction was a key step in this sense, he said, but it was not enough to defuse the situation. "Autosar is just easing the pain", he said.

Von Tils joined Titze in the demand for a further standardization, including at the hardware level. "How many different microcontrollers are already in a car? Dozens!" he said. "There is no need for so many different microcontroller architectures. The flexibility for the differentiation at the market can be done by software."

In order to get the increasing complexity at bay, Titze also called for measures at the software side - including the way software today is generated in the automotive industry. "We need to introduce further levels of abstraction," he said. "And we need more model-based development. We still are far away from real object orientation".