Automotive Semiconductor Market

Automotive Semiconductor Market

The global automotive semiconductor market is projected to expand at a CAGR of 7.5% and thereby increase from a value of US$57.3 Bn in 2023, to US$95 Bn by the end of 2030.

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Market Introduction and Definition

The automotive semiconductor market is a dynamic sector that is dedicated to the manufacturing and dissemination of semiconductors that are engineered specifically for use in the automotive industry. Semiconductors of this nature are indispensable in supplying power to an extensive array of electronic components found in automobiles, including engine control units, infotainment systems, and advanced driver-assistance systems (ADAS). The market's importance is derived from its fundamental function in the continuous digital revolution of the automotive industry, which witnesses an ever-increasing need for cutting-edge technologies, connectivity, and automation.

The growth and prominence of the global automotive semiconductor market can be attributed to a multitude of factors. The principal catalyst is the swift progression of automotive technology, which primarily emphasizes electrification, autonomous driving, and connectivity. The need for sophisticated and interconnected semiconductors to facilitate the integration of these features increases as automobiles progress in sophistication.

In addition, the development of compliant and efficient automotive systems is accelerated by the need for semiconductors to accommodate stringent regulatory requirements for emissions and safety. The market is additionally impacted by the growing inclination of consumers towards intelligent, interconnected automobiles, which creates a strong environment for semiconductor manufacturers and suppliers to prosper amidst this paradigm shift.

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Market Growth Drivers

The Expanding EV Space

The indisputable catalyst influencing the course of the worldwide automotive semiconductor industry is the unyielding progression towards electrification of vehicles. This paradigmatic transition is a leading aspect of the automotive sector's effort to address environmental issues and the critical need to mitigate carbon emissions. Considering stringent environmental regulations and the pursuit of sustainable practices, manufacturers are compelled to adopt electrified powertrains. This has resulted in a substantial increase in the need for specialized semiconductor components that are specifically designed for electric vehicles (EVs).

The emergence of electric vehicles has brought about a fundamental redefinition of automobile architecture, requiring the coordination of complex semiconductor networks to manage the intricacies of electric propulsion. Power electronics, an essential semiconductor component, assume a prominent role in the discourse surrounding electrification. Power electronics, which regulate and transform electrical energy between the battery and the electric motor, are critical to the efficacy and effectiveness of electric vehicles.

Current developments in battery technology, which require cutting-edge semiconductor solutions for seamless energy management to accommodate high-capacity, fast-charging batteries, further amplify this surge. The automotive semiconductor market has undergone a significant transformation to become an essential contributor to the sustainable future of mobility, thus becoming inextricably linked to the propulsion revolution.

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Market Restraints

Extremely Difficult Supply Chains

The complexity of the automotive semiconductor supply chain magnifies the consequences of disruptions, given that any bottleneck within the network can propagate to various production stages. The supply chain challenges presented by the rapid technological advancements in vehicles collide with the demand for semiconductors, resulting in a significant constraint.

As a result of the scarcity, automakers around the globe, which rely on a consistent and timely supply of semiconductors, experience production halts and increased expenses. This limiting factor compels the sector to reevaluate and strengthen the resilience of its supply chains, investigating the feasibility of expanding procurement operations and localized production to mitigate the potential hazards linked to worldwide disruptions.

Higher R&D Costs

The escalating expenses associated with research and development present a substantial impediment for semiconductor firms as they endeavour to create sophisticated solutions to tackle the complex demands of the automotive industry. Significant financial investment is required to address the intricacies associated with the design of semiconductors for electric vehicles, connected systems, and autonomous functionalities.

Furthermore, the intense competition among businesses forces them to surpass their competitors in terms of technological progress, which spins a recurring pattern of increasing spending on research and development. This formidable force compels semiconductor manufacturers to maintain a precarious equilibrium between cost-effectiveness and innovation, thereby ensuring financial sustainability and technological leadership in an industry that is financially dependent on breakthroughs.

