The global automotive semiconductor market was valued at USD 37.41 billion in 2020 and is expected to reach USD 101.28 billion in 2026, registering a CAGR of approximately 17.34% during the forecast period of 2021-2026. The automobile industry has changed rapidly over the past few years with the advent of several technologies in the industry, such as 3D mapping applications, the emergence of electric vehicles, automation of automobiles, and many more. This has increased the demand for various advanced semiconductors, such as sensors, memory devices, ICs, and many more.
- The electrification and automation of automobiles act as primary drivers of the market studied and have led to increased demand for semiconductor wafers. Semiconductor ICs with different functionalities are used in various automotive products, such as navigation control, infotainment systems, and collision detection systems. The inclusion of these features has an impact on automobile sales.
- For the past few years, advanced technologies are being increasingly incorporated into the mass production of cars, including matrix LED lights, enhanced LiDAR sensors, and ADAS systems. The industry has also witnessed improvements in 3D mapping applications, EV batteries, and augmented-reality technologies, such as head-up displays. Also, the 5G networks have been enabling the next generation of mobility solutions in the sector. Owing to the rising demand for safety features that have been designed to avoid collisions and accidents by offering technologies that alert drivers about potential problems (or to avoid collisions by implementing the safeguards and taking over control of the vehicle), the ADAS (Advanced Driver Assistance Systems) sales are expected to flourish in the future.
- Moreover, connected vehicles are key drivers for consumers accustomed to the rich user experiences. The resulting expectations have triggered a transformation in the infotainment systems from bulky, purpose-built devices into sleek, connected, upgradeable, and integrated platforms and they require the latest technology-featured semiconductors. Thus, the future of connected and autonomous cars is anticipated to create potential opportunities for the semiconductor industry.
- However, higher costs or premium pricing for advanced automobiles are expected to act as a restraining factor, as these vehicles target a small group of customers demanding high-priced advanced automobiles. However, the 2020 Consumer Electronics Show attracted the leading high-tech companies across sectors and featured more than 500 exhibits on mobility solutions for cars and vehicle technology, with 290,000 sq. ft of vehicle technology exhibit space. Many global automotive OEMs and suppliers showcased innovative sensors, mapping applications, connectivity platforms, and other new technologies, such as flying cars and electric vehicle (EV) batteries.
- Further, the automotive sector is undergoing various challenges, such as reduced purchasing power due to COVID-19, charging infrastructure improvements, and consumer expectations of further technology improvements to lower vehicle prices and give better range. Moreover, according to Korea Automotive Technology Institute, or Katech, the global shortage of automotive semiconductors that started around the end of 2020 may continue to affect the global car industry for the first half of 2022. Even after 2023, some companies may still feel its effects.
Key Market Trends
Passenger Vehicle Segment to Occupy the Largest Market Share
- Taxis and passenger automobiles are focusing more on greener technologies as the trend toward mobility-on-demand grows. Various governments are taking steps to boost the usage of electric vehicles in public transportation to minimize CO2 emissions by offering incentives and tax breaks to e-passenger vehicles, such as e-buses. For instance, in India, the government has implemented various initiatives, such as the National Electric Mobility Mission Plan (NEMMP), the Automotive Mission Plan, and other initiatives, to facilitate long-term growth in the automotive industry to reduce emissions and oil dependency. To combat emissions, the government wants to bring local regulations up to the line with international norms by 2020, allowing India to go to BS-6 from BS-4 emissions (EUR 6 equivalent).
- Additionally, India has set Corporate Average Fuel Efficiency rules, requiring manufacturers to increase their fuel efficiency by 30% or more from 2022. Companies like Toshiba and NXP Semiconductor improve fuel-saving technologies in passenger vehicles by storing the electric energy generated during deceleration using battery management systems, among other things. Therefore, with the widespread adoption of these technologies, there will be greater demand for autonomous vehicles. This is where e-drive systems come in handy for reducing vehicle weight. This presents an excellent opportunity for automakers to adopt various solutions, including discrete power devices, integrated ICs, sensors, and other components, to enhance passenger vehicles.
- On the other hand, increased demand for safety systems can be linked to the introduction of ADAS or automated emergency braking systems, as well as improved road safety rules, which are increasing demand for automotive semiconductor components globally. For instance, several nations in North America, Europe, and the Asia-Pacific have passed legislation requiring various versions of ADAS in passenger vehicles. For example, the European Union has announced Vision Zero, a plan to reduce traffic fatalities to zero by 2050. By 2030, the authority hopes to have cut deaths and injuries in half.
