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Semicon West Day Three

Reporter’s notebook: Auto outlook; auto VC panel; SEMI board.

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It’s day three at Semicon West. (In case you missed it, here’s the day one/two recap of Semicon.)

Day three was fairly lively, featuring several keynotes, panels and technical presentations. It’s difficult to write about everything. So I decided to only focus on a few items.

Keynote–What happen to automotive?
For years, automotive has been a bright spot in the semiconductor industry.

Automotive is still a small percentage of the overall semiconductor industry, but the semiconductor content has increased in cars. And so, the automotive semiconductor market is growing faster as a percentage than other chip businesses.

Recently, though, the automotive market has stalled, at least for many device makers and OEMs. The automotive semiconductor market has been in a slump amid a slowdown in car sales in China and elsewhere.

2020 looks like another slow year for most. The Covid-19 pandemic has turned the car market from bad to worse. “In semiconductors, we were expecting to be up by double digits this year. Obviously, those forecasts are down in this environment. We think it will be down probably mid-single digits, maybe flat if we see some upside,” said Scott Jones, a partner in KPMG’s Strategy Group, during a presentation at Semicon West. “That is actually dramatically better from an industry perspective than what we are seeing in automotive. New car sales are down roughly 20%.”

Long term, though, automotive still remains a bright spot. “Despite the environment that we are in 2020, we actually see this as an amazing opportunity for the industry,” Jones said during the presentation, entitled: “The New ICE Age: The $200B Opportunity for Automotive Semiconductors.”

Jones’ presentation doesn’t mean the car market is moving into the literal ice age. In this case, ICE refers to the internal combustion engine.

The ICE isn’t going away anytime soon. But there are four major forces that are reshaping the automotive industry—autonomy, electrification, connectivity and mobility as a service (MaaS), according to KPMG.

All of these will require an increase in data and electronics, which in turn could jumpstart the automotive market. “Today, we think we’re about $40 billion to $45 billion in automotive revenue for semiconductors. It basically goes from being about 10% of the semiconductor market to around 20%, maybe a little more than 20% by 2040. We see this as a $200 billion opportunity over the next two decades,” Jones said.

One big growth driver is electric vehicles. Electric vehicles still represent a small part of the overall car market. By 2030, though, some 50% of all vehicles will include some form of electrification, according to the firm. As we move from internal combustion engines to better electric vehicles, that really drives about a 2X to 3X increase in semiconductor content,” he said. In the electric power train, for example, the semiconductor content increases by about 300 to 700 units.

The next big leap is autonomous vehicles. Advanced driver-assistance systems (ADAS) will also fuel chip growth in cars. Generally, ADAS involves various safety features in a car, such as automatic emergency braking, lane detection and rear object warning.

Meanwhile, in the autonomous driving world, “Level 1” involves the automation of one or more control functions in a car, while “Level 2” is the automation of two or more functions. Tesla is currently at “Level 2.” “Level 4” has high self-driving capabilities, while “Level 5” is fully autonomous, steering-wheel optional.

“The move from level zero or even level one and two up to level four and five is really what drives the next big step function,” Jones said. “You get twice the content as you move up from the ADAS features from level zero to level one and two. But then you even get another increase of 4X to 5X as you go from level one to two to level four to five. These two step functions are really what is going to drive this market opportunity over the next 20 years.”

Still, the big question is clear—When will the car market shift toward Level 4/5 technology? By 2030, some 10% of all car sales will have these capabilities, according to the firm.

That’s a matter of debate. For more details, you can find KPMG’s report here.

Panel—More automotive
Following that presentation, I attended a panel, entitled “Automotive Startups and VC Panel: Impact of COVID-19 on Global Automotive Industry.”

As stated, the automotive industry has been hit hard by the coronavirus pandemic. What does that mean for startups and venture capital in the arena?

“There are many different facets on the impact of Covid-19 on automotive and mobility. In Europe, the automotive industry was already in difficult times even before Covid,” said Yvonne Lutsch, an investment principal at Robert Bosch Venture Capital’s (RBVC) affiliate.

The pandemic made matters worse. “No one was buying cars. No one was driving cars. Here in the Bay Area, the traffic is still very much down. So there is, of course, a very severe short-term impact. This is just the reality,” Lutsch said.

China, however, is bouncing back. “In April, when Covid-19 was over in China, people bought even more cars than the year before, because no one wanted to use public transportation anymore. You don’t want to be in a tight space in a subway if you can drive your own vehicle, even if the commute is worse. It’s still better than being with other people,” Lutsch said.

It’s a different situation elsewhere. “In Europe, Bosch is the leader in electrification of bicycles. These are so-called e-bikes and for the drive trains and the whole system. This business is going crazy. In Germany and Europe, people have cars. There is no stronger demand probably, but some people didn’t want to buy a third or a second car. They bought a bicycle and not take the bus or the subway,” she said.

Covid-19 has also impacted automotive startups, especially those in the autonomous vehicle world. “In autonomous vehicles, there has also been an impact from Covid-19. That’s twofold. One is OEMs, who are in a more difficult financial situation. They have to work stronger with partners, startups or other companies,” she said. “And we see also some consolidation. There is cost pressure. Then, consolidation happens. Covid overall accelerates many of these developments, which are underway.”

Consolidation is a big theme in the autonomous driving market. For example, Amazon recently signed an agreement to acquire Zoox, a California-based company working to design autonomous ride-hailing vehicles.

What about the startups? “Some startups eventually will probably die, because of money. Money is probably not abundant anymore in the VC space,” she added.

There are other issues. “A lot of these startups aren’t really impacted by Covid,” said Jeff Peters, a partner at Autotech Ventures, a transportation-focused VC firm, during the panel. “They were never making revenue to begin with. They are going to see the timelines of working with their OEM or tier-1 partners stretching and stretching. Time is the most valuable resource for these startups. They will suffer and AV and automotive will suffer as well.”

It’s not all doom and gloom for the autonomous community. “Autonomous vehicles exist outside of passenger cars and trucking. There are commercial use cases for autonomous vehicles. We see a lot of renewed interest, as well as new interest, in automating some of those activities, where the labor force is hurt or materially impacted by Covid-19,” he said. “So that’s industrial robotics in factories and warehouses, as well as for agricultural products.”

SEMI board
SEMI has announced a new board member and confirmed the re-election of seven current members. Bertrand Loy, president and CEO of Entegris, is chairman of the SEMI Executive Committee.

Kevin Crofton, CEO of the Comet Group, is vice-chairman of the SEMI Executive Committee. In May, Comet named Crofton as CEO, effective Sept. 1, 2020.

Chip funding
SEMI President and CEO Ajit Manocha has voiced his support for amendments the United States House of Representatives and Senate included in the Fiscal Year 2021 National Defense Authorization Act (NDAA) that would authorize important programs to support semiconductor manufacturing and research in the U.S.



1 comments

Caroline says:

Really interesting, thank you!

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