Car OEMs will increasingly develop their own chips, predicts Gartner

Car OEMs will increasingly develop their own chips, predicts Gartner
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The supply bottlenecks for semiconductors are causing carmakers to lose billions because ordered cars cannot be finished. Car manufacturers will therefore increasingly switch to developing their own chips, predicts the technology consultancy Gartner. And the shortage of chips is not the only driver here.
By Christoph Hammerschmidt

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By 2025, chip scarcity and trends such as electrification, connected cars and automated driving will drive 50% of the top ten automakers (OEMs) to develop their own chips, Gartner forecasts in a recent study. Such a measure will not only help to alleviate the supply shortage. At least as important is the fact that it will give OEMs better control over the value chain.

 “Automotive semiconductor supply chains are complex,” says Gaurav Gupta, research vice president at Gartner. “In most cases, chipmakers have traditionally been Tier 3 or Tier 4 suppliers to automakers, which means it usually takes them a while to adapt to changes in demand in the automotive market. This lack of supply chain visibility has increased automotive OEMs’ desire for more control over their semiconductor supplies.”

In addition, the ongoing chip shortage primarily affects devices with mature semiconductor technology manufactured on smaller 8-inch wafers, where capacity expansion is difficult. “The fact that the automotive industry has been conservative in qualifying older devices on larger wafers has also hurt it and is likely to motivate it to take chip design in-house,” Gupta said.

This model of in-house chip development, commonly referred to as ‘OEM-foundry-direct’, is not unique to the automotive industry and will become more prevalent among technology companies as the semiconductor market undergoes several changes. Semiconductor chip foundries such as TSMC and Samsung have provided access to state-of-the-art manufacturing processes, and other semiconductor manufacturers have provided access to advanced intellectual property that makes custom chip development relatively easy. “We also expect that the lessons learned from the microchip shortage will further push carmakers to evolve into technology companies,” says Gupta. This evolution has already begun. Volkswagen, for example, announced some time ago that it would develop its own chips, and more recently Stellantis entered into a collaboration with Foxconn to develop and manufacture its own, semiconductor devices.

The study also predicts that the average selling price of new vehicles in the US and Germany will exceed $50,000 by 2025, leading to increased repair and upgrades of older vehicles. “This price acceleration will likely shrink the total number of vehicle sales and increase the market for replacement parts and upgrades as people seek to keep their existing vehicles on the road longer,” said Mike Ramsey, research vice president at Gartner.

Gartner analysts expect the market for new vehicles to stagnate or even decline in the face of rising prices. Meanwhile, automakers will push new services and even upgrades to equipment and computers to extend the life of existing vehicles.

Gartner report: Predicts 2022: Automotive and Smart Mobility.

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