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Vertical integration is trending, but things won't be so easy for car OEMs

Yusin Hu, DIGITIMES Asia, Taipei 0

Credit: DIGITIMES

At Semicon Taiwan 2022, executives from Denso, Renesas, and Infineon shed light on the major changes taking place in the automotive supply chain. Denso is one of the largest automotive tier-1 suppliers in the world, while Renesas and Infineon are major car car chips developers.

The executives remain positive about electrification; however, there are some nuances in the process of collaborating that are worth noting.

First is the vertical integration initiated by many carmakers including Tesla, Volkswagen, and Chinese marques. JT Hsu, managing director and senior partner of the Boston Consulting Group, pointed out that on the path leading to electrification in the operating system or even the powertrain system, most OEMs moved fast to deploy their own in-house software development teams or to partner with IC design houses to develop their own system on chips (SoC).

Although the automotive industry sees vertical integration as one of the effective ways to secure material supply, notably semiconductors, and to keep supply from being disrupted by pandemic or logistics clog, Hans Adlkofer, senior vice president and head of automotive system group from Infineon, said that each OEM developing its own SoC will be a wrong direction. Yoshifumi Kato, CTO at Denso and the automotive solution business unit, agreed with Adlkofer by saying that "we hope that there should be some standardization."

During the panel discussion at Semicon, Denso from the tier-1 system integrator sector, and Renesas and Infineon from the tier-2 semiconductor supply side, reached a consensus that increasing engagement between the automotive manufacturer and IC industry is a good sign for the industry to advance electrification.

Electrification includes electrifying the car system and the power system, which is increasing the importance of SoCs needed to command the entire car system from autonomous driving, braking system, to software updates. Traditional vehicles required multiple chips to control multiple functions, but with smart mobility, the new generation of SoCs are expected to be much more powerful.

As OEMs require higher computing capabilities and stronger functions, current SoCs are not designed for automotive use cases, said Adlkofer. Infineon now provides automotive-specific chips; however, the volume for customized SoCs does not justify the investment to start production.

Adlkofer said the catalyst in terms of volume production is not big enough to justify such kind of big development, because SoC development is definitely not cheap. He added that another big challenge for this trend to last is to have software development catch up.

Adlkofer indicated that developing new SoCs is not an easy task, either. Unlike SoCs for smartphone, automotive-specific SoCs need to carry safety functions and real-time capabilities for the braking system to react immediately when danger is detected.

In addition, value of car sales is now more focused on software and service, instead of hardware, said Takeshi Kataoka, senior vice president and general manager of the advanced device business group at Renesas.

Kataoka recognized that the industry now needs to adapt, evolve, and to change as EV rises. Renesas is now working tightly not only with mega OEMs but also emerging OEMs.

The speaker from Denso, which plays a representive role of system integrator in the automotive supply chain, pointed out that despite increasing engagement and discussion between OEMs and chip makers, they still need tier-1 suppliers to help integrate MCC, power supply, and meters, conduct testing, and implement software.

Tier-1 suppliers are often invited to join the collaborations between the two because they "speak different languages," said Kato, and that it is good for all parties if specifications can be clarified earlier in the development stage.

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