Automotive electronics industry globally to reach USD 172B by 2020

In 2018, global automotive electronics producers generated revenue of USD 152 billion. The ADAS segment is likely to become the most attractive in the upcoming years.

Definition / Scope
Market Overview
Top Market Opportunities
Market Drivers
Market Restraints
Industry Challenges
Technology Trends
Regulatory Trends
Market Size and Forecast
Market Outlook
Distribution Chain Analysis
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

Demand for automotive electronics market in the passenger cars segment is gaining momentum to reach over USD 350 billion by 2024 due to the recent technical developments such as the integration of advanced safety systems at reasonable prices.

The passenger cars segment is driven by developments including safety and driving assistance. There is also a growing demand for infotainment inside the vehicle. The newly developed passenger vehicles integrate several augmented systems that offer advanced safety and luxury feature.

Moreover, the demand related to comfortable vehicles owing to an increased purchasing capacity in countries such as India, USA, and Germany among others are adding the passenger vehicle production.

The newly developed commercial vehicles deploy several high-end and robust electronic systems that offer better performance and longer life in diverse applications. These vehicles are mainly deploying modern ADAS, powertrain, and infotainment systems that offer better facilities to the drivers as compared to conventional trucks and buses.

Market Overview

Within the automotive display component, overall, center stack display is the most preferred display system that both passenger and commercial vehicles are equipped with. But there is a stiff competition in choosing between instrument cluster display system and center stack display with instrument cluster display representing slightly lesser revenue.

In 2015, center stack display sales were USD 3.25 billion while that of instrument cluster display were USD 2.75 billion while revenue from head-up display sales was insignificantly less recording just USD 250 million. During 2016-18, the sales for all the three display components remained fluctuated with a slight positive growth throughout the period.

The sales for most used center stack display is estimated to generate USD 10 billion in revenue in 2018 and sales of instrument cluster display is forecasted to reach USD 7.75 billion by 2022. Head-up displays are likely to make USD 2.50 billion in sales in 2022.

Likewise, Market revenue for global automotive sensors recorded USD 13.9 billion for passenger cars, USD 11.1 billion for light commercial vehicles, and USD 7.7 billion for heavy commercial vehicles in 2018. The market for automotive sensors is calculated to grow at a CAGR of 7.6% during 2018-28.

Additionally, Advance Driver Assistance System (ADAS) has witnessed substantial penetration in the automotive electronics market segment with a CAGR 9.5% growth rate. This system is expected to enhance blind spot detection, night vision, etc. aiding the safe driving mode.

The head-up display market is expected to reach USD 4.71 Billion by 2023 from USD 1.27 Billion in 2018, at a CAGR of 29.91% between 2018 and 2023.

The classification of automotive electronics by technology include

Adaptive Cruise Control
Automatic High Beam Control
Autonomous Park Assist
Blind Spot Detection
Driver Monitoring
Forward Collision Warning
Front Lighting
AEB
Night Vision
Head-Up Display
Lane Departure Warning
Park Assist
Surround View System
Traffic Sign Recognition
Tire Pressure Monitoring System

Similarly, by Sensor, the classification comprises

cLiDAR
Infrared
Ultrasonic
RADAR
Image Sensor

Market Risks

Intellectual property infringement from technology transfer

Though almost half of the world’s chips are designed in the US by ‘fabless’ companies, where much of the production, assembly, and packaging is done in the host country. In 2017, for instance, a total of USD 192.5 billion worth of chips was manufactured in China.

The process deteriorates the protection of intellectual designs as technology is transferred in other countries and the international technology transfer act is not that much stringent. Therefore, the owners of such IP bear the risk of diluting their patent rights in a host country.

Top Market Opportunities

The integration of Bluetooth technology in a vehicle’s audio device helps in synchronizing between the vehicle’s audio system and the driver’s phone. With the increasing requirement for audio system technologies, such as Bluetooth-enabled hands-free communication systems combined with reverse guidance systems, energy-efficient systems, vehicle noise compensation, and touch screen navigation systems, the automotive electronics market is expected to offer enormous growth opportunities to the existing market players and the new entrants.