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Opportunities

Growing Shift Towards Autonomous Vehicles

The continuous shift towards autonomous vehicles is a highly influential and advantageous factor that is reshaping the global automotive semiconductor market. The automotive industry has placed significant emphasis on the pursuit of greater vehicle autonomy, motivated by the potential for improved safety, efficiency, and a transformative impact on transportation. The increasing demand for specialized semiconductor components resulting from autonomous vehicles' reliance on cutting-edge technologies, sensors, and computing capacity represents a tremendous opportunity for the semiconductor industry.

The progression toward autonomous driving is contingent upon an advanced network of processors and sensors that empower vehicles to perceive their environment, execute decisions in real time, and navigate independently of human intervention. The sensory apparatus of autonomous vehicles is comprised of lidar sensors, radar systems, and advanced cameras; therefore, high-performance semiconductor solutions are required for data processing and analysis.

Semiconductor manufacturers occupy a leading position in innovation due to the high demand for powerful and efficient processors that can process the intricate algorithms necessary for autonomous navigation. Furthermore, the integration of ML and AI within autonomous vehicles amplifies the requirement for sophisticated semiconductor technologies to facilitate the vehicles' ability to acquire knowledge and adjust to a wide range of driving situations.

With the automotive sector rapidly transitioning to autonomous driving, semiconductor firms are strategically positioned to profit from the expanding market for components that power the intelligence systems of autonomous vehicles.

Analyst’s Viewpoint

The automotive semiconductor market is anticipated to undergo substantial expansion and change. Under the influence of a confluence of industry-transforming factors, the worldwide automotive market is positioned for substantial expansion. An important catalyst is the expedited integration of electric vehicles because of regulatory pressures and environmental apprehensions regarding emissions. As a result of this electrification surge, the demand for sophisticated in-vehicle electronics and electric powertrain components has increased. There is a paradigm transition occurring in the relationship between manufacturers and consumers, characterized by a growing focus on intelligent and connected vehicles.

Presently, there is a consumer demand for automobiles that are outfitted with state-of-the-art infotainment systems, seamless connectivity, and advanced safety features. The dynamic nature of consumer expectations is cultivating a mutually beneficial association with manufacturers, compelling them to advance and provide customized, technologically proficient driving encounters. In this context, telematics and infotainment systems are assuming a critical role by augmenting the driving experience and cultivating brand allegiance.

Anticipating the future, the automotive semiconductor market will witness the transformation of vehicles into sophisticated mobile computing platforms through the integration of autonomous driving technologies. Nonetheless, potential risks are presented by obstacles such as disruptions in the supply chain, underscoring the importance of striking a nuanced equilibrium between supply chain resilience and innovation.

The automotive semiconductor industry is currently experiencing significant and groundbreaking developments, primarily propelled by electrification, connectivity, and the forthcoming era of autonomous driving. These factors offer manufacturers a range of prospects and obstacles as they strive to satisfy the ever-changing demands of contemporary consumers while navigating a technological environment that is swiftly progressing.

Supply-side Dynamics

Prominent companies such as Intel Corporation, Qualcomm Technologies, Inc., and NVIDIA Corporation dominate the global automotive semiconductor market by utilizing their technological prowess to influence the industry. The market is currently experiencing substantial uptake in prominent automotive manufacturing nations, such as Germany, China, and the United States. China, being the largest automobile market globally, is proactively adopting automotive semiconductors in response to the rapid growth of electric vehicle manufacturing and the progress made in autonomous driving technologies.

An example of the nation's dedication to technological advancement is the integration of state-of-the-art semiconductors in electric vehicles by Chinese automaker NIO. Prominent American corporations, such as Tesla, are spearheading the integration of sophisticated semiconductors to augment the performance and autonomy of electric vehicles, thereby bolstering the nation's pre-eminence in the adoption of automotive technology.

The market leaders in automotive semiconductors are altering constraints via ongoing innovation and strategic alliances. Intel Corporation is exerting a significant impact on the trajectory of the market through its emphasis on autonomous driving solutions and artificial intelligence. Prominent in the development of connectivity solutions, specifically 5G technologies designed for connected vehicles, is Qualcomm Technologies, Inc.

