Overview of automotive electronics industry

The world's automobile production has stagnated to around 58 million units per year (Denso figure) since 1999, after showing a dismal 1 percent growth from 1974 to 1999, and an acceptable 5.9 percent growth from 1951 to 1974. However, the automotive electronics segment is among the fastest growing electronics application markets, showing the increasing use of electronics in automobiles. Automobile electronics revenue will rise from $70.3 billion in 2003 to $113.4 billion in 2008 (iSuppli figures). With a CAGR of 8.3 percent from 2002 to 2008, the automotive electronics segment is powering up faster than mobile phone or consumer electronics or data processing, Worldwide shipments of semiconductors used in automotive applications will more than double over the next five years, with sales rising from $10.7 billion in 2002 at a CAGR of 14.9 percent to $24.5 billion in 2008.

With vehicle production declining in North America and Western Europe, but increasing in Asia, Asia will be the biggest contributor to the growth of automotive electronics. Electronics continues to encroach into various segments of automobile technology, replacing traditional ways of achieving functionalities. The main driving factors pushing electronics further into automobiles are customer demand, fuel economy, benefits to car makers, and legislation driven by environmental and safety issues. For instance, body/chassis electronics will show an average growth of 11.7 percent per year between 2002 and 2007, with the world market increasing from $2.7 billion to $4.7 billion during the period (In-Stat/MDR figures). Overall safety and convenience accounted for 47.3 percent of the global market in 2002 which is forecast to reach 48.8 percent by 2007. The electronics automotive instrumentation market will rise from $2.1 billion in 2002 to $2.5 billion in 2005.

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I think the migration of electronics into volume segments of the automotive systems will put severe pricing pressures. Even though electronics will continue to expand into automobile systems, the revenue forecasts might need some scaling back. Such pressure has already been seen in the powertrain electronics segment, which accounted for 34.8 percent of the global market in 2002, but has now been forecasted to fall under 31 percent in 2007.

New products and applications should come up in the next 2-3 years, such as advanced lighting and night vision, at least in the upper market segments. The technology for navigation will continue to move towards convergence with audio, video, computing and telecom all available in the automobile for the affluent consumer. However, there does not seem to be enough demand for such technology. Nor is there any killer application on the horizon that will create any such demand.

The growth in automotive electronics industry will spur nearly 14 percent increase in semiconductor revenue.