90nm accounts for 60% of the automotive chip industry’s demand, but industry investment is far from enough

If the supply shortage of semiconductor components continues, the number of cars rolling off the assembly line globally will decrease by as much as 20% by 2026. The German Automobile Industry Association (VDA) therefore calls on the EU to provide special support for automotive-related chips.

Back in 2021, semiconductor supply shortages caused the global automotive industry to reduce vehicle production by 9% from the previous year. Meanwhile, the semiconductor crunch has eased in some areas but not across the board. The VDA now predicts how production will develop if chip supply does not continue to improve.

Result: The automotive industry's demand for semiconductor components will triple by 2030. This means that the industry's demand will grow significantly faster than overall demand, which is only growing 1.8 times globally. At the same time, the importance of the automotive industry as a customer of semiconductors is growing: while currently only 8% of global chip production is used to make cars, this number will grow to 14% by 2030.

Cars need non-mainstream chips

However, the automotive industry does not require the same chips as the general market. Although the consumer and IT markets have long since opted for smaller form factors, chips with a form factor of 90 nanometers are still particularly important for automobiles. According to VDA research, by 2030, the scale of this technology node will account for about 60% of the automotive industry's chip demand. However, currently, less than 20% of the capex announced by the global chip industry through 2025 will be for nodes 65 nm or larger. Currently, funding and investment are focused on 7-nanometer or smaller device technologies, such as microprocessors with higher computing power while improving energy efficiency.

Due to high demand for semiconductors, the automotive industry will become the third largest chip customer by 2030, after mobile communications and data storage. This is where the competitive landscape with China's emerging car manufacturers becomes clearer: According to the VDA's findings, China has recognized the special importance of semiconductor production to the automotive industry. Chinese semiconductor companies are particularly investing in node sizes of 90 nanometers or larger to promote the development of domestic automotive companies.

To counteract the threat of continued declines in European production and make supply chains more resilient, the VDA believes that there should be a push, in particular, for additional production capacity on a European automotive-related node scale. The industry association said the message is "expand, expand, expand" and follow an easy-to-understand concept using a pragmatic approval process. "The EU Chip Bill must now be acted upon immediately. Europe must now invest in chip production relevant to the automotive industry and increase the production of chips with suitable feature sizes," demands VDA President Hildegard Müller road. Müller said the European auto industry can only maintain its global leadership position by significantly reducing its dependence on Asia, especially China.