Silicon Island Shifts Gears for Automotive Future
2024/07/31 | By Andrew Hsu
According to the International Data Corporation (IDC), the demand for semiconductors for high-performance computing (HPC), image processors (IPUs), radar chips, and laser radar sensors is expected to surge with the proliferation of advanced driver-assistance systems (ADAS), electric vehicles (EVs), and the Internet of Vehicles (IoVs). IDC forecasts that by 2027, the global automotive semiconductor market will exceed $8.8 billion, with a compound annual growth rate (CAGR) of 12% from 2023 to 2027.
The new generation of automobiles presents a vast blue ocean of opportunities for technologically advanced Taiwanese manufacturers. However, navigating this emerging field comes with its share of opportunities and challenges, requiring a collaborative approach to overcome.
Automotive semiconductor technology is indispensable for numerous applications. In autonomous driving, high-performance chips enable real-time sensing and decision-making by processing data from sensors, cameras, and radar systems. In intelligent cockpits, semiconductors power high-resolution displays, speech recognition, and touch-screen interfaces, enhancing comfort and interactivity. For powertrains, they manage motor control and energy efficiency in electric and hybrid vehicles. Additionally, semiconductors enhance the safety and control of chassis and body systems by supporting Advanced Driver Assistance Systems (ADAS) and stability control. These advancements boost vehicle performance and user experience, driving significant growth in the semiconductor market.
With the ongoing advancement of application scenarios, the maturation of 5G communication technology, and the widespread adoption of Vehicle-to-Everything (V2X) technology, the use of semiconductors in vehicles is set to become even more extensive and profound. The future of the automotive semiconductor market promises breakthroughs in technological innovation and cost control, playing a crucial role in the transformation of the automotive industry by meeting increasing demands for safety, comfort, and environmental sustainability.
Seizing opportunities in the automotive electronics market is no easy feat. With safety as a paramount concern, automotive electronics must operate reliably under harsh conditions for extended periods. Consequently, stringent regulations have been established by governments and legal organizations worldwide. Suppliers must comply with these norms to qualify for entry into the industry chain. The automotive sector is governed by complex regulations, including the electromagnetic compatibility (EMC) standard CISPR 25, component reliability testing standards AEC-Q100 and AEC-Q200, the quality management system IATF 16949, and the functional safety standard ISO 26262. These standards are fundamental for designing, manufacturing, and testing automotive electronic products, ensuring quality, safety, and performance, and guaranteeing reliable operation under all conditions. While these regulations are demanding, they create a threshold that can help investing companies gain entry into new markets, earn the favor of automotive supply chain manufacturers, and establish long-term, stable partnerships.
Semiconductor Equipment and Materials International (SEMI) forecasts that by 2028, the global automotive electronics market will exceed $400 billion, with a compound annual growth rate of nearly 8%, indicating tremendous development potential.
Faced with substantial business opportunities in the automotive electronics market, Taiwanese manufacturers are poised to capitalize on them. Beyond securing standards and certifications, their greatest strengths lie in their highly flexible and meticulous customer service, quick responsiveness to changes, and provision of one-stop solutions. Continuous innovation and development to meet the customized needs of the automotive electronics industry further enhance their resilience and ability to swiftly adapt to market demands and changes. Numerous Taiwanese manufacturers are actively expanding their presence across various industry segments. For example, chip design companies have introduced new Intelligent Cockpit System-on-Chip solutions integrating artificial intelligence (AI) to cater to international customers. In semiconductor manufacturing, functional modules, automotive computers, and cockpit systems, Taiwanese firms have been launching innovative products, positioning themselves at the forefront of this rapidly evolving market.
Despite the wealth of opportunities, the automotive electronics market presents significant challenges. Historically focused on the consumer market, Taiwan's electronic components industry has recently been making inroads into the automotive sector. Major testing companies and standards organizations now offer comprehensive automotive certification services. Compared to other countries, Taiwan's manufacturers excel in producing small batches with high variety and possess strong flexible manufacturing capabilities, allowing them to quickly respond to market changes. In global leadership areas like automotive lights and bumpers, Taiwanese companies can further their advantage by providing cross-domain integration solutions. Moreover, Taiwan's complete supply chain in the electronics industry, particularly in semiconductors, is globally competitive. By expanding cooperation and pursuing win-win scenarios, Taiwanese enterprises can usher in a new wave of growth in the automotive electronics industry.
Furthermore, Taiwanese automotive component manufacturers have actively participated in the international division of labor and invested in factories in the U.S., China, and Southeast Asia. This strategy has opened international markets, integrated them into the supply chains of global automakers, and enhanced Taiwan's competitiveness in the global automotive component industry. In the aftermarket components (AM) field, Taiwanese manufacturers enjoy high industry recognition and profitability. They continually invest in research and development to improve production technology, especially in lights, dashboards, ADAS, and other electronic components. This innovation has driven steady growth in Taiwan's automotive components industry.
The Industrial Development Administration (IDA) under Taiwan's Ministry of Economic Affairs (MOEA) also strives to support the domestic automotive industry's development of intelligent vehicle electronics and integration into international supply chains through initiatives like the "Vehicle Industry Intelligent Transformation Promotion Program" and the "Intelligent Electric Vehicle Industry Counseling and Promotion Program." Leveraging resources such as the Automotive Research & Testing Center (ARTC) and the Taiwan Testing and Certification Center, these initiatives promote industry upgrading and transformation. In 2023, 15 companies were assisted in developing intelligent vehicle power products, successfully entering the supply chains of European, American, and Japanese automakers. It is projected that within three years of product development completion, domestic production value will rise to NT$5.79 billion.
Looking ahead, the trends of intelligence and electrification in the automotive industry are accelerating. Taiwanese manufacturers investing in the automotive market are adjusting their industrial strategies and mindsets. By leveraging its accumulated technological expertise in semiconductors and information and communications technology (ICT), Taiwan is poised to become a key partner for global vehicle manufacturers in the future automotive electronic component industry.