How is ADAS chip supply-and-demand changing?
Ambitious ADAS demands some of the most advanced chips on the market, and this demand is set to rise. This is because:
Sensor resolution is getting higher, and cars will have more of them. This will push today’s chips past their limits.
ADAS must compute all this data within just a few milliseconds, meaning the chips need to work faster as well as harder. These two factors are still in a rapid growth phase. The chip supply problem looks like it’ll become more acute.
The most ambitious car makers believe this problem will constrain their ADAS roadmaps, so instead of settling for compromise they are responding by building their own silicon. Tesla have been making their own ADAS chips for many years, and many Chinese OEMs are making a very successful start. However, this level of commitment is too big for most OEMs. Instead they are leveraging their supply chains to adapt to the challenge.
So why can these chips be so difficult to source?
Each new ADAS chip is a huge engineering project. Few companies make them because few companies have the scale and ability to do it. This means there is less competition, and a lack of competition means the choice is low and the price is high.
What makes them so hard to build?
Chip design and fabrication is modern-day alchemy. The machines that make the chips push the frontiers of physics and ingenuity. They are mind-bendingly complex, only one company (ASML) makes them. Consequently they are scarce, and among the world’s most expensive machines.
As the chip gets more complex, the structures on it get smaller and the alchemy gets even more esoteric. Not only the hardware, but the software too. Engineers need to write robust code libraries for hardware that has never existed before. But ADAS is just AI, and AI chips are everywhere. Even my phone has an AI chip.
Chips for cars are fundamentally different. Some features may be shared with smartphones but their automotive counterparts have fundamental differences:
These challenges combine to ensure that consumer-grade chips are unsuitable for ADAS. Automotive silicon demand is growing 10% a year. Why aren’t more chips available?
Cars are a big market but datacenters and smartphones are 10x bigger. They are also growing much faster. For most, cars are an afterthought. Even giants like Apple and Intel have tried to make the economics of automotive chips work, and both have abandoned the effort.
Qualcomm and Nvidia have the resources to compete, but because ADAS chips are so expensive to create only about 5% of their total portfolio is earmarked for automotive customers. Lack of consumer choice leads to painful tradeoffs between price and performance. ADAS specialists like Mobileye step up to fill the gaps, but the market remains under-served.
The situation seems hopeless. What can be done?
Chip demand is steadily increasing because ADAS moves from a niche luxury to an everyday commodity. Chip makers recognize the opportunities and want to serve the growing automotive market.
Know-how is also paying off. Automotive chip development is becoming both faster and cheaper, meaning they can afford to bulk out their automotive product lines and offer more choice. This means better value for OEMs. Licensing models are also innovating, reducing costs by letting customers pay only for the chip’s functions they choose to activate.
It seems things are improving. How are OEMs taking advantage?
This depends on each OEM’s persona. Some see cutting-edge tech as risky and prefer to keep it at arm’s length. Toyota have done this by sharing know-how (and risk) with Denso, under a partnership called Mirise Technologies.
At the opposite end of the spectrum, Mercedes-Benz are upending the supply chain by inviting chip makers into their R&D processes. Collaboration with the whole supply chain takes skill, but the outcome is a tighter customer experience that the OEM can better control.
"Today’s selection of the most advanced ADAS silicon is somewhat weak – currently we see a sellers’ market. But as standardization and competition grows, expect more choice and better value starting around 2028." Henry Simmonds, SBD Automotive – Senior Consultant |  |
How SBD can help
If you or your team would like to understand how the highlighted technologies, partnerships and market dynamics could impact your strategy, we invite you to get in touch. Email info@sbdautomotive.com to connect with one of our experts and discuss your specific requirements. |
