Big chipmakers struggle to connect with automakers

SAN FRANCISCO (Bloomberg) -- Intel Corp., Qualcomm Inc. and NVIDIA Corp. -- pioneers in the production of chips for computers and phones -- are finding it harder to make inroads into the auto industry.

Consider the new 2015 Hyundai Genesis, a luxury sedan brimming with semiconductors that handle everything from automatic braking and lane-keeping sensors to blind-spot detection. Other chips enable the car to open the trunk when it senses the owner’s arms are full, and to sniff for carbon dioxide to decide if the cabin needs more fresh air.

While the Genesis represents the forefront of the auto industry’s use of chips, only a handful of the vehicle’s thousands of semiconductors is provided by Intel. Qualcomm and NVIDIA don’t even make the list. The main hurdle is the industry’s safety and reliability standards, which far exceed those for computers or phones. Instead, most of the electronic components are provided by longtime suppliers, like Freescale Semiconductor Ltd., Renesas Electronics Corp. and STMicroelectronics NV, which have proven track records.

“We don’t get a beta test with our products -- they have to work from the first one,” said Mike O’Brien, a U.S.-based vice president of product planning for the Korean automaker, explaining the company’s cautious approach to chips in its cars. “We can’t say, ‘Oops, we didn’t do that right.’”

Safety standards

The Hyundai Genesis illustrates the obstacles for Intel, Qualcomm and NVIDIA -- whose chips dominate in computers and phones -- as they try to crack a potentially lucrative market. Cars are increasingly filled with complex computing and communications systems and driverless vehicles are getting closer to becoming a reality.

The market for automotive chips is projected to grow 6.1 percent to $27.9 billion this year, according to IHS Corp. Within that business, sales of chips for automated driver-assistance systems, or ADAS, will increase an average of 13 percent a year through 2020, making it the fastest-growing area.

Even as the systems proliferate and software developers such as Google Inc. and others roll out plans for connected entertainment and mapping systems, carmakers have been slow to switch to unproven chip suppliers because their products are governed by rigorous safety requirements. When a computer crashes, a user might lose some data. When a car crashes, people can get hurt.

For autos, chips have to withstand temperatures as low as minus 40 to 320 degrees Fahrenheit. They need to be available to carmakers for up to 30 years and have a zero failure rate, according to a study by PricewaterhouseCoopers LLP. By comparison, consumer-device chips only need to be around for a year and are built to fail less than 10 percent of the time.

“Experience in automotive is something that you don’t grow in one day,” said Luca De Ambroggi, an analyst at IHS. “The requirements are still tough.”

Touting strengths

The newcomers are initially going after in-vehicle entertainment and driver-assistance functions by touting their strengths -- Intel’s processing, NVIDIA’s graphics capabilities and Qualcomm’s wireless communications. As consumers come to expect their cars to get better at the same rate as their smartphones, tablets and laptops, the demand is there, yet it takes time to bring new technology to market while keeping the driver safe and free from distraction, Hyundai’s O’Brien said.

For example, deciding that automated steering requires too much effort to turn the car and adjusting software to lighten it could take two months of testing. When Hyundai was building a reversing system with lasers and cameras, it found that the technology initially couldn’t tell the difference between obstacles and steep driveways.

All of this complexity and expense needs cooperation from component suppliers, O’Brien said. Carmakers are looking for chips that they can tune to do the job of many, he said.

Supercomputers in cars

That should be good news for Intel, Qualcomm and NVIDIA, which make some of the fastest processors available. All three say they’ve got products in the market or coming that meet the most stringent automotive requirements.

NVIDIA said its processors are now powerful enough that they can be partitioned -- devoting part to functions that must work no matter what, and others to information and entertainment, where hiccups are less dangerous.

“We’re seeing a lot of interest in the industry in the new technologies,” said Danny Shapiro, NVIDIA’s senior director of automotive. “Ultimately every car is going to have a supercomputer.”

The ability to quickly capture and process images allows vehicles’ computers to know what’s going on around them and to alert drivers to potential hazards. Shapiro said that requires massive parallel processing -- something that NVIDIA’s graphics chips excel at.

Wireless connections

Qualcomm, meantime, sees more of that processing going on in data centers requiring speedy and reliable wireless communication, Senior Vice President Kanwalinder Singh said. The company has won the majority of orders to add the latest wireless modems into cars, and expects that by 2017 as many as 60 percent of cars will have cellular connections.

“It all comes from the cloud,” Singh said. “Otherwise you have to put terabytes of data into the car’s trunk.”

Audi and other automakers are now using both Qualcomm and NVIDIA to connect cars to the Internet and make them aware of their surroundings. Top-of-the line Audi models use more than 6,000 semiconductors. A demonstration version of the A7 sedan running an NVIDIA Tegra processor drove itself onto the stage at the graphics chipmaker’s annual conference in March.

Product cycles

“This is a new architecture to solve a challenge that is becoming increasingly urgent -- innovations in consumer electronics and rapid gains in computing power are being introduced much faster than the product cycles of automotive manufacturers,” said Tim Fronzek, a spokesman for the Audi.

Of the three newcomers, only NVIDIA has so far brought in enough business from the automotive market to register on its earnings. Intel has announced BMW, Hyundai and Infiniti as customers, and on June 25 unveiled a research partnership with Ford to explore new applications for connected cars. Still, the chipmaker has a way to go before automotive makes an impression on its more than $50 billion in annual revenue. In 2013 it had $51 million of automotive revenue, a jump of 65 percent from a year earlier, according to VDC Research.

“Make no mistake -- my objective is to drive this into volume, not just luxury German vehicles,” said Elliot Garbus, Intel’s vice president of automotive. “We need to drive it into entry-level vehicles.”

New features

Intel is aiming to win more orders by offering carmakers whole systems -- software and computers built on its chips -- that it says can cut the time and cost it takes to build features into cars. New functions such as tracking eye movement to monitor a driver’s attention will require faster processing, he said.

For Qualcomm, supplying tens of millions of modems for connected cars will provide a boost, though it’s not enough to add noticeable revenue to a company that dominates the smartphone market, which passed more than a billion units last year. The company is working on chipsets that provide multiple functions for cars, including cellular connections, and expects that to be the basis for an expansion of its revenue in the industry, Singh said.

“It’s going to hinge on all cars getting connected,” he said. “We are building this in steps. We understand it takes a lot of effort in the nascent stage.”

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