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Automobiles represent the most complex electronic devices that are available to consumers today, offering the semiconductor industry a tremendous growth opportunity by providing innovative vehicles unlike anything your grandparents drove.
The electronics content in cars will continue to rise—Electronics.ca Publications (Quebec, Canada) forecasts the worldwide automotive electronics market will grow from $74 billion in 2006 to $110 billion in 2011, and both car makers and their electronics suppliers face a formidable array of new automotive electronics standards. These standards are being driven by consumer demand for better fuel economy, concerns over the environment, and safety. Future car technologies, intelligence, and high-performance requirements of next-generation automotive applications such as autonomous driving, automated crash notification, lane-departure warning, and vehicle-stability systems will likely force the emergence of even more standards.
Advantages
While standards are slow to take hold, there are a myriad of advantages that are especially important for the automotive industry. Automotive standards enable a vibrant industry ecosystem by ensuring interoperability across the supplier base, increasing the number of participants by leveling the playing field, and ensuring multiple "winners." That ecosystem is comprised of car makers and integrators, IP companies, semiconductor companies, and tool vendors.
Standards also make the automotive industry more efficient by lowering costs across the board and encouraging continual improvement through competition. Additionally, standards increase safety by establishing a baseline that can be independently verified and enable a replacement-parts industry for products with very long life spans.
The automotive electronics market is growing fast. Consumers are demanding new features in vehicles, and as a result, the electronics enabling these features rapidly are becoming more complex. In response, new semiconductor companies are entering the arena and incorporating as much semiconductor IP as possible. By leveraging proven IP, these semiconductor companies can quickly participate—with minimal cost and risk—in the automotive market's growth.
The importance of standards to an ecosystem
Automotive standards encourage competition among suppliers by leveling the playing field but still allow room for product differentiation. When General Motors designs a dashboard, it decides what the radio should look like and how it connects to the chassis. Any numbers of vendors—say, Alpine and Becker——can compete for that space. Both companies design systems that look the same and connect to the car the same way. But inside, the electronics are completely different. GM now has at least two players competing for that space on its dashboard, but the differentiation between the two products—and consumer dynamics—determine that neither vendor will "win."
Competition, in turn, drives efficiencies throughout an industry by lowering costs across the board and encouraging continuous improvement. The automotive industry is notoriously price-sensitive, so in case of car radios, Alpine and Becker compete to provide high-quality systems to GM at the lowest possible cost. The radio vendors, in turn, push this cost-sensitivity down throughout their supply chain—so now, Alpine's and Becker's suppliers are competing on both quality and cost.
Finally, standards enable replacement parts for products with very long lifespans. Unlike the consumer electronics industry—in which cell phone designs change every six months—automotive specs are around for years, even decades. Even if a vendor discontinues a product or goes out of business, the replacement market guarantees that it's economically viable for another vendor to manufacture a part that meets the original spec.
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