Cars Now Have More Tech in Them Than Computers. What Does That Mean for the Supply Chain?

As humanity is constantly on the verge of evolution, the technology that we use every day is also getting more advanced and sophisticated.

Every object that you touch with your fingertips has some sort of hidden technology behind it. Of these, the car that you commute in day-to-day has a million lines of computer code hidden beneath its complex structure.

All this has happened within the span of the 21st century, a period where the globe is witnessing a technological revolution like never before.

With millions of these computers-on-wheels sold each year on car-selling portals like CarIndigo, we analyze how this boom of technology-powered cars would ultimately affect the global electrical supply chain.

Smart cars were already a raging trend way back in the 60s when Walt Disney immortalized Herbie, the intelligent Volkswagen Beetle through his 1968 film “Love Bug”.

Car enthusiasts might also have fond memories of the indestructible Pontiac Firebird named KITT, which starred alongside popular actor David Hasselhoff in the 1980 TV Series “Knight Rider”.

With smart cars already immortalized in TV and movie culture, automakers saw this as an opportunity to integrate all their latest modern technologies inside their cars.

In the early 70s era, electronic controls began replacing the old mechanical controls that were used to manage the fuel flow and ignition timing inside the internal combustion engine.

In that same era, the first microprocessor was invented, which eventually made its way onto automobiles by the early 1980s. These intricate microprocessors replaced the old analog circuits used before.

With computer-based technologies, automakers bring speed, flexibility, and precision to the table, which has empowered them to create new technologies like lean-burn engines and electronic stability control, which are now a prominent feature of every 21st-century automobile.

Take into consideration a high-tech vehicle from 2004. This vehicle featured almost 5 million lines of computer code.

Fast forward just 9 years later and this number now stood at a lofty 150 million lines of computer code for an automobile of similar stature.

This highlights the complex structure of most automobiles in the world today, as they feature almost 10% of the software inside. By 2030, experts predict this figure to be at least 30%.

Demand for New Architectures

Automakers are utilizing their research and development sectors to discover new solutions to change the way the electrical systems are packaged and implemented inside their automobiles.

This process requires integrating all the vehicle functions into a more powerful domain controller, instead of a bundle of different microprocessors to control every single intricacy of the vehicle’s electrical system.

Automakers are also working tirelessly to invent new technologies that will empower the vehicle’s autonomous driving capabilities. These systems need sophisticated sensors and specialized systems to deliver and interpret complex data.

Simultaneously, these complex systems come with their share of complications. For example, autonomous cars pump in several kilowatts of electricity to allow their onboard computer technology to function efficiently.

Simultaneously, with all the power only flowing in one direction, the efficiency of fossil fuel cars gets greatly compromised. In the case of electric cars, this equates to a loss of driving range.

To set the pace for self-driving cars in the future, the automotive industry has to overcome these challenges by exploring new domains of technology.

New vehicle architectures can overcome the limitations of the existing ones, which include new energy-efficient high-performance semiconductors and cloud-based technologies.

With the help of cloud-based technologies, automakers can reserve some complicated processor functions for high-tech remote data centers. These data centers can seamlessly sync data at high speeds through 5G data networks.

The Conflict Between the Automotive and Semiconductor Supply Chain

As the modern vehicle architecture is constantly being reshaped to accommodate the all-new technologies, another major sector of in-car electronics is getting influenced.

Semiconductor manufacturers have always followed a different product development philosophy than traditional automakers.

For instance, semiconductor manufacturers are compelled to release a new product every 12 or 18 months, in order to stay in sync with the changing trends of the IT industry.

On the other hand, automakers develop their new products at their own relaxed pace, with evolution in car models occurring once every 5 or 7 years. These same models are then sold in the market for another 20 years or so.

Automakers emphasize agility and responsiveness in their manufacturing chains, as they implement strategies like just-in-time supply chains and lean production systems to enable smooth delivery time.

On the other hand, semiconductors plants are always running at full capacity to maximize profitability. Hence, semiconductor manufacturers always appreciate large batch sizes and long lead times.

Both these global giants have to figure out a way to align their manufacturing cycles as efficiently as possible.

If they fail to coordinate, this could lead to adverse consequences like-new vehicles that feature parts that are already outdated by the time they go into production, uncertainty about the availability of spare parts, and big costly inventories that are a result of incompatible production patterns.

New Convergence in the Global Supply Chain

An optimistic future lies ahead for automakers and semiconductor manufacturers if they succeed in resolving their differences. Currently, the automotive industry accounts for only 9% of sales of the global semiconductor market.

However, experts forecast the automotive industry to play a bigger influence in the semiconductor segment by the near future. Automakers always buy the most premium products available, which also works in their favor.

Despite buying only 10% out of the global supplies of microcontrollers, automakers account for at least 1/3rd of the revenue of the 32-bit microcontroller industry.

To work consistently with more automakers, big players like Bosch are making large investments to make their production lines more flexible with the demands of the automakers.

The German semiconductor giant is establishing a new wafer fabrication plant worth €1 billion in Dresden, Germany.

When production eventually begins in 2021, this facility will be the largest investment ever for Bosche, and it will continue to flush in more new products for its automotive partners.

New strategies like Vendor Managed Inventory (VMI) and Collaborative Planning Forecasting and Replenishment (CPFR) are helping both these industries streamline their global supply chains.

These strategies relay consumption and production forecast data in the earliest stage possible, in order to enhance the effectiveness and responsiveness of the overall supply chain.

Both the automotive and electronic worlds are merging into one new family and are co-developing new products together to set the stone for cars of the future.