The automotive industry is witnessing a significant transformation, with the automotive industry investing over $106 billion into autonomous driving capabilities since 2010. Evolving these systems has not only required the need to onboard new talent to create these sophisticated systems but also to develop the technology capability of driving a car on its own. As such, semiconductors have become a greater commodity in the automotive industry than ever before. The role of semiconductors in autonomous vehicles can’t be understated and is one of the many challenges that any company will have to overcome if they want to deliver a self-driving car.
What are Semiconductors?
Semiconductors are a fundamental part of any modern circuitry. As the name implies, semiconductors are materials that have electrical conductivity between conductors and non-conductors. This semiconductivity allows them to control the flow of electricity, so they are used to make transistors and diodes. Semiconductors are found in everything from cars to smartphones, causing their demand to increase as the world becomes more technology-aligned.
Historical vs. Current and Future Use in Vehicles
The usage of semiconductors in automobiles isn’t particularly new. Since the late 60s, cars have had microcontrollers handling many facets of a vehicle’s systems. Initially, this was limited to the Engine Control Unit (ECU), which could variably control the fuel injection in a car, increasing fuel efficiency and power. Eventually, these microcontrollers spread throughout the vehicle. Everything from climate control, electronic steering, lighting, radios, infotainment systems, and so on had to use semiconductors.
However, the rise of autonomous vehicles has dramatically changed this landscape. The average modern car contains less than 1,000 semiconductors. For brand-new electric vehicles with autonomous features, that number jumps to 3,000. Today and in the future, semiconductors are increasingly used for sophisticated purposes such as advanced driver-assistance systems (ADAS), connectivity modules, and extensive sensor networks, including LIDARS, radars, and cameras. These systems require much more complex and powerful semiconductors capable of processing large volumes of data in real-time, starkly contrasting their past roles.
Even today, ADAS accounts for the largest share of the automotive semiconductor market, with a compound annual growth rate (CAGR) of 19.8% by 2027, accounting for 30% of the market in that year. Infotainment systems, which will continue to advance as well, have a CAGR of 14.6% and are estimated to account for 20% of the market in 2027.
A different analysis also points to the increased prevalence of semiconductors in electronics in modern cars. In 2020, it was found that electronics account for 40% of a new car’s cost, a significant increase from the 2000 figure of just 18%. This figure projects to only grow with a rise to 45% in 2030.
Dangers Of Semiconductor Shortages
The demand for semiconductors in the automotive sector is escalating, particularly for autonomous vehicle technology. During the pandemic, we saw what happened to the automotive industry as semiconductor shortages hit. Cars sat on lots simply because they didn’t have the chips for systems we perceive as simple, such as lighting or wireless phone chargers.
This halt in automotive sales occurred even before most vehicles were equipped with advanced autonomous systems, requiring numerous specialised chips to work. The crisis highlighted the vital role of semiconductors in vehicle manufacturing and their importance in the industry’s supply chain.
Semiconductor Production
Hardware is just as necessary as software when it comes to AVs, and that’s why the role of semiconductors in autonomous driving will continue to grow. These chips will need to be able to collect data, interpret it, and act upon it thousands to millions of times a second if autonomous driving is to succeed. As such, automakers will need to develop chips that are more advanced than anything they’ve ever used in their cars.
When it comes to producing semiconductors, there are a few avenues automakers can take. We can draw comparisons to battery production strategies that companies use for their EVs already. Some will entirely rely on battery manufacturers such as LG for their supply. Others partner up with these manufacturers to create new factories. Finally, others like Tesla try to be as vertically integrated as possible and handle everything from sourcing materials to production independently.
In the same way, automakers have similar choices for semiconductor production.
- Hands Off. In this scenario, an automaker integrates an off-the-shelf solution from a company such as Cruise or Mobileye.
- Semi-Directed. In this case, the automaker could direct their needs for the chip to suppliers and rely on them to develop hardware that satisfies the requirements. This brings added flexibility without committing to a large in-house team.
- Partnership/Self-Reliance. Some automakers have taken to designing their own chips for their vehicles. This brings flexibility that allows for the ultimate efficiency when interacting with the software, ensuring that hardware and software are as compatible as possible. This, of course, is a big step for any automaker, as it requires a large team of hardware engineers. This can partially be offset by leveraging a partnership with an existing chip maker but may not allot total flexibility.
Whatever the case, automakers won’t have full vertical integration as they will all need to rely on a foundry to create these chips. Unfortunately, a lot of the time, these foundries are the bottleneck for semiconductor production. Creating a foundry is prohibitively expensive, so it’s unlikely that any automaker will go through the effort of building their own.
Change In Car Design?
One of the reasons automobiles have been much maligned for their dated chips is due to the timespan it takes to design a new car. At best, it takes about three years to design a vehicle and bring it to production, often even longer.
Three-plus years in the world of semiconductors is almost an eternity. When a car reaches production, it is at least one or two generations behind the newest chips. Companies will surely expect that their autonomous driving software will advance considerably in three years, so how will they handle the planning of a new car? As an example, Tesla has made their hardware modular and allows owners with older hardware to retrofit the newest in their vehicles (although that hasn’t been perfect either). Will this be the standard moving forward with other automakers? It’s left to be seen.
Automakers Turn Into Tech Companies
Semiconductors are indispensable in the development and operation of autonomous vehicles. Their importance has surged in an era where cars are not just modes of transport but complex mobile computing systems. As the automotive industry progresses towards greater autonomy, the synergy between vehicle manufacturers and semiconductor producers will be crucial in shaping the future of transportation.