Semiconductors drive automotive transformation

April 27, 2016 //By Christoph Hammerschmidt
With cars becoming increasingly turning entities of silicon and software, the European Executive Forum of the Global Semiconductor Alliance (GSA) took a close look at the current transformation of mobility and its consequences for the chip industry.

The automotive industry is facing enormous challenges, said Dominik Wee, a top automotive expert of consulting company McKinsey. Starting from the finding that the automotive industry is currently influenced by four disruptive trends (electrification, connectivity, autonomous driving and the diversification of mobility), Wee predicted that new business models that will emerge on top of the traditional car as the “mobility hardware” will expand the global automotive revenue pools by 35 percent by 2040, translating into a volume of $1.5 trillion of extra business with software, data and services. Even better: Most of this on-top business will be achieved as recurring revenue, in contrast to today’s business model based mainly on the one-time-sale of a (hardware) car.

Also the user behavior will significantly change, said Wee: Today’s predominant model of buying and owning a car to use it will dwindle in favor of a new paradigm: Car usage will be linked to a lesser extend to car ownership. Instead, consumers will increasingly lease vehicles on demand through sharing platforms. This does not appear to be good news for the automotive industry – after all, the mobile society will need fewer cars to be built. But at second looks, the news is not that bad: By 2030, 9% of all vehicles will be shared in some way or another, effectively reducing the market for privately-owned vehicles. Nevertheless, these shared vehicles will be used much more intensively than a private one, and this they ride more kilometers per year. And there is another aspect for car design, resulting from the changing ownership model. Today’s vehicles are typically a compromise between different tasks: commuting, business, leisure, or shopping. The new mobility model based on car sharing however will enable users to make less compromise – they will be able to rent or lease a vehicle exactly designed for the respective purpose. Which will lead to an even more pronounced differentiation in the car designs.