In an analysis produced for EE Times, Semicast Research has identified Infineon as the leading vendor overall for the combined automotive and industrial semiconductor market.
Semicast’s combined automotive and industrial semiconductor vendor share analysis ranks Infineon as the largest supplier in 2016, with an estimated market share of 8.3 percent, ahead of NXP with 7.9 percent. Completing the top five, Texas Instruments had 7.5 percent; STMicroelectronics was at 6.1 percent; and Renesas had 5.0 percent.
With sixth-placed Intel back on 3.1 percent, it can be seen that leadership for automotive and industrial semiconductors comes down to five vendors who are well ahead of the pack. This is a fragmented market with the top five vendors together taking about one-third of the total and the top ten collectively just under fifty percent.
Semicast estimates the combined automotive & industrial semiconductor market to have been worth $72.2 billion in 2016 and forecasts average growth of about seven percent a year to more than $100 billion in 2021.
Automotive and industrial are two quite different end markets, but from a semiconductor device perspective, they have much in common. This includes operation over an extended temperature range, operation in harsh environments, need for high product quality and reliability, guaranteed long life supply and compliance with tightly specified industry standards. So although the applications and customers in the automotive and industrial markets may be quite different, the expertise required to produce and supply semiconductors for these two markets is very similar.
Taken together, the automotive and industrial sectors represented only about one-fifth of the total semiconductor TAM in 2016, and much less than the computer, consumer and communications sectors. Combined with long development cycles and fragmented customer bases, many semiconductor companies have historically avoided both markets altogether and pursued opportunities elsewhere.
However there are clear signs of changing dynamics. Suppliers are lining up to expand into the automotive and industrial markets, in pursuit of the riches promised by new and exciting technologies such as autonomous driving, artificial intelligence and of course IoT.
Intel’s $15 billion purchase of Mobileye for autonomous driving is the most potent example of this so far in 2017. Recently it has been pretty hard to find a major trade show or industry event without a keynote from Jen-Hsun Huang promoting Nvidia’s solutions for autonomous driving and AI.
Semicast sees parallels forming with the semiconductor industry of twenty years ago when everyone went prospecting for a slice of the market for cellphone and subsequently smartphone baseband processors. The golden nuggets of victory eventually concentrated into the hands of a very few winners such as Qualcomm and Mediatek, and red ink splashed over the balance sheets of pretty much everyone else.
The list of companies that started and then either divested or abandoned their baseband processor business includes Infineon, NXP, TI, STMicroelectronics and Renesas. These five semiconductor suppliers that each correctly identified cellphones as a way to lose them money, and automotive and industrial as a way to make it.
I think it was Mark Twain who said “he gold rush it is a good time to be in the pick and shovel business.” As the semiconductor industry heads for maturity, many vendors’ strategies are noticeably starting to split into those prospecting for the moonshots of autonomous driving, AI and VR and those seeking the dull but reliable pick-and-shovel business.
Companies such as Infineon that focus on automotive and industrial semiconductors may not be sexy, but history teaches us that dull and reliable can unearth the buried treasure too. Just ask Warren Buffett.
--Colin Barnden is principal analyst at Semicast Research (@semicast_res) and has covered the semiconductor industry for almost twenty five years. His focus is on the automotive and industrial sectors and he is clearly not dull because he drives a Toyota Prius.