The proficiency of NVIDIA Corporation in high-performance computation is crucial for the advancement of autonomous driving solutions and advanced driver-assistance systems (ADAS). These entities are not solely propelling technological progress but also exerting an impact on industry norms and partnerships, thereby establishing a precedent for an automotive future that is more interconnected and automated.

By collaborating with automotive manufacturers and dedicating resources to research and development, they are effectively guiding the market toward improved efficiency, safety, and sustainability. This solidifies their position as architects of the dynamic automotive semiconductor industry.

Market Segmentation

Which Components Contribute the Maximum Revenue?

Processor-based Component Category Dominant in Sales for its Increasing ADAS Applications

In terms of market share, the processor segment is anticipated to hold the most in the automotive semiconductor industry. Automotive application complexity is a significant factor in the expanding demand for high-performance processors, particularly in the domains of advanced driver-assistance systems (ADAS), connectivity, and autonomous driving. With the continuous advancement of vehicle technology, processors assume a pivotal function in the management of complex computations and data processing.

Simultaneously, it is expected that the Sensor segment will undergo the most rapid expansion in the automotive semiconductor market. The exponential growth of autonomous vehicles and the growing adoption of advanced driver assistance systems (ADAS) are driving the need for a wide array of sensors, such as lidar, radar, and cameras.

The sensors play a crucial role in facilitating vehicles' ability to perceive their surroundings and make instantaneous judgments. As the automotive sector progresses towards increased innovation in safety and autonomy, the sensor market segment experiences rapid growth.

Which Vehicle Type Represents the Leading Market Category?

Passenger Vehicles Most Prominent Owing to Advanced Safety Features

It is anticipated that the passenger car segment will hold the greatest market share in the automotive industry. Consisting of a substantial worldwide clientele and a persistent need for individual transportation, the passenger car sector sustains its prevailing market position through ongoing advancements, safety attributes, and consumer inclinations.

Conversely, the LCV sector is anticipated to develop at the quickest rate. The expansion of the e-commerce sector, the rise in urbanization rates, and the demand for streamlined last-mile delivery solutions are driving this growth. To satisfy the demands of contemporary logistics and transportation, the LCV segment is undergoing rapid development, which makes it a key growth driver for the automotive industry.

Which Area of Application Surges Ahead?

Powertrain-based Solutions will be the Top Application Area

Predicted to capture the greatest market share in the automotive sector is the powertrain segment. The powertrain segment, which comprises the engine, transmission, and other vital systems that provide propulsion for the vehicle, is an essential element of every vehicle. As such, it is a primary concern for both automotive manufacturers and consumers.

Contrarily, it is anticipated that the telematics and infotainment sector will witness the most rapid expansion. Significant investment and innovation are being propelled into this sector due to the growing consumer demand for connected vehicles, advanced infotainment systems, and real-time communication.

 The automotive sector is poised for a significant transformation as the Telematics and Infotainment sector expands at a rapid rate, mirroring the increasing integration of vehicles into the digital ecosystem.

What does East Asia Hold for Manufacturers?

East Asian Markets to Flourish as EV Sales Climb up in China, and Japan

It is expected that East Asia will hold the largest market share in the worldwide automotive semiconductor industry in 2023. The stronghold of this position can be ascribed to the resilient automotive sectors in nations such as China, Japan, and South Korea. Automotive semiconductors are in high demand in China, the largest automobile market in the world, due to the accelerated adoption of electric vehicles (EVs), and the development of autonomous driving technologies.

Additionally, the dominant market share of the region is bolstered by its strategic location as a manufacturing center for Fortune 500 automotive companies. Japan, and South Korea, both of which are well-known for their technological advancements, are crucial players in the automotive semiconductor industry, contributing to a competitive environment.

What Opportunities do  South Asia, and Oceania Offer?

Opportunities Accompany the Widening Automotive Sector, and Multiple Government Initiatives

South Asia, and Oceania are anticipated to witness the most rapid expansion of the worldwide automotive semiconductor industry. The burgeoning automotive sectors in nations such as Australia, India, and Southeast Asia drive the proliferation of this upswing. Government initiatives to promote electric mobility and the expansion of the middle class in India are driving the demand for automotive semiconductors.

