A McKinsey report states that the majority of future automotive wafer demand will involve nodes of 90 nanometers and above, as many automotive controllers and electric powertrain systems, including electric drive inverters and actuators, rely on these mature chips. By 2030, such nodes will account for approximately 67% of automotive demand.
Semiconductor companies are increasing production of 90-nanometer chips, "but our analysis shows that the compound annual growth rate will only remain around 5% from 2021 to 2026—not enough to eliminate the supply-demand mismatch," the company added.
This is McKinsey's analysis of the numbers:
By 2030, total revenue for automotive chips could increase from $41 billion in 2019 to $147 billion. Three areas—autonomous driving, connectivity, and electrification—will drive the majority of demand, accounting for $129 billion of revenue, or approximately 88% of total revenue.
By 2030, the annual demand for 12-inch equivalent automotive wafers is expected to increase from approximately 11 million wafers in 2019 to 33 million wafers, representing a compound annual growth rate of 11%.
McKinsey explains that OEMs that rely on 90 nm chips in many applications have little incentive to migrate to smaller nodes because redesign would incur development and certification costs as well as require more R&D personnel.
Unwilling to redesign
Cars have a much longer lifespan than consumer products, making it difficult to upgrade their electronic specifications as technology advances. Furthermore, consumer companies use the same chips that many automakers are vying for, and in much larger quantities. One analyst stated that automakers have lost leverage in negotiating favorable terms because they are no longer the most influential customers of chip manufacturers. Automakers also have a reputation for ordering components in advance and then canceling at the last minute. This exacerbates the impact of the global chip shortage on the automotive industry.
McKinsey explains that the drawbacks of using more advanced chips in vehicles often outweigh the technological advantages. Because driving inverters and actuators requires high voltage and current, the chips used in these applications cannot benefit from the high transistor density characteristics of smaller node sizes.
“Of course, OEMs do sometimes need leading-edge chips—for example, to significantly enhance autonomous driving systems,” the company added. “These chips have a compound annual growth rate (around 9% from 2021 to 2026) higher than mature nodes. However, due to intense competition across industries, OEMs may still struggle to secure sufficient quantities. Therefore, the supply-demand mismatch will persist across all node sizes.”
signs of progress
For the past two years, McKinsey and other consultants have been advising automotive OEMs to develop better technology roadmaps and improve short- and long-term demand planning to avoid a recurrence of industry-specific chip shortages. The automotive supply chain also needs better cross-industry collaboration. McKinsey recommends:
Tier 1 suppliers engage in discussions with automotive OEMs when creating technology roadmaps to identify opportunities for embedded components that can be used across a variety of vehicles.
Tier 1 suppliers can also co-invest in projects with original equipment manufacturers (OEMs) to share the financial burden of creating mature or leading node design and manufacturing capabilities—a strategy that can both reduce costs and increase supply.
OEMs and Tier 1 suppliers may be able to secure a more reliable supply of automotive chips by working more closely with semiconductor companies on demand forecasting and other activities.
There are indications that automakers have taken this advice to heart:
Ford has signed a non-binding agreement with U.S. semiconductor supplier GlobalFoundries to collaborate on developing chips for Ford vehicles, and the two companies will explore expanding domestic chip production.
General Motors said it is in talks with some of the leading companies in the semiconductor industry, including Qualcomm and NXP Semiconductors, and has reached an agreement to jointly develop and manufacture computer chips.
Mercedes-Benz has established direct relationships with all chip suppliers, including Taiwanese wafer manufacturers.
SEMI and the Center for Automotive Research have signed a joint exploration memorandum of understanding to promote supply chain cooperation between the semiconductor and automotive industries.
Volkswagen is in direct talks with chip manufacturers.
Nissan and other companies are accepting longer order commitments and higher inventory levels.
Tier 1 suppliers, including Robert Bosch and Denso, are investing in chip production.
While supply chain collaboration is significant, joint development agreements often look forward rather than backward. Automakers may be eyeing a transition to more advanced semiconductor technologies.
