One of the highlights of IESF for me each year is Paul Hansen’s update on the automotive electronics industry. Hansen, publisher of The Hansen Report on Automotive Electronics (www.hansenreport.com), focused this year on three topics: competition, active safety, and distracted driving.
Automotive electronics competition is already fierce and getting worse, according to Hansen.
“The automotive electronics market has for decades relied on a steady increase in the penetration of electronics, but electronics’ share of the vehicle’s cost can’t continue to grow forever, and in non-hybrid vehicles I believe electronics content has already leveled.”
Hansen suggests that the amount of money a carmaker can devote to electronics content is constrained by the vehicle’s retail price. “Retail prices are up,” he says, “yet between 2008 and 2013 retail prices have risen by just 2.5% per year, or just 0.6% per year when you adjust for inflation.”
An unprecedented number of new electronic features are being readied for market, but with retail prices constrained they won’t make sense for high volume vehicles until costs decline substantially.
Suppliers must focus sharply on cost reduction to stay viable, in Hansen’s view, but suppliers are crowding toward the same markets, which include active safety, CO2 reduction, and technologies that link the vehicle to the cloud. “The biggest tier ones are embracing all three of these megatrends, and everyone seems to be investing in China and India.”
Most extreme example
According to Hansen, the most extreme example of a market with too many suppliers is infotainment, with 22 tier-one suppliers.
Several very big players are vying to offer connections to the cloud, or to cloud-connected services, creating what we’re coming to know as the Internet of Things. “Ultimately, every car will have two modems: one that’s embedded, like OnStar, and the other that’s brought in – the smartphone in the driver’s pocket – like Ford Sync uses.
“All vehicles will eventually have access to data and to computing assets in the cloud. Speech recognition will be located in the cloud. Navigation data will be located in the cloud. Computing assets in the cloud will substitute for computing assets embedded in the vehicle. As that transition progresses, infotainment suppliers will take another hit. They will have less to sell, unless of course they offer cloud services, as the world’s leading infotainment supplier, Harman, is already doing.”
Verizon purchased Hughes Telematics a year ago, Sirius XM Radio is acquiring Agero, General Motors is partnering with AT&T, and Cisco, the world’s leading provider of Internet Protocol-based networking products and services, says that the Internet of Cars represents a potential $1 billion market. Cisco and NXP have invested in Cohda Wireless, which specializes in vehicle-to-vehicle and vehicle-to-infrastructure communications.
There will be more from Paul Hansen in my next blog post.