The race to autonomous vehicles brings auto suppliers, high-tech companies into partnerships, competition

June 8, 2017
Electronics account for as much as 30 percent of a new vehicle’s cost, and the role of software is rapidly expanding in vehicles.

Tech giant Intel Corp. acquired Mobileye N.V., a leader in the development of the computer vision and machine learning solutions used for advanced driver assistance systems (ADAS) and autonomous self-driving vehicle solutions. The deal, completed in March, was valued at approximately $15.3 billion.

Intel made this move to position itself as a leader in the autonomous vehicle space, where both automotive OEMs and tech firms like Google are already jockeying for position. Intel estimates that the vehicle systems, data, and service market opportunity will reach $70 billion by 2030. Bain & Company puts the autonomous vehicle market at $25 billion annually by 2025.

The new Intel autonomous driving organization will combine both companies’ technology, and will be led by Professor Amnon Shashua (Mobileye’s co-founder and CTO) from its headquarters in Israel.

“This acquisition is a great step forward for our shareholders, the automotive industry and consumers,” said Brian Krzanich, Intel CEO. “Intel provides critical foundational technologies for autonomous driving including plotting the car’s path and making real-time driving decisions. Mobileye brings the industry’s best automotive-grade computer vision and strong momentum with automakers and suppliers. Together, we can accelerate the future of autonomous driving with improved performance in a cloud-to-car solution at a lower cost for automakers.”

Increased activity around autonomous vehicles, as well as growth in the electric vehicle segment and consumer interest in converged infotainment and navigation systems, means that companies like Intel, Apple, Google, and others are becoming a larger part of the automotive supply chain. They also are trying to get a piece of what could be a very lucrative business based on the data generated by these new types of vehicles.

The convergence of tech and automotive suppliers is being driven by two trends. Technology companies like Intel are looking for new outlets for their technology as their traditional, legacy computer business have slowed down. At the same time, automotive manufacturers and suppliers have been hard pressed to keep up with the fast pace of development when it comes to new mobile technology and self-driving car solutions.

Intel’s Krzanich, in fact, recently spoke at the L.A. Auto Show where he gave a speech entitled “Data is the New Oil.”

“My message was simple: automobiles and the automotive industry are increasingly driven by data and computing,” Krzanich said in a statement after the Mobileye acquisition. “The saying ‘What’s under the hood’ will increasingly refer to computing, not horsepower.

“At four terabytes of data per day, the average autonomous car will put out the data equivalent of approximately 3,000 people,” he continued. “Put just one million autonomous vehicles on the road and you have the data equivalent of half the world’s population. This massive amount of data requires all of Intel’s assets to provide the cost-effective high-performance solutions our customers need. The addition of Mobileye to our family provides the data path to our computing solutions becoming the intelligent set of eyes that will allow a vehicle to see and define the world around it. “

A challenging market

Electronics account for as much as 30 percent of a new vehicle’s cost, and the role of software is rapidly expanding in vehicles. As tech companies move closer to vehicle production, they do face some challenges. Product development cycles are much longer in the automotive space than in technology – years compared to weeks, in some cases.

“The level of performance required is much higher in automotive than it is in consumer electronics,” said David Leiker, senior research analyst, global auto and truck, for Robert W. Baird & Co. “When there is a new technology, the auto industry is going to evaluate that for a year or more to make sure it will do what they think it will do, so there is a contract that is out 18 to 24 months before a car even goes into production.”

The second challenge Leiker sees is that technology systems have to be automotive grade in order to survive extreme operating temperatures and vibration, and that can be in place for as long as 10 years.

That’s why technology companies typically need some sort of bridge between their market and automotive, and some Tier 1 suppliers have emerged to fill that role. “We’ve long positioned Delphi as just as much of a technology company as anyone in Silicon Valley,” Leiker said. “They serve as that type of bridge between tech companies and being a Tier 1 supplier that can deliver a part to the assembly line 60 minutes before it goes into the car.”

Last year, Samsung Electronics announced it would buy Harman, a U.S.-based infotainment/audio supplier, for $8 billion. The majority of Harman’s revenue (65 percent) comes from supply components and software for auto manufacturers, including navigation, infotainment, telematics and driver assistance solutions.

Samsung also is rumored to be in talks to acquire Magneti Marelli, a high-tech component company that is a subsidiary of Fiat Chrysler. Parts maker Denso also made an investment in Ibiden, an electronics company, to develop products for electric vehicles. Bosch and Daimler are teaming with Intel rival NVIDIA on another autonomous vehicle project.

Intel also has formed partnerships with BMW and Delphi Automotive, as well as acquiring a 15 percent stake in digital mapping company Here. In fact, the Mobileye acquisition grew out of a partnership between the two companies and BMW to deploy 40 autonomous cars in the U.S. and Europe this year. In May, Delphi officially became part of the BMW/Intel/Mobileye autonomous driving platform project. The company will help integrate the BWM/Intel solution into OEM vehicle architectures, as well as providing hardware components such as sensors.

“This is a great opportunity for Delphi to use its technical depth and experience with automated driving and electrical architecture to help the cooperation develop and deploy at scale. Our close working relationship with all three partners serves as a solid foundation for a success,” said Kevin Clark, president and CEO of Delphi.

There is significant opportunity for traditional suppliers to both leverage their own tech as well as forge partnerships with these newer entrants and be well positioned as the automotive tech market develops.

“We cannot speak regarding specific companies or to a specific instance, but there is no doubt the mobility industry is on the cusp of the biggest changes it has seen in 100 years,” said Steve Handschuh, president and CEO of the Motor Equipment Manufacturers Association (MEMA). “Technology is emerging quickly, and MEMA’s members are poised to meet the demand for vehicle-to-vehicle communications, advanced safety systems, and automated driving technology. MEMA’s members are leveraging technology to become an economic engine driving growth in jobs, fuel economy, and – perhaps most important – safety.”

One area where tech companies and OEMs will come to loggerheads is in data ownership and privacy. Automakers have long tried to keep a firm grasp on operational and customer data generated by vehicles. Technology companies, on the other hand, tend to strive for open access.

“There are many automakers, for example, that won’t do business with Google because their contracts require data sharing,” Leiker said. “They are trying to maintain the privacy of the customer and derive value from that relationship. They also have the desire to monetize that data. They aren’t going to allow Google or anyone else to take that data and use it for themselves.”

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About the Author

Brian Albright

Brian Albright is a freelance journalist based in Columbus, Ohio, who has been writing about manufacturing, technology and automotive issues since 1997. As an editor with Frontline Solutions magazine, he covered the supply chain automation industry for nearly eight years, and he has been a regular contributor to both Automotive Body Repair News and Aftermarket Business World.

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