In the Internet of Things – or “Intelligence of Things”, which is a more appropriate description – the automotive segment has become a major center of innovation. Only healthcare provides the ability to advance in sensor, processing, connectivity, and artificial intelligence technology to improve society as well as to advance the industry.
As a result, the entire electronics and automotive ecosystem is racing to develop self-driving / autonomous vehicles. However, transforming an established industry that was traditionally long-term product development and the life cycle does not come without challenges.
A recent panel at the NXP Connects conference in San Jose highlighted some of these challenges. The NXP Connect conference brought together several technology companies, automotive equipment manufacturers and some new and traditional automotive vendors to discuss the future of the automotive industry. The first thing that stood out was the separation between new vendors and old vendors – or Silicon Valley (new) vs. Detroit (old).
While geographical associations are not entirely accurate, especially with both camps spread around the world, the discussion highlighted some of the differences between the two camps.
New technologies, new approaches
The first difference between new and old is the mindset of how these companies do business. The traditional automotive ecosystem consists of technology vendors, systems vendors, automotive manufacturers and dealers with a very defined timeline with a very defined timeline. A new vehicle design cycle typically takes about five years.
For more than a century the traditional automotive value chain has been defined by the concepts of dividing functions along lines of expertise, and ensuring that everyone in the value chain can achieve a fair advantage.
On the other hand you have new entrants, ranging from semiconductor startups to new car companies, who have a very aggressive attitude of “moving forward and worrying about the consequences later”.
Companies like Uber and Tesla see this mentality by their decisions to introduce new technology before it is fully qualified, and often before infrastructure, regulations and markets are ready for it. Uber also used its technology to evade the rules.
These startups are also set to break the value chain. Tesla, for example, is developing everything from AI processors through the rest of the car. In addition, Tesla sells vehicles directly to consumers through storefronts instead of traditional dealers.
This battle is already breaking the traditional value chain of the automotive segment and adding to the uncertainty in the market. On top of this battle, the industry is rapidly changing around technology.
With the goal of achieving full driving autonomy, the automotive industry is advancing technology advances. Sensors are becoming increasingly smaller, increasing fidelity; Processor architectures are designed to meet the power and performance requirements of mobile AI processing; And the wireless industry is moving to 5G to provide low latency cloud connectivity.
These steps are forcing the automotive industry to develop more flexible designs at a faster pace, and adapt to changing technology as quickly as possible.
At the same time, the automotive industry is increasing the level of autonomy – level zero is no autonomous function and level 5 is full autonomy – at a pace that can go beyond the infrastructure, laws and regulations to support it.
If this was not enough, the industry is also bringing changes around concepts such as electrification of vehicles and changes in business models and ride-sharing. (For more detail on this economic and social change, see Will Sharing Economy Kill Personal Ownership?)
Long period of adaptation
The result of all this change is uncertainty about how the automotive industry will look in the future, and which business model to adopt. The traditional value chain is already breaking.
Chip vendors such as NXP, Renesus and ST Microelectronics once supplied automotive systems suppliers – usually referred to as “tiered ones” – such as Bosch, Continental, Denso, Delphi and Magna. With the entry of companies such as Nvidia and Intel, the introduction of AI technology, and system complexity, chip providers are now supplying full boards and systems, like Nvidia Drive PX2 or NXP Blue Box.
At the same time, many original device manufacturers are developing their own infotainment and control platforms to integrate more vertically like Apple, and to ensure that they are chip / system vendors, or major software vendors such as Amazon Google and Apple, which now dominate user interfaces and Internet services, are not to behold.