On Automotive Electronics
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Roland Berger | Delphi | Continental | Autoliv | Volkswagen | Tesla | Tier-1s in Trouble
The study Computer on Wheels, Part 2, says, traditional tier-1 suppliers are under pressure from all sides because business models are waning
Not since the Great Recession, which officially ended in June 2009, has the automotive industry been in so much trouble. Tier-1 automotive suppliers are stressed, to say the least. Russ Shields, an early investor and top executive at Navigation Technologies (now Here), recently described the extent of the disruptions in store for our industry. “Over the course of the next ten years, or so, the electronics supply chain will be radically different. Of that I am certain.” Shields is now Chair of Ygomi LLC, and president and CEO of RoadDB. The list of the major challenges that tier-1s must confront is long. To stay vital, suppliers must continue to fund huge investments in new technologies for electric and autonomous vehicles, and they must do this in a severe, coronavirusinduced economic downturn. Spin-off Here, Spin-off There The market for internal combustion engines and transmissions is waning as carmakers slowly transition to xEVs. This has already led to Delphi’s spin-off of its powertrain division. What remains is now Aptiv, a company focused on wiring harnesses, advanced vehicle architectures, autonomous driving and ADAS technologies. Continental plans to spin off its powertrain business, which has been renamed Vitesco, but given the current economy, Continental delayed the spin-off until at least 2021. Two years ago, the occupant restraint maker Autoliv spun off Veoneer, its unprofitable electronics division. Veoneer has been building a portfolio of active safety systems and needs to attract more patient investors, comfortable with the prospects for long-term gains. Veoneer set its sights on the emerging market for autonomous vehicles, but that market has been much slower to emerge than expected. This summer, Volvo and Veoneer broke up Zenuity, their 50:50 autonomous vehicle joint venture. While it has finally dawned on the automotive industry that software development must lead E/E development, incumbent suppliers are finding it exceedingly difficult to attain the level of software competence that carmakers so desperately need. And further, the market for software products is not as strong as it could be as carmakers bring software integration and development in-house, a trend that is accelerating.
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Competition is fierce, and it is coming from multiple directions. Semiconductor and other tier-2 suppliers such as Mobileye are adding value that the tier-1s used to supply. Cloud service providers and big tech companies, including Amazon, Google, Microsoft and Apple, are elbowing into tier-1 domains. Manufacturing service providers such as Flex Automotive and Foxconn are helping to drive down the cost of hardware. Perhaps most troubling to tier-1 suppliers is the emergence of high-performance, multicore processors, which will facilitate centrali
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