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Roland Berger | Delphi | Continental | Autoliv | Volkswagen | Tesla | Tier-1s in Trouble
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, coronavirus-induced 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.
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 centralized architectures capable of doing the work of multiple ECUs. Carmakers will source hardware and software separately and shop from multiple suppliers for the best software.
According to the Roland Berger study, Computer on Wheels, Part 2, "Traditional tier-1 suppliers are under pressure from all sides. Their established business models are breaking apart, and they risk becoming irrelevant." ... "The traditional black boxes are outdated. That means suppliers will have to go in different directions," advised Wolfgang Bernhart, Senior Partner at Roland Berger and co-author of the study. New architectures necessary to compete against Tesla and the other new players aren't expected until 2024 or 2025, he said, adding, "Tesla sees cars as another gadget [like smartphones], which is a different mindset from the traditional carmakers." Tesla started doing over-the-air software updates in 2012; traditional carmakers are still struggling to implement the technology.
Much of the Software Must Be Thrown Away
Despite the benefits from reduced complexity, moving to centralized computing architectures is not at all easy. Much of the software already written for separate ECUs must be thrown away and new software developed to run on the central processor. While there are projects underway to develop cockpit domain computers, which combine the infotainment system with the cluster, most new centralized computing work has been devoted to clean-sheet developments of electric vehicles. The new Volkswagen ID.3 electric vehicle, due this fall, has three high-performance computers: one for the cockpit, one for the gateway, and one for ADAS.
According to Elektrobit's Executive Vice President, Martin Schleicher, centralized computing won't lead to commoditized hardware or plug-and-play applications in the near future. The high-performance computers required are still expensive, and the interfaces that would allow you to easily replace or exchange a function won't soon be standardized. "Thus far, there have only been limited gains from Autosar, he said. "We still have large variations in hardware and ECUs." So major tier-1s will be able to profit from the market for high-performance computers at least until standards are widely adopted that lead to commoditization. "Smaller tier-1 suppliers that presently make specialized ECUs, the kind that will be consolidated in a centralized computer, will be more at risk," advised Schleicher.
Last April, electrek.co published a quote from Volkswagen Group's then CEO, Herbert Diess, that suggests what is driving Volkswagen to build a large software development organization in house: "What worries me the most is the capabilities in assistance systems. 500,000 Teslas function as a neural network that continuously collects data and provides the customer with a new driving experience every 14 days with improved properties. No other automobile manufacturer can do that today."
Bosch | Cross-domain Computing Solutions Reorganization
Among all tier-1 suppliers, Bosch is probably the least likely to get into serious trouble as suppliers face multiple challenges including declines in the diesel and gasoline engine component markets, outdated black box business models, and the extremely competitive software environment. Bosch is huge, well-funded, and privately held; its unique ownership structure guarantees entrepreneurial freedom, making it possible to plan for the long term without having to concentrate on short-term results.
Under the direction of Harald Kroeger, member of the board of management of Robert Bosch GmbH with responsibilities in the Mobility Solutions business sector, a new division called Cross-domain Computing Solutions will provide customers a single source for automotive electronics systems and software. The new organization will combine the Car Multimedia division with parts of the Powertrain Solutions, Chassis Systems Control, and Automotive Electronics divisions that develop software-intensive, cross-domain electronics systems. Software, electrical and electronics engineers working on driver assistance, automated driving, car multimedia, powertrain, and body electronics will be assigned to the new division. In all, 17,000 associates will be employed at more than 40 locations in over 20 countries. The new setup kicks off in 2021.
High-performance Computing from Own Origin
In a statement to The Hansen Report, Kroeger explained a key objective for the division: Under one roof, Bosch will develop high-performance computers for all automotive applications. "In this way, Bosch will make it possible to master even highly complex driving functions [that] cross individual vehicle domains. … Bosch will be developing a consistent software- and data-oriented electronic architecture for the entire vehicle." Bosch's platform architecture will be flexible, making it possible to assign functions, even functions from competing suppliers, to the most appropriate vehicle computer depending on available computing power, memory capacity, and required safety level. According to Kroeger, Bosch's in-house semiconductor design and production capabilities set it apart from many of its competitors. Bosch is developing its own SoCs, system ASICs and sensor ASICs for automotive applications. Bosch says the new organization is a response to the expected growth of software-intensive electronics systems, a market that will grow at 30 % per year from 2020 to 2030. Based on what ATZelectronics knows thus far about the reorganization, it is by no means certain that Bosch will be able to keep pace with this market. Nor is it clear at this point how Bosch will be able to compete with the likes of Tesla and Mobileye, given their world-dominant software expertise.
KPIT | Expanded Presence in Europe with New Automotive Software Engineering Facility
KPIT's new development center will be the company's largest outside of India. More than 700 employees from at least 25 countries will work on topics including electrification, autonomous driving, Autosar, vehicle diagnostics and digital cockpits. KPIT's global automotive software development business has been growing at about 20 % per year since 2016. And while that growth rate has slowed during the Coronavirus economic slowdown, demand is expected to quickly pick up again once the pandemic is behind us. Europe is KPIT's largest growth market. With 7000 engineers, the company serves carmakers and tier-1 suppliers from facilities in Europe, USA, Japan, China, Thailand and India. KPIT claims to be the world's number-one software integration partner. In November 2018, BMW enlisted KPIT and TTTech as software development partners for autonomous driving.
The Autoware Foundation | Open-source Self-driving
In an article posted earlier this year about Autoware at Forbes.com, Rahul Razdan closes with this provocative notion: "With Linux, a small team in Finland built sufficient momentum to change the center-of-mass in the corporate computing space. Perhaps the next big shift will come from a small team in Japan in the autonomous space." Autoware.AI, the group's first initiative, was started in 2015 and has found international adoption by more than 100 companies. The software today runs on more than 30 vehicles in more than 20 countries. The Autoware Foundation is supported by 45 member organizations including ARM, LG, TRI-AD (Toyota Research Institute - Advanced Development), Velodyne and remarkably, the US Federal Highway Administration. The 2020 ARM DevSummit, held on October 6 to 8 2020, features a workshop on Autoware Open Source Software.
Molex | 5G Antenna Challenges
In a May 2020 white paper, Molex outlines a major difficulty automotive developers will face as they try to integrate 5G antennas into vehicles: Currently, signals are transmitted via cable connections from an antenna on a vehicle's roof to the onboard electronics, which are often located in the driver's cockpit. With the need for more bandwidth, 5G will explore a wider operating frequency range from 6 to 100 GHz, where sending signals from the antenna to the electronics via a cable would result in large losses. That means the electronics, and thus the signal processing, must be positioned close to the antenna, either directly under the roof or in the antenna. One problem with that is the fluctuating weather conditions the electronics are then exposed to. Molex is developing concepts to deal with this problem.
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On Automotive Electronics. ATZ Electron Worldw 15, 24–27 (2020). https://doi.org/10.1007/s38314-020-0275-2
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DOI: https://doi.org/10.1007/s38314-020-0275-2
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