Market Drivers

Luxurious and comfortable need

The recent shift towards offering luxury and comfort is a primary reason fueling the automotive electronics market. Automotive electronics manufacturers operating in this market are increasingly integrating superior digital microchips processors and chips in current audio systems. These microprocessors and chips offer superior sound quality.

Rapid Electrification of Automobile

Rapid electrification of automobiles is one of the major factors driving the growth of the global automotive IC market. Decline in price of ICs; increase in demand for electronics in vehicles; and rise in demand for powertrain systems that require sensors, microcontrollers, and analog converters are factors that have led to the growth of automotive IC market.

Moreover, the driver assistance systems (ADAS) are the largest users of automotive ICs, as these systems help cars and drivers to remain safe on the road, and provide essential building blocks to semiautonomous and autonomous vehicles. This feature is anticipated to offer a lucrative opportunity for the automotive IC market.

The emergence of the Internet of Things (IoT) in Integrated Circuits

The emergence of IoT is the latest trend, which is gaining momentum in the market. Companies are investing heavily on connected cars, which feature IoT and offer potential growth and significant opportunity for market expansion. Moreover, the rise in adoption of sensors and real-time tracking is contributing to the growth of the global automotive IC market. Furthermore, an increase in the application of IoT propels the growth of the transportation security technology market, which in turn supplements the growth of the automotive IC market.

Design Complexity of ICs

One of the major factors hindering the growth of the automotive IC market is the design complexity. Generally, microprocessors contain many transistors and lengthy copper lines. In addition, the transistors should be highly reliable. The design chain of automotive IC is much more complex than those of mobile phones or electronic home appliances, such as televisions and remote controllers, thus acting as a major barrier for the automotive IC market.

Comfort and infotainment

Vehicle drivers are constantly demanding a more enhanced driving experience. The digitalization of dashboards, the sound, and video capabilities, and the customization of the driving and passenger environment should heighten the pleasure of time spent in the vehicle.

Market Restraints

Indirect tariffs such as delay in custom clearance reduce the competitiveness of electronics production particularly in the South Asian market since these markets are highly dependent on imports.

In India, for instance, the average time to clear customs varies from 2-10 days for large firms, and 14-21 days for SMEs.

Industry Challenges

For automotive electronics manufacturers, the key challenge remains at balancing between demographic demand for mobility and adjustment with a regulatory framework.

Complexity and cost pressure

The stringent regulations with respect to environmental and safety standards are raising costs but also increase complexity, as they need to be managed apart from domestic markets. At the same time, OEMs will have to develop alternative powertrain technologies for lower-emission vehicles without knowing what will end up being the prevailing technology of the future. This will require significant investment.

Technology Trends

The introduction of new technologies, such as emergency call systems, alcohol ignition interlocks, and accident recorder systems are likely to drive the growth of this global market.

In addition, companies offering infotainment solutions are also integrating features, such as Advanced Driver-Assistance Systems (ADAS) along with the infotainment systems. For instance, NVIDIA Corporation introduced the DRIVE CX platform.

DRIVE CX is a hardware and software solution that can be used for infotainment, as well as ADAS solutions, in next-generation autonomous vehicles.

V2X & V2G Technology

The telematics application of automotive vehicle-to-everything technology offers intelligent traffic systems, collision avoidance, parking management systems, emergency vehicle notifications, and remote monitoring and diagnostics, among other sub-applications. It provides the vehicle with the ability to receive warnings regarding real-time traffic and alerts related to accidents or other hurdles.

There are different types of automotive connectivity which includes the use of IOT by V2V, V2I, V2X, and V2G. Vehicle-to-grid (V2G) technologies use peak load management as distributed storage devices which enable the usage of electric vehicles (EVs). The stored power can be utilized to feed the electrical system during periods of peak demand in homes and offices and in case of sudden surges in electrical load.

