Automotive semiconductor growth forecast to continue in high gear

Electronic News, August 8, 1994

NORWELL, MASS.--The 1993 automotive semiconductor market in North America, Japan and Western Europe grew 14 percent to $3.8 billion, despite corresponding vehicle production falling by 2.5 percent for the same period, according to a report by market analysts BIS Strategic Decisions.

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North America, Japan and Western Europe constitute around 85 percent of the world's car production, BIS said. It was predicted that automotive semiconductor demand in these three regions will increase an average of 11.9 percent per annum to $6.7 billion in 1998 (including the North American light truck/minivan segment). Europe was said to exhibit the highest growth of the three regions at a compound average annual rate of 16 percent.

The growth is accounted for by the increased use of electronic systems for engine performance and emission control, diagnostics, vehicle handling, safety, security and convenience, adding that legislative, competitive and consumer pressures are expected to continue to build in the next few years.

Microcontrollers, power control and ASICs provide the largest dollar markets within automotive applications but the fastest growth in demand is for 32-bit microcontrollers and flash memory, according to the report.

Although 8-bit microcontrollers dominate automotive applications, 32-bit microcontrollers are just starting to appear in sophisticated highend engine and transmission controls and ABS/traction control applications.

Flash products are expected to dominate the automotive memory IC market by the end of the 1990s. The advantages offered by flash devices of insystem erase and reprogrammability allowing, among other things, reduced electronic module inventory variations, adaptive system control and diagnostics, are compelling benefits to car makers, BIS noted. Powertrain control will be the primary application for flash memory.

Toward the end of the decade, BIS anticipates enhanced 8-bit, 16-bit and 32-bit microcontrollers with onboard flash memory will begin to be used in automotive applications.

Despite a reduction in car production in the world's three major car producing regions, demand for electronic systems in cars continued to show steady growth and, with signs of an upturn in car production in all regions during 1994, the outlook is very good, BIS said. The report noted the largest drop in car production in 1993 was in Europe, down 14.5 percent; Japan followed, down 7 percent.

Despite this, demand for electronic systems was said to have increased by 14.3 percent to $37.8 billion in 1993. BIS forecasts that this growth will continue at an average of 11 percent per annum over the next five years to reach $63.8 billion in 1998. The value of all electronic components in these systems increased by 13.8 percent to $8.9 billion in 1993 and is forecast to continue to grow at an average of 10.7 percent per annum over the next five years to reach $14.8 billion in 1998.

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There are three major factors responsible for the growth in the use of electronics in the automotive sector: safety, emission legislation and competition, said the report. Safety has become a key feature in passenger cars. The initial growth resulted from the introduction of anti-locking braking systems(ABS). This growth will continue as more models adopt ABS as standard. Now, the increasing availability of air bags as standard fittings is contributing to the growth.

"Emission legislation has been with us for several years, but standards are becoming more stringent requiring more complex monitoring and control functions," said the report. "Smaller cars, which had previously escaped the legislation are now required to comply."

The report added that during the recession, car makers faced a decline in demand and offered additional standard fittings such as electric windows/sun roofs, central locking and other safety and comfort features which increased the demand for electronic systems. "Moving out of recession, car makers continue to find additional ways of differentiating their own product from their competitors'. This often results in increased use of electronics," BIS said.