As electric vehicles and hybrid vehicles gradually gain popularity in the market, automotive electronic systems may become the key technology areas that are most valued by various electronic system suppliers. Advances in technologies such as electronic active suspension technology and electric vehicle drive systems in the automotive industry have continued to expand the application of power electronic systems in the automotive field.
The Pursuit of More Comprehensive Vehicle Security and Driving Safety Continues to Drive Up the Future Demand for Automotive Electronics and Sensors
It is reported that the global automotive electronics market is expected to reach US$392.49 billion in 2028. From 2022 to 2028, it will grow rapidly at a compound annual growth rate of 7.9%; among them, the automotive electronics market in the Asia-Pacific region accounts for about 41% of the overall demand, and the annual average compound growth rate is expected to be as high as 8.3%. At present, the market demand in the Asia-Pacific region is mainly supplied by China, India and Japan.
China is not only the world's manufacturing center, but also one of the fastest-growing major economies. At the same time, Chinese automakers are taking advantage of its advantageous market conditions to try to dominate market trends. In addition, after the Prime Minister of India came to power in 2020, he announced reforms and shouted "Replace China as the world's factory!" The Make in India campaign is also expected to attract investment in the automotive industry, thereby promoting the growth of automotive electronics demand.
At the same time, the booming electronic component manufacturing industry in Taiwan, South Korea, Malaysia and Thailand has also become another reason for the rapid growth of the automotive electronics market. Benefiting from local demand, there are few automotive electronics manufacturers at present, and it has become an excellent investment opportunity for regional suppliers, which in turn makes investors turn to other Asia-Pacific markets.
The pursuit of more comprehensive vehicle security and driving safety continues to drive up the future demand for automotive electronics and sensors. It is reported that the compound annual growth rate of the automotive sensor market from 2022 to 2028 is forecast to be 3.8%; the application areas of automotive sensors include detection of physical parameters, proximity sensing, vehicle positioning, engine and body sensors. Changes in chemical parameters, and sensing of various program variables. The current government policies on passenger safety and vehicle security will also help drive the revenue growth of the automotive sensor market. These sensing devices, which can detect parameters such as vehicle temperature, speed, tire pressure and tire condition, have become standard in newer vehicles, enabling them to predict hazards and take preventive measures while driving.
No matter in developing or developed countries, reducing the probability of traffic accidents has become a common goal all over the world, so that people's requirements for vehicle safety or security continue to increase, which also pushes up the market demand for automotive electronic products; The increasing demand for cars, self-driving vehicles and advanced automotive technology is also another driver. High-tech features such as accident data recording systems, emergency call systems and alcohol locks have raised the need for automotive sensors to another level of security.
With the advent of advanced vehicle safety system functions such as blind spot detection and automatic emergency braking, the market acceptance has become higher and higher, which makes the automotive electronic controllers (ECUs), sensors, and control systems used in these systems. Demand for parts and components for vehicle electronic functions continues to increase. On the other hand, future traffic regulations will also gradually incorporate these safety system features, paving the way for a future where autonomous vehicles are commonplace.
The Automotive Electronics Field Will Be Widely Used in The Future, and the Specialization of Component Manufacturers Will Continue to Increase
With the automotive industry striding towards the development of intelligence and electrification, the automotive electronics market has expanded rapidly. As auto parts manufacturers become more and more specialized, sometimes they play a more important role than contract manufacturers by virtue of technological innovation in certain fields. In the advanced smart vehicle market with unlimited business opportunities, the development of breakthrough technologies in the field of automotive electronics such as advanced driver assistance systems (ADAS), vehicle networking technology, and electric vehicle development will not only have unlimited market potential, but will also have a profound impact on the automotive industry chain
Four Major Driving Forces Affecting the Development of Automotive Electronic Systems
The main drivers of automotive electronic systems fall into four categories - technology push, software-defined vehicles, business model disruption, and customer pull.
