A car today features an average of $450 worth of semiconductors; by 2026, it will be $700 — a growth of 55.6% — according to new research from Yole Développement.
The research gives new understanding to why the automotive market has been hit so hard by the ongoing chip shortage as ever-increasing demand is not slowing down but growing substantially, putting pressure on chipmakers and manufacturers to keep pace.
“The value of semiconductors, at the chip level, in cars will grow from $34.4 billion in 2020 to $78.5 billion in 2026, a 14.75% CAGR (compound annual growth rate),” said Eric Mounier, director of market research at Yole Développement (Yole). “The largest growth will be in EVs due to the major shift to electrification.”
The root cause of the current shortage was the mismanagement of capacity due to the unknown optics from the COVID-19 pandemic, causing many automakers to cut or halt capacity because they were unsure of market demand. When demand returned, capacity had moved elsewhere, and shortages emerged. The shortage was also not helped by lockdowns and issues at the supply chain due to the initial outbreak of COVID-19.
Intel already predicted that by 2030, about 20% of the total vehicle cost will come from semiconductors, but the rapid inclusion of chips in vehicles will impact the supply chain due to China intensifying the competition and investing massively in semiconductors in the automotive industry, Yole said.
- Connectivity in the automotive industry will rise to $55 billion in 2026.
- Advanced driver assistance systems (ADAS) will reach more than $60 billion by 2026.
- Sharing will reach $3 billion by 2026.
- Electrification will reach $28 billion in 2026
- By 2035, connectivity, ADAS, sharing and electrification (CASE) will be a $318 billion market.
Additionally, Yole forecasts that wafer shipments will grow from 20 million to more than 45 million in the automotive sector, with 8 inch wafers being the most used wafer size. The 20 nm node and below will be driven by ADAS and infotainment applications.
“Today, most of the wafer production for automotive is for 130/180 nm and more, and leading-edge technology is very scarce,” Mounier said. “But 40nm and 28nm are used for the Mobileye EyeQ3 and EyeQ4 for ADAS and autonomy. Memory for infotainment and ADAS use 10-14 nm. In the future, 7nm could be used for ADAS. The current chip shortage mainly affects nodes in the 40-180nm range.”
More players, more chips
The development of electric vehicles and self-driving technologies is causing an increased demand for more chips in the market. New OEMs such as Nio, Xpeng, Lucid Motors and others have entered the industry with other players coming from the semiconductor or the consumer industries as well.
In the race to full autonomy, large OEMs with many resources will develop the software themselves or partner with or acquire robotic vehicle companies. Those with few resources will have to rely on Tier-1s to develop basic automated driving features including cameras, radar, lidar sensors and computing.
“Companies from the semiconductor side, like Qualcomm, Nvidia, and Intel-Mobileye, are positioning themselves, sometimes through acquisitions, at the center of automated driving systems,” said Pierrick Boulay, technology and market analyst for solid-state lighting at Yole. “For example, Qualcomm is in talk to acquire Veoneer to reinforce its position in the automotive industry.”
Companies are also coming from other industries such as the consumer industry where Apple, Huawei and Xiaomi are entering the market and could develop only the self-driving part or the entire electric car. Foxconn is partnering with several companies such as Apple and Stellantis and is increasing its automotive-related business. In the future, it could be possible to see new automotive OEMs being fabless and relying on the experience of subcontractors, Yole said.
The full research can be found in Yole’s Automotive Semiconductor Trends 2021 report.