Growing demand for semiconductors by the auto industry is resulting in tight supply for some semiconductors.
Revenue growth for semiconductors used in automotive systems will outpace the growth rate of the overall semiconductor industry due in part to growing demand for electric and hybrid vehicles and development of self-driving cars which will be packed with thousands of dollars of semiconductors.
In addition, the growing use of advanced driver assistance systems (ADAS) in conventional gasoline- powered vehicles will further boost auto industry demand for semiconductors. As a result, the automotive semiconductor market is expected to increase from $37.4 billion in 2017 to $58.5 billion in 2023, a compound annual growth rate of 7.7 per cent. The overall semiconductor market is expected to have a CAGR of 3.5 per cent, according to researcher IHS Markit.
In the short term, robust demand by the auto industry for semiconductors could result in tight supply of some semiconductors. Electronics purchasers last year reported long lead times for some discrete semiconductors such as MOSFETs, thyristors, varistors and diodes and said part of the reason was because of strong demand for those chips from the automotive segment.
Industry analysts and semiconductor companies that supply to the auto industry say that semiconductor demand by the auto industry will continue to increase for years because electronics content in conventional vehicles will continue to rise. At the same time more EVs and hybrids will ship and those vehicles contain more semiconductors than gasoline-powered cars. Automakers are also developing autonomous vehicles which will be equipped with thousands of dollars of semiconductors, many of which will be high-end chips, including processors and application-specific integrated circuits.
“Autonomous driving and the further electrification to full electric vehicles are demanding higher performance microcontrollers and microprocessors as well as more efficient, high-power MOSFETS, which will spur further growth,” said Roger Forchhammer, manager of marketing and applications for the automotive product Group, Americas region for STMicroelectronics, headquartered in Geneva Switzerland.
Kevin Anderson, senior analyst, power management for researcher IHS Markit, said shipments of electric vehicles (EVs) and hybrid electric vehicles (HEVs) will rise over the next 20 years. He noted in 2017 only about 1.6 per cent of vehicles sold worldwide were electric or hybrid. By 2040, that percentage will increase to 30 per cent, he said.
An increase in EV and HEV shipments will boost demand for power semiconductors, especially insulated gate bipolar transistors (IGBT) in the powertrain of electric cars and hybrids. The compound annual growth rate for semiconductors used in powertrains of EVs and hybrid electric vehicles will grow 22 per cent per year from 2017 to 2023, according to IHS Markit.
To provide perspective, in 2017 semiconductors used in the powertrain gasoline or diesel engines totaled $5 billion. By 2023, the figure will grow to $5.4 billion. The semiconductor content that goes into hybrid and electric vehicle drive systems including chips used in the inverter, charger and battery management system of the vehicle will rise from $1.3 billion in 2017 to $4.3 billion in 2023.
“So, the content in EVs and HEVs is getting close to being equivalent to gasoline-powered cars and will exceed gasoline cars over time,” said Anderson.
Jim Feldhan, president of Semico Research, said that standard vehicles today have an average of just under $400 of semiconductors for all electronics systems in vehicles. “With electric cars. the figure pushes up to $2,000 with all the power MOSFETs and other chips. If you make an autonomous car today you are talking about $15,000 worth of semiconductors,” he said.
Of course, as more autonomous vehicles are built over the next 10 years, the cost of semiconductors used in the vehicles will decline over time, he noted.
Growing demand for semiconductors by the auto industry obviously is good news for semiconductor companies that already support the automakers industry and they will earmark more capacity and resources to that segment. In addition, other semiconductor companies may focus more attention in an effort to grow sales.
As a result, there could be short-term shortages of some chips used by automakers and other customer segments. However, shortages are likely to be short lived once chipmakers determine that demand for their semiconductors is not a short-term phenomenon, but a lasting trend.
Chipmakers will add capacity for all customers, not just automotive, because automotive will continue to account for a relatively small percentage of overall semiconductor revenue, despite having a higher growth than the overall industry.
