Smart car era: Consumer electronics companies are involved in the wave of vehicle price cuts

More and more consumer electronics companies are also entering the automotive industry.

Among China's advantageous industries, industrial chains involving consumer electronics, motors, power supplies and other fields have accumulated considerable momentum. In fact, 2023 is ushering in a wave of price cuts, and at this moment, we will see many auto parts companies in trouble. In fact, companies engaged in consumer electronics and power supply have already made great achievements in mobile phones and other fields. In this period of fierce cost competition, we have also seen some cases of cross-border integration of mobile phones and cars.

As the development trend of intelligence continues to deepen in 2023, many companies committed to the manufacturing or supply of consumer electronics such as smartphones , tablets, and laptops have relied on technology and resource advantages (including price and speed, etc.) and expand its business into the field of smart cars. At present, this involves providing auto parts, displays, power chips , communication chips, connectors, structural parts, etc., while also cooperating with auto manufacturers to promote the development and production of complete vehicles or OEM business. This new trend is constantly changing the landscape of the automotive industry.

Part 1. Why is there a transition from consumer electronics to automotive electronics?

Since 2022, global consumer electronics demand has been weak due to multiple factors such as industry cycles, international environment, and industrial and supply chains. Canalys data shows that in the second quarter of 2023, the global smartphone market shipped 258 million units, a year-on-year decrease of 10%, and shipments declined for the fifth consecutive quarter.

In the second quarter of 2023, global tablet shipments fell 11% year-on-year to 31 million units, becoming the lowest shipment volume since the first quarter of 2020.

In the second quarter of 2023, global tablet shipments totaled 28.3 million units, a year-on-year decrease of 29.9%.

Consumer electronics companies are also seeking breakthroughs. In fact, we have seen that some companies have already taken action in 2023. For example , OFILM, which makes cameras , has revenue of 616 million yuan from smart car products in the first half of 2023, a year-on-year increase of 3.42%. BOE Precision Electronics has begun to assist car screens. In the first half of 2023, BOE Precision Electronics achieved a cumulative revenue of RMB 4.838 billion, a year-on-year increase of 8%, setting a record high. The automotive display business achieved RMB 4.316 billion, accounting for 89%.

There are multiple reasons behind this transition from consumer electronics to smart car racing:

◎ The development of the consumer electronics industry has slowed down and the replacement cycle has been extended, resulting in a reduction in the overall profit margin of the industry and the need to find new growth points and breakthroughs.

◎ Smart cars are the trend and direction of future development, with huge market potential and space. They have certain technical and product similarities with the consumer electronics industry. Enterprises can use existing advantages and experience to transform and upgrade.

◎ The field of smart cars is still in the early stages of innovation and competition. It has not formed a complete monopoly pattern, which provides opportunities and challenges for companies in the consumer electronics industry chain. They can achieve success in the global automotive field through overtaking in corners or through win-win cooperation. rise.

Part 2. The upgrading of automotive electronics brings huge opportunities

We can see that automotive electronics is evolving rapidly, and Tesla has played a pioneering role in this field. As Tesla drives the rapid development of automotive electronics, we can observe the following trends:

● Introduction of centralized architecture: from a software model centered around Autosar ECU to a centralized one, with software developed around vehicle companies

● More and more screens, lampposts, speakers, microphones and sensors

● The application of cameras, millimeter wave radar and lidar in perception systems is increasing.

● The demand for in-car chips is increasing, and the shortage of chips also brings opportunities for chip companies to quickly get on board.

The rapid establishment of demand also makes vehicle companies welcome consumer electronics to participate in this fierce competition. The huge pressure to reduce costs has led auto companies to be more willing to accept low gross profits and adopt a long-term approach (tolerating a field that does not make money for a period of time). Therefore, companies in the consumer electronics industry chain have also received a once-in-a-lifetime systemic opportunity.

The main ways to enter the field of smart cars are as follows:

◎ Due to the commonality of technologies, establish an automotive business department to “shift” or upgrade the existing product system to the field of smart cars

◎ Enter through acquisitions and integration of related companies with a certain foundation in the field of smart cars

◎ Through in-depth cooperation with car companies and strategic equity investments, the smart car business of enterprises has quickly entered the consumer electronics industry chain and has achieved certain results and influence. Some companies have realized the realization of new business and become an important growth pole of corporate performance. .

In fact, due to differences in concepts, for consumer electronics companies, developing according to a one-year cycle is not called "volume" at all. Rapid iteration and rapid changes according to terminal needs are the core magic weapon for Chinese consumer electronics companies to gain global status.

Part 3. The difference between consumer electronics and automotive electronics

In the long run, for the chip industry, automobiles and consumer/industrial industries are slowly beginning to be connected.

But objectively speaking, there are significant differences between automotive electronics and consumer electronics in terms of usage environment, design requirements, and design life. Automotive-grade chips refer to chips that meet the specifications and standards of automotive electronic components. They have higher requirements in terms of temperature, lifespan, impact resistance, reliability, etc. to adapt to the complex and harsh working environment of automobiles. They cover many fields such as power safety systems, body control systems, driving control systems, communication systems , and entertainment systems.

For China, although entering the field of smart cars is a huge opportunity, developing car-grade chips is not easy. It faces the following major difficulties:

● Difficulty in certification testing: Automotive-grade chips must pass strict testing standards such as AEC-Q100, including 41 test items in 7 categories. These tests require a lot of time and cost, and require zero failure.

● Difficulty in chip optimization: The chip must be optimized and balanced in terms of performance, power consumption, volume, etc., and the integration and compatibility of software and hardware must also be considered.

● Slow implementation and difficult mass production: It takes more than 3 years for automotive chips to go from design to mass production. It also requires cooperation and verification with vehicle manufacturers, which also requires a certain cycle and communication costs.

● It is difficult to reduce costs: The cost of automotive chips is relatively high due to high technical threshold, small market competition, long life cycle, etc., and consumers are highly sensitive to car prices, so how to reduce costs and increase profit margins is A challenge.

But overall, in this new situation, the industry's tolerance for iteration speed, failure rate and long-term life has increased. In 2023, under the huge pressure of price reduction, many changes are indeed taking place.

summary

To sum up, we have clearly observed that this year vehicle companies no longer regard profitability as their main goal, which has led to a trend and path of price reductions for various parts and components . At the same time, there is still the problem of overcapacity in the consumer electronics and power electronics fields. These two phenomena have caused the supply of electronic products to increase rapidly, which will reshape the market structure. As this round of changes gradually unfolds, we remain hopeful about the fundamental changes in the future landscape.