On the other hand, vehicle-to-everything (V2X) is a wireless technology that involves the exchange of information between a vehicle and all the entities it comes in contact with such as other vehicles, infrastructure, devices in the vicinity, the grid, and the cloud. V2X technology optimizes traffic flow, increases traffic safety, saves time, reduces emissions, and performs various functions such as intersection collision warning, obstacle detection, lane change assistance, lane departure warning, rollover warning, road departure warning, forward collision warning, rear impact warning, and safety margin for assistance vehicles.

Regulatory Trends

Regulatory bodies across various countries are framing new guidelines for automobile manufacturers mandating the installation of automated safety systems in vehicles due to increasing cases of road accidents.

For instance, the European Commission and China launched New Car Assessment Programme (NCAP), which mandates the installation of automatic emergency braking and Lane Departure Warning (LWD) features in vehicles, thus, improvising the safety standards.

Automotive regulation in China and European market

China and the EU both recently have launched New Car Assessment Program (NCAP), which mandates the inclusion of Automatic Emergency Braking (AEB) and Lane Departure Warning (LDW) feature; therefore, companies are consolidating features, such as Advanced Driver-Assistance Systems (ADAS) and in-vehicle infotainment. Alcohol interlocks are automatic control systems which are designed to prevent driving with excess alcohol by requiring the driver to blow into an in-car breathalyzer before starting the ignition.

The alcohol interlock can be set at different levels and limits. These have been used widely in North America and Sweden in rehabilitation schemes for repeat offenders driving with a blood alcohol content over the legal limit.

They are also used in government and company fleet cars in Sweden. Trials have been taking place in various countries such as the US, Australia, Canada, Belgium, and Sweden. Similarly, the fitting of advanced braking systems have now become obligatory for two-wheel motorcycles and automatic “switching-on” of headlamps has been mandatory for all light vehicles. The Regulation also sets ambitious emission lowering requirements for these vehicles.

Automotive Regulation in North America

North America automotive ECU market is driven by the increasing trend of vehicle electrification owing to initiatives such as low fuel & energy consumptions in modern vehicles. Increasing environmental pollution and high non-renewable resource consumption in the North American countries is accelerating the utilization of EVs and HEVs.

Market Size and Forecast

The global market for automotive electronics was recorded USD 131 billion in 2016. The market is growing at a CAGR of more than 6% since 2016. The market is predicted to account for more than USD 172 billion by 2020. The demand from the commercial vehicles sector will witness a CAGR of 3% while the demand from passenger vehicles sector will increase at a double rate than the former.

Moreover, the demand related to comfortable vehicles owing to an increased purchasing capacity in countries such as India, USA, and Germany among others are adding the passenger vehicle production. In 2018, global automotive electronics producers generated revenue of USD 152 billion.

Asia-Pacific has the largest share in the global automotive electronics industry with market size valued USD 95.26 billion in 2018. European automotive electronics industry was the world’s second-largest market worth USD 15.75 billion in 2018. North-American automotive electronics market reached USD 8.32 billion in 2018. The market for the Middle East, Africa, and GCC region combined was roughly worth USD 32 billion in 2018.

Market Outlook

The ADAS segment is likely to become the most attractive in the upcoming years, due to the development of sensor technologies and signal processing algorithms. The body electronics application segment is also expected to fuel this market in the near future.

The APAC market for automotive electronics is expected to grow at the highest CAGR of 6% to reach USD 135.1 billion by 2024. Likewise, there will be a 4% CAGR of the automotive market in the European region to record USD 19.92 billion in 2024.

Lastly, North-America will see the lowest growth rate of 4% to make the market worth USD 10.52 billion by 2024. The automotive electronics market in the Middle East combined with the GCC region and Africa will reach USD 36 billion by 2024.

Distribution Chain Analysis

The worldwide automotive electronics manufacturing industry is very lean. Excess inventory or transit time anywhere in the value chain can result in value loss, which can be a severe disadvantage in such a fiercely competitive industry. Key players always consider cost and speed – in production and logistics to maintain their competitiveness.

The automotive electronics manufacturing industry is segmented in two primary ways – first along the electronics value chain and second along with the end-user segments. As seen in the figure, raw materials for automotive electronics types of equipment are procured from cost advantage locations around the world after rigorous design and engineering phase. Such component materials are transported either by owned logistics system or by outsourcing the transportation part to the third party.