Feldhan said automotive represents about 10 or 11 per cent of overall global semiconductor sales and that percentage won’t grow much because there will be growing semiconductor demand from other customer segments as well, which already account for higher percentage of the semiconductor market.
He notes that’s the Internet of Things applications are growing which will also boost semiconductor sales. In addition, the communications market is expected to grow as 5G networks are built. Fifth generation networks will also mean consumers will upgrade their handsets to further drive chip sales. While computer sales have faltered recently, computers consume the most integrated circuits, accounting for 38 per cent of all IC sales, while communications represent 36 per cent of integrated circuit revenue, according to researcher IC Insights.
“Automotive’s share of the overall semiconductor market may grow one or two points, but it will not be dramatic,” said Feldhan.
More capacity to be added
Still, greater use of semiconductors by auto manufacturers will be welcome news to some semiconductor companies and they will allot more capacity to that segment, especially those chip suppliers that have served the automotive segment for years. Feldhan noted NXP Semiconductor’s “vast majority of its internal production is devoted to automotive market. They are one of the leading suppliers, so they have migrated more of their production capabilities to automotive,” he said.
Another leading supplier to automotive is STMicroelectronics. “Automotive is a key market for the continued growth of STMicroelectronics,” said Forchhammer. In 2017, ST had $8.35 billion in total semiconductor revenue, including more than $3 billion from its Automotive and Discrete group, he said. Sales to automotive increased about 10 per cent in 2017. The average number of ST semiconductors in some premium cars totaled 1,000, according to Forchammer.
ST supplies microcontroller (MCUs), infotainment processors, tuners, custom ASICs, application specific standard products, highside/low slide drivers and power silicon and SiC MOSFETs and other discretes to the auto industry. “Microcontrollers are the fastest growing product in automotive,” said Forchhammer. All other segments have substantial volumes shipped across the industry,” he said.
“STMicroelectronics is committed to further invest in smart driving and vehicle electrification driving growth accordingly with increased vehicle semiconductor content.” said Forchhammer,
Sales to automotive rise
Automotive is also critical customer segment for Infineon Technologies, based in Neubiberg, Germany.
In 2017, automotive represented about 42 per cent of Infineon’s overall revenue, said Peter Schiefer, president, automotive division for Infineon. He said in 2017 Infineon sales to automotive grew 13 per cent compared to 2016.
“Every automotive segment that we participate in is seeing strong growth,” said Schiefer. “This includes power semiconductors, sensors found under the hood and technologies such as radar to enable advanced driver assistance systems, and microcontrollers,” he said.
The underlying reasons for growth of semiconductors in automotive systems “revolve around emissions reduction strategies and rapid development in advanced driver assistance systems” and autonomous driving, according to Schiefer.
In an average vehicle, the semiconductor value for automated driving functions is expected to reach about $150 in the year 2020. By 2025, the semiconductor value for automated driving functions the average vehicle is expected to increase to $580, he said.
Electric vehicles and hybrids are also driving greater semiconductor use. “Electrification of the drivetrain” requires inverters, on board chargers and battery management systems, said Schiefer.
“Currently based on silicon power transistors, on-board inverters will transition in a few years to silicon carbide (SiC) devices with even greater power handling capacity,” he said. Schiefer. Silicon carbide semiconductors have a great potential to make electric driving more affordable in the future, he said.
“Chargers and inverters based on SiC will be more compact, lighter, and more efficient, so the range of the vehicle increases,” he said.
Because of growing demand for semiconductors by automotive customers and other customer segments, Infineon is investing in more capacity. While Infineon does not comment on specific manufacturing capacity for business units, in the 2018 fiscal year, the company’s investments in property, plant and equipment, intangible assets and capitalized development costs are planned to total between €1.1 and €1.2 billion ($1.36 billion and $1.48 billion).
“This reflects high investments in additional manufacturing capacities, especially for electro-mobility products, along with other lines of business. The investment will also be used to “speed up expansion of our 300mm thin wafer manufacturing for power semiconductors in Dresden, Germany,” said Schiefer.