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Automotive ICs Lead Market Growth

Nanochip Staff

In the current slow-growth period for the overall semiconductor industry, the automotive IC sector is a relatively bright light. With electric vehicles (EVs) and advanced driver assistance system (ADAS) features leading the way, analysts say the semiconductor content in vehicles is set to increase at a healthy pace.

Gartner automotive electronics analyst James Hines, speaking at a SEMI event in Austin last year, predicted that automotive semiconductor revenue will grow at nearly twice the rate of the overall semiconductor market through 2018. Semiconductors aimed at ADAS features and EVs, he predicted, “will grow at above the automotive market average.”

Automotive semiconductors “are one of last bastions of profit, and provide good returns on investment,” said IC Insights analyst Brian Matas, an author of the firm’s report on IC growth markets.

Dave Pahl, vice president of investor relations at Texas Instruments, recently estimated a new car now has about $350 in semiconductor content, on average. “That’s a number that’s been growing very nicely,” Pahl said.

For makers of cameras and other automotive sensors, the growth rates are enticing. Yole Développement, the Lyon, France-based market research firm that tracks “More Than Moore” markets, predicts that the market for sensor modules for autonomous cars will grow from $3B in 2015 to more than $35B in 2030, providing “massive opportunities for sensor manufacturers and the semiconductor industry,” said Guillaume Girardin, a Yole analyst and co-author, with senior analyst Eric Mounier, of the report “Sensors and Data Management for Autonomous Vehicles.”

WSTS Sees Steady Growth

With semiconductor sales slowing recently for smartphones, tablets and PCs, cars—along with virtual reality—have captured industry news headlines.

The World Semiconductor Trade Statistics (WSTS) Council predicts little growth for this year’s worldwide semiconductor market, just 0.3% to $336B. Next year will be a bit better, with a 3.1% growth rate to $347B in 2017 revenues.

According to WSTS, automotive ICs accounted for about 7.3% of the 2015 global IC market, a relatively small percentage compared to computer and communication ICs. However, the rate of growth is impressive: back in 1998 automotive ICs were only 4.7% of the total semiconductor market, and WSTS expects that share to increase to 8.1% by 2019.

Matas said the strong dollar exchange rate impacted last year’s automotive IC market, as sales in yen and euros translated into fewer dollars. That held down growth in the 2015 market to just 1%, with $20.8B in automotive IC sales, even as unit shipments grew at a healthy pace.

Besides the exchange rate factor, car manufacturers asked for lower unit prices in return for relatively long buying cycles, he said. Nevertheless, IC Insights does see solid growth in the automotive semiconductor sector. “We definitely see this market on the rise,” Matas said, “with an average growth rate of 6.7% through 2019.”

IC Insights said “intelligent cars are the catalyst” for much of the growth in the market for 32-bit MCUs, set to increase 8% this year (see figure 1). Features such as self-parking, advanced cruise control, and collision avoidance rely on 32-bit MCUs.

Figure 1. Despite lower unit prices, the market for 32-bit MCUs is expected to increase 8% in 2016. (Source: IC Insights, WSTS)

32-Bit MCUs Drive Cars

Jim Feldhan, president of Semico Research, said automotive ICs account for about 10% of the overall chip industry now. “While the automotive pie is getting bigger, it still does not rival the market for mobile ICs. Profits are relatively good but the car companies tend to hit you down on price. Once a vendor is designed in, the good thing is that they probably are locked in for a number of years.”

Tony Massimini, who tracks the MCU market for Semico Research, said while automotive MCUs account for only 10–11% of unit volume, they will represent 36% of MCU revenues, which is $5.7B dollars.

Matas said while low gas prices in the US negatively impacted sales of battery-powered EVs and hybrids last year, that won’t last for long. “We still see an upward trend in EVs and hybrid EVs. They are only 2–3% of total vehicle shipments now, but they have a good chance of getting to 3–4% over the next few years.”

NXP Takes the Top Spot

The relatively strong growth predicted for automotive ICs favors heavyweight European suppliers, who claim four of the top six spots.

Matas said three of the large European IC manufacturers— Infineon, NXP, and STMicroelectronics—were among the top five suppliers to the 2015 automotive IC market (see figure 2). Robert Bosch, another European-based supplier, was the sixth-largest.

Figure 2. With its acquisition of Freescale Semiconductor, NXP becomes the leading automotive IC supplier. (Source: IC Insights)

The wave of consolidation in the industry last year also changed the top ranking in the automotive sector, which had $20.5B in 2015 sales. Matas noted that NXP’s $11.8B acquisition of Freescale Semiconductor—completed on April 1, 2016—makes it the leading automotive IC supplier. In automotive IC sales last year, Freescale was the third-ranked and NXP the fifth ranked supplier, giving the combined company more than 17% market share last year and vaulting NXP past Renesas.

“About half of the automotive IC supplier base is made up of other companies such as Texas Instruments and Analog Devices,” Matas said, adding that it took more than $1.3B in automotive IC sales to make the top-five supplier list in 2015.

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