The global automotive chip industry is expected to surpass USD 35 billion by 2022 with CAGR exceeding 10% over the forecast period. The rising computerization and digitization of automotive parts are anticipated to fuel industry growth.
The global demand for an automotive chip is expected to witness an upsurge owing to the rapid incorporation of Engine Control Unit (ECU) in modern automobiles. The chips are required to monitor and control various functions of an automobile by the ECU. These chips make use of algorithms to direct the part to operate in a particular manner.
Technological developments in the automobile industry have led to an active involvement of computers in the operations of automotive engines. Manufacturers are harnessing the power of digital control equipment leading to high-performance delivery of automobiles. The ongoing research to discover the innovative use of automotive chip may act as a key factor for increasing product demand.
Consumer chip manufacturers such as Renesas Electronics Corporation and NXP are actively eyeing automobile brands at collaborative chip manufacture initiatives. It follows a declining demand for chips from the computer industry and manufacturers are now aiming at exploiting the growing automotive chip market. However, with only a few key players directing the market dynamics, the smaller companies may face challenges to sustain over the next few years.
Chip manufacturers such as ARM Holdings, generating more than 40% revenue from smartphone industry, are actively developing products that may be required in future by the automobile industry. However, with elongated design cycles, the industry is still in pre-nascent stage and may begin rolling out products only after a few years. Further, the collaborative efforts of automobile manufacturers and chip makers are expected to fuel demand over the forecast period.
The market is segmented by type into after-market and OEM products. While the OEM sector accounts for healthy growth, owing to active development stage activities, the after-market sector is poised to witness a substantial growth over the forecast period. This growth may be attributed to the increasing demand from the Asia-Pacific region where cost-effective after-market solutions are widely available, and future demand for these components is expected to be high. The advent of hybrid vehicles and self-driven cars is also expected to spur demand owing to extensive computer-based operating systems employed in them.
The industry is fragmented regionally and depends heavily on global automobile production. Since most chip manufacturers are entering into agreements with automakers, smaller companies are finding it challenging to sustain competition, impeding the overall industry growth. However, with the varying features of the chips, firms may develop competency for specific components, imposing market growth.
The ongoing involvement of chips in automobiles incentivizes chip manufacturers to integrate related functions in their existing chips, creating chips with multi-function capabilities. Manufacturers are focusing on automobile sector more as compared to communications, medical/healthcare, government and military owing to the highest demand over the forecast period.
Automotive chips find numerous applications in safety, performance, and infotainment-related requirements. While the infotainment sector exhibits a healthy growth, the security and performance related chips are yet to capture the market which may be attributed to the relatively simplistic nature of the infotainment systems chips. The safety and performance related circuits require extensive research & development on the manufacturer’s end, often causing a delay in rolling out products to consumers. However, with the increasing demand for computer-controlled safety and performance, the growth may be anticipated to be high.
Key players in this industry include Renesas Electronics Corporation, Infineon Technologies, STM Microelectronics, NXP, Robert Bosch and Texas instruments. North America currently accounts for the majority revenue share followed by Europe and Japan. Asia-Pacific, with its growing population and increasing automobile adoption, is expected to grow at the highest CAGR of more than 15%, over the forecast period, providing ample growth opportunities for the companies.
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