Then, the main devices are manufactured in the plant. The process follows handling outbound logistics to deliver finished products from the warehouse. Sales, marketing, and after-sales service are the competitive factors to retain B2B customers

Competitive Landscape

The key players operating in the market include Bosch Group, Continental AG, Lear Corporation, Hyundai Mobis, Magna International, Altera Corporation, Delphi, Infineon Technologies, Texas Instruments, and ZF Friedrichshafen AG.

North America is the largest share of the global automotive electronics market. Huge penetration of an assistance system for safe driving is still in its early adoption phase in North America. The U.S.A. held the largest share in the North American market, due to the ongoing efforts made by the manufacturers to design vehicles with low fuel emissions and energy conservation. In addition, manufacturers are also trying to enhance the safety performance of vehicles.

The European automobile industry is recognized for its technically advanced and innovative automobiles. The growth of the European automotive electronics market is mainly due to technological innovation and development activities of the automotive sector, which is mainly focused on saving energy and protecting the environment, improving vehicular comfort and safety, and equipping vehicles with improved communication technologies and entertainment systems.

The Asia Pacific automotive electronics market is expected to be the fastest growing and hold the largest share in the forecast time period. Growing concerns over safety and escalating incorporation of safety systems in vehicles, the presence of key manufacturers, and the rising need for minimizing production costs are the key factors likely to drive the automotive electronics market in the upcoming years.

Latin America also possesses huge growth potential in the market electronics, due to the rising awareness about safety concerns in the region. The Brazilian automotive electronics market is projected to show a remarkable rate of growth, owing to the increasing purchasing power and changing lifestyles of people.

The Middle East and Africa are also projected to show a noticeable rate of growth in the upcoming years. Saudi Arabia is expected to see a remarkable growth for automotive electronics market in the near future owing to the favorable government policies, the rise in the number of automobile fleets, increase in the vehicle sales, and a huge surge in the foreign investments witnessed across the automobile industry.

Competitive Factors

Automotive electronics is differentiated from the consumer electronics market in the sense that the foremost focus is on product quality, and the highest standards are used to ensure the reliability of electronics components in vehicles.

This has also an impact on the quality and supply chain of materials such as gases and chemicals used in the manufacturing of these electronics devices.

Key Market Players

Bosch Group

The Bosch Group is a leading global supplier of technology and services. Its operations are divided into four business sectors: Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology.

It uses its expertise in sensor technology, software, and services, as well as its own IoT cloud, to offer its customers connected, cross-domain solutions from a single source. The company’s earnings from mobility solutions vertical were 52.52 billion in2018.

Continental AG

Continental AG is a German company specializing in brake systems, interior electronics, automotive safety, etc. It had generated USD 49.61 billion in revenue in 2018.

Lear Corporation

Lear Corporation is a leading supplier of automotive parts. It supplies seating, electrical distribution systems, and electronic modules, as well as related sub-systems, components, and software, to all of the world’s major automotive manufacturers. Its business is organized under two reporting segments: Seating and E-Systems.

Seating segment consists of the design, development, engineering, and delivery of complete seat systems.

E-Systems consist if the design, development, engineering, and manufacture of electrical distribution systems that route electrical signals and manage electrical power within the vehicle for traditional vehicle architectures. Its revenue in 2018 was USD 21.1 billion.

Other players include:

Hyundai Mobis: South Korea
Magna International: Canada
Altera Corporation: USA
Delphi: Ireland
Infineon Technologies: Germany
Texas Instruments:USA
ZF Friedrichshafen AG: Germany
Mercedes-Benz Connect: Germany
Magneti Marelli: Italy

Strategic Conclusion

Growing concern for road safety coupled with government regulation to switch towards an electric vehicle, fuel efficiency, and augmenting the luxurious functions are accelerating the demand for automotive electronics worldwide. The automotive electronics manufacturing outlook seems lucrative and will be growing at a CAGR of 6% until 2025.

Appendix

ADAS- Advance Driver Assistance System