- Furthermore, by 2022, the strategic plan included essential safety features, like autonomous emergency braking, lane departure warning, and tiredness and attentiveness detection, to be mandatory in new passenger vehicles. The major automakers are using ADAS systems to attain improved safety ratings and attract more customers.
- As a result, top automakers either standardize safety systems across models or offer them as options. As a result, throughout the projected period, the demand for ultrasonic sensors, radar sensors, sophisticated driver ICs, and LiDAR may increase due to the rising penetration of ADAS features.
Asia Pacific to Witness Highest Market Growth Rate
- The Asia Pacific automotive semiconductor market is fueled by increased automotive manufacturing and continued partnerships between automotive OEMs and semiconductor manufacturers. Cost and fuel efficiency are no longer the most important factors to consider when buying an automobile; instead, the comfort and luxury offered by the vehicle are more important. This may be attributed to the fact that global automobile manufacturers are seeing strong demand for luxury and semi-luxury vehicles, which is pressuring them to install more electronic components, pushing the Asia-Pacific automotive semiconductors market. As a result of this reason, the Asia-Pacific automotive semiconductor industry offers a potential market area.
- The rapid expansion of the Asia-Pacific automotive semiconductor industry is expected to be fueled by the rising demand for electric vehicles. Automobile manufacturers must continue to innovate, create, and develop self-driving cars, which have already attracted a significant number of customers in key automotive manufacturing countries. The growth trajectory of fully-autonomous automobiles is expected to be heavily influenced by several factors, including technology advancements, consumer willingness to accept fully-automated vehicles, pricing, and suppliers' and OEMs' capacity to address major concerns about vehicle safety.
- China is one of the major contributors to the automotive semiconductor market in the Asia-Pacific region. This scenario is due to an increase in the use of safety features in vehicles and an increase in infotainment applications such as navigation. ADAS systems have also grown in popularity in the country, with features like parking assist, adaptive cruise control, lane-departure warning, forward collision warning, and blind-spot recognition contributing significantly to the market's growth. Currently, domestic OEMs dominate the Chinese EV industry, with a sales share of roughly 94% (Source: IEA). China has put a quota on automakers for 100% electric or hybrid vehicles, which may account for at least 10% of total new vehicle sales. Furthermore, some large cities and provinces are enacting stricter regulations. Aside from that, manufacturers in the country are working to minimize their present GHG emissions by optimizing their powertrain system design and focusing on lightweight and smaller powertrain systems that deliver higher performance.
- Raw materials, equipment, and small active-passive components are driving Japan's semiconductor industry. Japan also offers several advantages in terms of upstream semiconductor materials. Here, semiconductor materials have stringent purity criteria that can only be met by Japan. This factor increases the need for semiconductors in the United States. Furthermore, while the country's semiconductor performance is not well known, its profound industrial experience is anticipated to propel its expansion. As a result, such advances may help propel the Japanese automotive semiconductor market.
- Apart from the aforementioned factors, the rising rate of scrapping of automobiles and engines tends to boost demand for original equipment engines. Due to the more rigorous environmental regulations in industrialized countries, scrap rates are increasing, resulting in more frequent replacement of motor vehicles and their engines than in developing countries. On the other hand, India has emerged as one of the world's fastest-growing economies, with its large population. According to the projections, the automotive semiconductor market in the country may increase rapidly in the coming years.
The Global Automotive Semiconductors market is moderately competitive and consists of several major players, such as STMicroelectronics, NXP Semiconductor NV, etc. The competitive environment requires technological upgrades, significant capital requirements, and investment in research and development for scalability.
- September 2021 - ROHM announced the development of new SerDes ICs and PMIC mainly designed for vehicle satellite cameras to support Advanced Driver Assistance Systems (ADAS). These products will help in low power consumption, low electromagnetic noise, and compact the ADAS system modules.
- July 2021 - STMicroelectronics announced an anchor partnership with startup Autobahn; there are major car brands and vendors in Autobahn's anchor partnership, with STMicroelectronics support through semiconductors, the main emphasis will be given on smart mobility for electric and smart connected driving vehicles.
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