The technology allows the evolution or subversive changes of the vehicle system architecture, including IC technology, networking technology, battery-powered electric vehicle (BEV) technology, and autonomous driving (AV) technology.
IC technology has always been the most important element, and its influence is unlikely to disappear in a short time; chip technology will continue to drive the evolution of all electronic technologies. Although semiconductor process evolution has been slower than it was a decade ago, other innovations, such as chip packaging technology, continue to drive new advances, such as system-in-package (SiP) components.
The rapid evolution of sensor technology is also largely due to the progress of IC technology; including cameras, radar technology, etc., which are indispensable for advanced driver assistance systems (ADAS) and autonomous vehicles, and continue to improve. Lidar and far infrared are rapidly evolving in cost and performance and will be important for autonomous vehicles.
Autonomous driving technology is on the rise and could significantly impact the vehicle and transportation industry in the coming decades. High-tech sectors and automakers are scrambling to invest in developing software platforms that can win in the long run, but the safety and reliability of autonomous vehicles will be a major challenge and will see more new standards and regulations.
Software Defined Vehicle
The main vehicle software technologies and platforms are also the main elements of software-defined vehicles. Domain electronic control units (Domain ECUs) are expanding software-defined vehicles because of the need for more advanced software platforms as well as middleware platforms. The cockpit domain ECU is currently the leading development category, and the ADAS domain ECU is the next growth category.
Connected vehicle applications have also been growing, but are becoming the arena for high-tech players, as smartphone applications are taking over as part of in-vehicle infotainment systems. Most vehicle users prefer an in-vehicle infotainment system that has the same user interface as a smartphone, because the latter is usually better than the one developed by the automaker. Smartphones have won this war, and high-tech players have dominated the content of telematics systems.
Over-the-air (OTA) updates and cybersecurity have become necessary features, and automakers have been slow to implement these two technologies, but now things have changed - at least in the OTA part. OTA is a cost-saving software update function and also generates new revenue through functional software updates.
The automaker has ambitions to keep software development in-house step by step, but so far it has been more difficult than expected; I think it will take some time to build up the expertise in-house. However, from a long-term perspective, car manufacturers must also improve their own software capabilities, which is a correct strategy.
Cloud-based software-as-a-service (SaaS) platforms are influencing automotive software in many stages as Amazon AWS and Microsoft Azure gain more and more new customers in the automotive space. Cloud SaaS platforms continue to increase in many industries, and it is also time to conquer the automotive industry.
Disruption of Business Models
The disruptive impact on business models, Mobility as a Service (MaaS), is slowly emerging, with many use cases being tested in places like the US and China. Four self-driving-based use cases include self-driving trucks, self-driving taxis, self-driving trucks - including local and long-distance freight - and fixed-route self-driving cars (due to less and less demand for ride-sharing during the pandemic) Getting investment.
The SaaS business model brings more software business opportunities in the automotive industry as cloud platforms become indispensable. Even the realization and payment of some car functions are done through SaaS or pay-per-use. Pay-per-view is similar to SaaS, but I list it separately because it increases revenue potential and generally improves market cap estimates.
New aftermarket business models are also developing in the vehicle usage phase, an example being the Data-as-a-Service (DaaS) model that monetizes vehicle data. Functional software updates are also a major new business opportunity for automakers, and the main reason they are accelerating OTA deployments.
Customer pull is particularly important to note that some of the impact comes from safety and related regulations. Price and cost are always important, and this is especially evident in the competition between BEVs and internal combustion engine (ICEV) vehicle technology - BEVs outperform in terms of purchase price, operating costs, and maintenance costs by 2025, whose purchase price will be similar to that of ICEVs on many models; BEVs will even have an advantage until 2030, or when charging infrastructure is acceptable for most BEV usage patterns.
In addition, as the New Car Assessment Program (NCAP) and the Insurance Institute for Highway Safety (IIHS) ratings have become increasingly influential in the decision-making of vehicle buyers, the importance of safety is also increasing. This trend looks set to continue as more and more safety regulations emerge over the next five years.