Australia's increasing fascination with electric and connected vehicles is a factor in the expansion of the regional market. Moreover, increased investments in automotive manufacturing and technology are occurring in Southeast Asian nations, which contributes to the region's heightened demand for semiconductors. Combined with a burgeoning automotive market, the region's unrealized potential positions South Asia, and Oceania for explosive growth in the automotive semiconductor industry.

Competitive Intelligence and Business Strategy

To maintain and increase their market share, the market leaders in automotive semiconductors, such as Intel Corporation, Qualcomm Technologies, Inc., and NVIDIA Corporation, are implementing diverse and complex strategies. Constant innovation is a main emphasis for these participants. For example, Intel is making substantial investments in autonomous driving and artificial intelligence (AI) technologies. Through the creation of sophisticated computing solutions and potent processors, Intel endeavours to furnish manufacturers with state-of-the-art instruments that augment the functionality and capabilities of their vehicles.

In contrast, Qualcomm Technologies holds a strategic position within the connectivity industry. Contributing to the rising demand for connected car features, Qualcomm's primary objective is to facilitate uninterrupted communication and connectivity in connected vehicles through the implementation of 5G technologies.

Furthermore, these industry leaders recognize the significance of tackling particular challenges. The automotive semiconductor industry encounters intricacies, including disruptions in the supply chain and the imperative for bolstered cybersecurity measures. The strategic approach encompasses not only the formulation of solutions that fulfill present industry demands but also the prediction and resolution of forthcoming obstacles, thereby demonstrating a dedication to enduring sustainability and pertinence in the swiftly changing automotive sector.

Key Company Developments

New Manufacturing Plant

Onsemi established a silicon carbide (SiC) manufacturing facility in Hudson, New Hampshire, in August 2022. By the end of 2022, it is anticipated that the facility will double the company's workforce in Hudson and increase production capacity by a factor of five annually.

Market Impact: The construction of Onsemi's silicon carbide (SiC) manufacturing facility in Hudson, New Hampshire, signifies a substantial advancement that will have extensive implications for the worldwide automotive semiconductor industry. The proposed expansion is anticipated to significantly augment Onsemi's annual SiC semiconductor output by a factor of five, thereby increasing the company's overall production capacity. In addition to strengthening Onsemi's market position, the expansion is anticipated to assist in satisfying the increasing worldwide need for SiC semiconductors, specifically in the realm of advanced power electronics and electric vehicle applications.

(Source: Bloomberg)

Strategic Partnership

Renesas Electronics Corporation, and Cyberon Corporation formed a partnership in June 2022 to offer voice user interface (VUI) solutions to clients utilizing the entire RA MCU line manufactured by Renesas Electronics. Customers would be granted complimentary access to Cyberon's command based VUI infrastructure, which would empower them to integrate voice recognition capabilities into a wide range of endpoint applications, including but not limited to home appliances, industrial automation, wearables, and building automation.

Market Impact: The collaboration between Renesas Electronics Corporation and Cyberon Corporation in the development of voice user interface (VUI) solutions utilizing the RA MCU line is anticipated to revolutionize the international market. With the increasing prevalence of voice-enabled technology across multiple industries, this strategic partnership not only strengthens Renesas' competitive advantage but also aids in the wider dissemination of voice-controlled applications, thereby influencing the direction of the worldwide semiconductor industry in the direction of enhanced innovation and user-centric features.

(Source: Renesas)

Automotive Semiconductor Market Report Scope

Automotive Semiconductor Market Research Segmentation

By Component Location:

• Processor
• Analog IC
• Sensor
• Memory
• Misc

By Vehicle Type:

• Passenger Car
• LCV
• HCV

By Application:

• Powertrain
• Safety
• Body Electronics
• Chassis
• Telematics and Infotainment

By Region:

• North America
• Europe
• East Asia
• South Asia & Oceania
• Latin America
• Middle East & Africa