why does it matter: Over the past few years, the semi-auto industry has become somewhat obsessed with cars. Every major segment company now allocates a fair amount of coverage to cars in all investor offerings. Or at least it seems that way. This partly reflects real growth in semi-autos, and on the other hand lower growth in many other categories such as mobile phones, PCs, etc.
It is often left without mention that the semi-final growth in cars is still somewhat off. Aside from companies that have been selling to automakers for years, auto revenue is still less than 10% for most chip companies. It is therefore difficult to make reliable forecasts for the sector. In fact, one of the most important questions About half cars It remains a big mystery – who will be the ultimate decision maker for semi-auto decisions?
There are really two pieces to this question. First, how cars will be manufactured in the future, and second, who will control the software in those cars.
guest author Jonathan Goldberg He is the founder of D2D Advisory, a cross-functional consulting firm. Jonathan has developed growth strategies and alliances for companies in the mobile, networking, gaming and software industries.
From our point of view, the auto industry appears to be preparing for a major change. Traditionally, the auto industry has had a high degree of vertical integration, and although that has changed, today’s big automakers still organize themselves around the manufacturing, or at least final assembly, of the cars they sell. This stands in marked contrast to the electronics industry where the ODM/OEM model has long separated manufacturing from design, sales and marketing. Car companies still spend a lot, by electronics standards, on capital equipment needed to build car assembly lines. But there are many companies looking to change this paradigm.
A leading example is Foxconn (Hon Hai), the group that among many other activities does the final assembly of the iPhone. Hon Hai has been in the news a lot lately, now offering five vehicle models ranging from sedans to pickup trucks.
The Foxconn CEO has said publicly that he hopes one day to build cars for Tesla. We’ve lost track of the number of parts in the automotive supply chain that Foxconn has built, invested in, or acquired. One of these days, we’ll take a deeper look at what they hope to achieve with this investment. For our purposes here, the main point is that a company that embodies the abstraction between electronics design and electronics manufacturing is now aggressively promoting its ability to replicate this automotive model.
It is by no means certain that Foxconn will succeed in its attempt or that this model will pass to other automakers. On Twitter, someone recently noted that Foxconn’s capex budget is significantly lower than that of a typical car OEM – in 2021, Ford spent nearly $7 billion on capex, and Foxconn spent less than $3 billion . And while Foxconn’s capital expenditures have increased significantly in recent years, the fact that its investment spending is less than half the maintenance capital budget for one automaker raises doubts about its ability to provide a manufacturing platform for many OEMs. Assembly of electronics also tends to be highly seasonal, with labor making up a much larger share of the bill of materials for phones than for cars, making it much easier to get the workforce going up and down. It’s also important to realize that Foxconn won’t start production until 2023. So put it all under “Too Soon to Tell.” There are multiple forces working for and against Foxconn.
What is clear is that as most of the world moves toward electric vehicles (EVs), the supply chain is changing dramatically. Designing electric cars is much simpler than designing cars that use internal combustion engines. The skills required for this job greatly favor the electronics supply chain, and this undoubtedly opens the door to a major disruption of traditional methods.
And then we get to the issue of software. Buyers today, especially the important demographic of young buyers, care more about electronics and the interior experience of their cars than previous and older groups that prioritized performance and speed. This falls neatly into the realm of user experience that the electronics industry is now doing very well for. Ultimately, this is a software question.
We have little confidence that existing automakers can gain this experience. They’ve had more than 20 years to adjust to this reality, but Apple’s CarPlay continues to spread throughout the industry. Automakers know they need to control their car software experience and are doing their best to keep Apple and others close at hand. We regularly hear a male Motorola ROKR As a cautionary tale for automakers. However, consumers want Apple-like experiences, and automakers struggle to emulate that, and probably always will.
Putting these trends together in a worst-case scenario, Carmageddon, there is a real possibility that automakers will fail to differentiate their own programs, and the emergence of new supply chains that dramatically reduce the cost of assembly. That’s what happened in computers and mobile phones, as software owners offload the value chain with the help of resilient, low-cost Asian supply chains. In theory, that could happen to cars, too.
To be clear, we don’t think the industry is destined to go this route. There are still significant differences between building cars and building electronics – including the higher upfront capital expenditures, a highly-tuned manufacturing model, the current dearth of battery manufacturing capacity, and an entirely different regulatory environment. But this does not mean that the cars will be completely exempted from the upcoming changes.
As always, it is important to watch what is happening in China. There are nearly 50 electric vehicle manufacturers in China today. Some of them outsource manufacturing, and some do it in-house. Some use stock software, others design their own software, and even their own chips.
As much as the Chinese government attempts to plan a large part of its economy, it often leaves sectors initially open to levels of Darwinian competition. It is clear that the success of Chinese automakers will depend on many factors, among them geopolitical ones, but it is very likely that all these experiments will lead to completely new production models that could destabilize the global industry in important ways.
#Opinion #Androidification #cars