How Growth in Automotive is Changing Silicon Valley
It’s no secret that the automotive business represents one of the semiconductor industry’s most significant and promising growth vectors. Increasingly, vehicles are becoming computers on wheels capable of processing information and connecting with storage and analytical capabilities in the cloud to make driving safer, more entertaining and more convenient. According to a recent Gartner report, the value of the semiconductor content in cars now ranges from $300 to $1,000. Higher-end models are the early adopters of electronics innovation, of course, but market forces are constantly at work pushing capabilities down into the mainstream.
That’s all good news for semiconductor companies; but how does a semiconductor company, or, in fact, any other company, capitalize on automotive?
The hard truth is that not every company will succeed in this new environment because the automotive business has significant barriers to entry. Having the scale to compete in target markets is one requirement. Having the latest technology to solve a problem in this market helps, but is not sufficient. Quality and reliability remain important differentiators in the automotive market, of course. A company’s ability to be able to provide the product for almost two decades from production is a whole different ball game. But even more than that, the world is moving faster than ever, and our customers expect us to help them manage the pace of change while delivering on basic requirements. They want a turnkey path to new products, new markets and new revenue. The time has long passed when we could throw a bunch of chips at them and believe that our job was complete.
"The pace of innovation and the ability of a supplier to convert ideas into real products has become so critical that automotive Tier 1 companies and OEMs alike have moved into Silicon Valley to be in the middle of things, working closely, and in real-time, with companies like Cypress who are enabling this revolution."
Serving automotive companies is changing the way we do business. We’ve changed our manufacturing processes, changed our product development methodology, hired systems engineers who understand what our customers’ problems are and how to solve them, and worked 24/7 on quality to bring it closer to 0 PPM (parts per million). We’ve organically built our Human Machine Interface business with TrueTouch, CapSense and PSoC MCUs, and we’ve completed the integration of Spansion and the wireless Internet of Things (IoT) business we acquired from Broadcom in recent quarters to expand our portfolio of embedded solutions. The Broadcom IoT acquisition, in particular, was key to our automotive strategy, bringing robust, easy-to-use Wi-Fi connectivity solutions, and Wi-Fi and Bluetooth combination solutions, under the Cypress banner and capabilities.
The changes in our revenue, our margin profile and our growth trajectory are evident. Revenue from the automotive business, which was 11% of our business in Q2 2012, expanded to 31% in Q2 2017. I can comfortably say that we are successful in automotive because we simply know how to do it; we speak our customer’s language.
More and more, many of the driving decisions in cars are being handled by Advanced Driver Assistance Systems (ADAS), a category of applications that includes collision avoidance, blind-spot detection and adaptive cruise control. With the semiconductor industry growing 4.7% annually, according to Gartner market share estimates, ADAS is expected to expand at a compound annual growth rate of 17.7% between now and 2021. The advent of commercially viable driverless cars will accelerate this trend. With 65% market share in Automotive NOR flash, Cypress plays an important role bringing innovation, high performance, security and integration to the marketplace—all of which are critical to a successful ADAS SoC deployment.
As drivers spend less time in their cars actually driving, you might wonder: What, exactly, will they be doing while they’re behind the wheel? Probably paying more attention to their feature-rich dashboard instrumentation and infotainment systems. These categories are expected to grow at 7.8% and 7.2% through 2021, respectively, according to Gartner market share estimates. Even faster growth will come from connected cars: vehicles with Wi-Fi, as opposed to the shorter-range Bluetooth connectivity that links mobile phones with car speaker systems, for example. This business is expected to grow at 15.9% annually over the next five years.
Cypress provides our embedded systems customers with system solutions: combinations of our flexible and secure low-power microcontroller products, world-class wireless connectivity, automotive memories and power-management products—plus the software that enables everything to work together seamlessly. Our programmable products enable customers to react to change fluidly and instantaneously—most of the time, through a Flash-Over-The-Air, or FOTA, implementation. Increasingly, we are helping our customers to consolidate their supply chains and accelerate their time to market.
Companies that bring these capabilities to the table will succeed in today’s fast-paced, change-oriented environment. Companies that don’t will not. It’s that simple.
This is more than just Cypress’ vision. We’re in 24 of the top 25 global OEMs. We’re shipping revenue in 14 of the top 15 Tier 1 suppliers. Our technical and sales teams bring new success stories to us every quarter. Many of our customers are scrapping their mechanical interfaces for touchscreens and touchpads driven by Cypress microcontrollers. One of our customers—a major North American automotive supplier—recently designed our Traveo™ and PSoC microcontrollers, two of our HyperFlash™ memories and an analog Power Management IC (PMIC) into its high-end instrument clusters. At the recent Embedded World trade show, we announced that leading automotive supplier Continental selected our second-generation Traveo II MCU family for its next-generation body electronics platform.
We’re proud of our progress in the automotive business and of the innovation we’re delivering to our customers, along with the value we’re providing to our stockholders.
You can find more information and more examples of our automotive system-level solutions on our redesigned website—www.cypress.com—under the “Solutions” tab on the home page.
Until next time, thanks for reading.