China's Auto Electronics Market Could Eclipse U.S. Soon

Despite sales slowdown relative to the peak a few years ago, China's automobile sales broke 19 million units last year, maintaining its lead in both global vehicle sales and production, hence the reasonable prediction that China's auto electronics market would reach US$16.471 billion in 2012 and then also eclipse the U.S. in this segment as the world's largest, with annual sales quickly soaring to around US$23.426 billion by 2015.

According to iSuppli Corp., an auto parts research agency, electronics are key to upgrading sophistication of cars and is thus a field where China's government would offer incentives to encourage enterprises to develop advanced auto electronics as means to raise the nation's automotive sector, where most operators still merely fill orders for overseas buyers and most auto electronics are generic items.

“Mainstream automotive electronics systems in China presently are not too complex or intelligent. These systems mainly focus on steering, driver assistance, passive restraint, brake and control systems and comfort and convenience,” says iSuppli.

Significant Improvements

However, China has made significant improvement in car electronics to meet the demand of consumers for easier driving as well as higher comfort and security. These include improvements in energy systems, safety systems, collision avoidance, drive-by-wire, control systems, smart sensors and actuators, integrated vehicle electric and electronic systems and thermal comfort systems. iSuppli forecasts that China's sector of automotive safety control electronics applications would double by 2015 from US$2.5 billion in 2010, to become one of the most important drivers for automotive electronics in China.

The proportion of electronic products applied to vehicles is also gradually increasing. The Taiwan-based Industrial Technology Research Institute (ITRI) estimates that auto electronics will account for 40% of every automobile's cost globally on average and reach a market scale of US$165.1 billion by 2013, predicting the auto electronics market will expand significantly with the introduction of in-car cloud applications.

Amid closer cross-traits interactions driven by the Economic Cooperation Framework Agreement, auto electronics are seen as an ideal field for bilateral cooperation. Taiwan's auto electronics industry, traditionally with body electronics, driver information and safety products as core products, has been gradually diversifying into engines/transmission, suspension/chassis, and other electronic controls.

Market Trend
There is an inevitable trend for PDAs as smart phones and tablet computers to demand such lifestyle be incorporated into automobiles, with an HUD or head-up display unit for cars having already been launched that can download applications. So in the next few years and with increasing production of HUDs with integrated cloud content, such applications will show explosive growth.

Through HUDs or smart phones, tablet computers and other PDAs, these auto electronic devices offer all kinds of infotainment, from cloud music and videos to remote automotive diagnosis and global positioning services.

Explosive Auto Computer Production
Similar to personal computers, automotive computer have software and hardware to offer applications to drivers via a built-in person/machine interface, and, through smart phone, enable a car to communicate, download data and access the Net. In fact, computers in upscale cars have voice-activated capability to enable hands-free operation.

As internet radio is popular with PDA users, it is also one of the most popular applications of automotive computer, with predictions of the production of automobiles with internet radio to jump from 168,000 units in 2010 to 24 million by 2018.

Car Information and Entertainment Revolution
The U.S. may remain the most important market for automotive Internet radio, with production to increase from 149,000 units in 2010 to 10.9 million units in 2018. In the U.S. there are already 50 models with internet radio integrated in the head unit. BMW, Ford, Lincoln, Mercedes-Benz, the Toyota Scion, Buick, Chevrolet and Hyundai have integrated internet radio. In Europe, only BMW and Mini currently have internet radio.

Apart from internet radio, there are also all kinds of cloud content services, such as cloud music library available from Apple's iCloud, Google Music and Amazon's Cloud Drive etc., which may be widely built into cars due to the burgeoning trend of cloud applications.

Speakers
Along with progress, popularization of auto electronic technology, automotive speaker functions have also improved greatly and premium audio systems will see double-digit growth. This year's global production of premium audio systems will reach an estimated US$7.9 million, a 14% growth compared to last year's US$6.9 million. In three years, premium audio systems will grow 12% to 18% annually to reach 13.3 million units.

Potential Hindrance
While auto electronics become increasingly popular to make driving easier, more comfortable and safe, drivers are also being distracted by talking on cellphones and texting while driving to cause increasing accidents in recent years. In the U.S., the National Transportation Safety Board (NTSB) recently said it is considering to ban drivers from using any electronic products while driving.

According to the National Highway Traffic Safety Administration's statistics, 3,092 people died in traffic accidents caused by distracted driving in 2010 alone, with texting when driving banned in 35 states.

The NTSB recommends drivers to refrain from using electronic products when driving, except in emergencies. Though not legally binding, NTSB's recommendations still weigh significantly with the U.S. Congress and state legislatures. These safety concerns and consequential official policies could impede growth in car electronics.