Automotive Semiconductor Basics & Where China Stands
The automotive industry has been hit hard by a global semiconductor shortage since the beginning of 2021, with auto OEMs/suppliers rushing to make duplicated orders from multiple sources and semiconductor manufacturers struggling to ramp up the volume. It also caught the attention from regional leaders, each initiating a localized supply chain to prevent future reliance on foreign providers.
This article provides a breakdown of the automotive semiconductor market by types, the competitive landscape of each type, and where China currently stands. It is the basics to how the shortage happened and what coping strategies to take, which have been discussed a lot these days.
The global automotive semiconductor market is expecting a boom along with the innovations like electrification, automation and connectivity in vehicle development. Semiconductors of different functionalities are used in various auto parts. Processors, power ICs and sensors are the major types that account for about 57% of the overall semiconductors cost in a conventional gas-fueled vehicle versus about 73% in an EV.
Here is an outline on the upcoming contents (Exhibit 1).
MCU
Microcontroller Units (MCUs), as a type of processor, are widely used in a vehicle across domains like powertrain, chassis, body, cockpit, and ADAS. The average vehicle has over 20 MCUs and relies on multiple MCU vendors. For example, Audi Q7 features 38 MCUs from 7 vendors and Honda Accord features 20 from 8 different suppliers.
The global automotive MCU market size is projected to grow to $8.8 billion by 2026 at a CAGR of 6% from the $6.5 billion in 2020. It is currently dominated by 7 vendors (Exhibit 2), which took 98% of the market share in 2020 (Exhibit 3).
The MCU production is usually outsourced especially with 28 nm to 65 nm process technologies, and TSMC has been able to secure about 70% of the contracts, resulting in a MCU dependence on TSMC.
A list of Chinese companies can produce MCUs in scale and supply OEMs while the products are mainly used for controlling simple functions (Exhibit 4).
AI Chip
AI chips are like “super-processors” specifically designed to process AI tasks faster using less power. They are currently used mainly in high-end electric passenger vehicles in the ADAS/AD domain (Exhibit 5). The demand is low as opposed to MCUs but picking up fast. The market size of automotive AI chips is expected to reach $12 billion by 2026 at a CAGR of 35% from $1 billion in 2019.
Mobileye, Nvidia and Tesla are the pioneers that have set the benchmark for AI chips. Chinese companies like Huawei, Horizon, and Black Sesame are trying to match the offerings and even to challenge them (Exhibit 6). However, traditional chipmakers are relatively slow in this area.
Power semiconductors are employed in automotive electronics to regulate the flow of electricity. The market will embrace a steady growth with the adoption of EVs. Among power semiconductor products, MOSFET and IGBT are the mainstream structures on vehicles.
MOSFET
The global automotive MOSFET market was valued at $1.071 billion in 2019, and is projected to reach $1.704 billion by 2027 registering a CAGR of 6%. In terms of competitive landscape, top 3 vendors (Infineon, ON Semiconductor, and STMicroelectronics) took almost half of the market share in 2019, while the Chinese owned Nexperia held small shares (Exhibit 7). Besides, CR Micro is a rising player in China with a complete line of power MOSFET products.
IGBT
The global power IGBT market splits into three categories by design approaches: module-based IGBT, discrete IGBT and IPM, with 52%, 21% and 27% shares respectively in 2018. Modular and discrete IGBT for automotive applications together were valued at $1.1 billion in 2018 while IPM is not currently used on vehicles.
Foreign vendors dominate the IGBT market with only one China-based player (Starpower) in top 10 in the modular area in 2018 (Exhibit 8 & 9). However, China has achieved rapid development with module-based IGBT, which is considered the ‘heart’ of the electric power train. In 2019, BYD, Starpower and CRRC took over 22.7% of the domestic demand.
Semiconductors are used in sensors to detect an event or a change in a factor. In automotive application, there are CMOS image sensors (CIS), GNSS, and radars.
CIS
Among leading CIS vendors, Sony took almost half of the market share and Chinese owned OmniVision held 7% in 2020 (Exhibit 10). For a long time, domestic Chinese CIS manufacturers mainly supplied low-end electronic devices and only BYD could produce high-pixel CIS chip products for automotive applications. But a shift is expected as companies like SuperPix have made progress in the mid to high-end market with its 8 million-pixel and 12 million-pixel chip products.
GNSS
GNSS chips are found in in-vehicle navigation systems. The precision of vehicle navigation and mapping is becoming crucial on automated cars but it is largely dependent on the satellites in the visibility range.
In terms of competitive landscape, none of the players dominate the market while the major ones include US-based Broadcom, Qualcomm, TI, SiRF, among others. Chinese vendors offer comparable or even advanced chip products to fulfill domestic demand. Also, China has built a complete industrial chain around the Beidou Navigation Satellite System that contribute to over half of the local navigation.
Radar
Among radars, ultrasonic radar has been relatively mature with lower technical barriers. LiDAR is being conquered worldwide in the automotive industry. Millimeter-wave radar mainly uses MMIC and DSP/FPGA, and the major suppliers are from overseas, like Infineon, STMicroelectronics and Freescale. In China, there are companies like IMSEMI, Calterah Semiconductor, and Andar Technologies in early stage of MMIC chip development.
Summary
The Automotive semiconductor space is highly competitive and consists of traditional semiconductor vendors like Infineon, NXP and Renesas that currently take majority of the overall market share, as well as tech giants like Intel and Nvidia breaking in through the AI chip segment.
Companies in the US, Europe and Japan have formed strong technical strength along the entire value chain over the years while China lacks core technologies with over 90% products relying on imports.
Designing and manufacturing semiconductors to the various automotive standards is no easy thing, which requires constant investment with no returns over almost a decade time. Chinese companies haven’t been devoted in this area until recent years. As things starting to change, China could be ahead with emerging AI chips.
In the ancient Chinese military classics, Sun Tzu suggested that the ultimate goal should be maximizing one’s gain not the opponents’ loss. Semiconductors are empowering the technological disruptions and automotive revolution, in which all of us are beneficiaries. Having that mutual interest in mind, we can align better strategies to tackle the future.
Sources:
Automotive Semiconductor Industry Report by Evergreen (Ji Ye Chang Qing) Economic Research Institute (2021.06)
Automotive Semiconductor Industry Report by China Automotive Technology & Research Center (2021.04)
