Gas to Chips: How Semiconductors are Reshaping the Automotive Industry (2024)

 The automotive semiconductor market is experiencing a red-hot growth spurt. Industry analysts report a surge in demand for these specialized chips, driven by the increasing popularity of tech-laden vehicles.

Automotive Semiconductor Market for passenger cars is to grow at the highest CAGR during the forecast period

The market for passenger cars growth can be attributed to the huge demand for passenger cars across the globe, especially in APAC. The rising middle-class population and improved disposable income have accelerated the demand for passenger cars in countries such as China, India, Thailand, Indonesia, and Malaysia among others. Semiconductor electronics not only help improve the performance of the car but also enhance safety and reduce carbon emissions to a greater extent. Rapid improvements in road infrastructure, easy availability of cheap labor, increased purchasing power of consumers, and high demand for safer vehicles have propelled the growth of the market for automobiles in emerging economies. The increasing purchasing power also creates a high demand for automobiles with more safety and advanced features. The adoption of ADAS technology and autonomous cars helps the automotive semiconductors market to grow in developed nations such as the US, Germany, and the UK.

The market for EVs and HEVs to register the highest CAGR for the automotive semiconductor market

The automotive semiconductor for electric/hybrid-powered vehicles is estimated to grow at the highest CAGR during the forecast period. Consumer’s growing adoption of greener and cleaner technology, as well as government goals and mandates, are expected to lead to a significant rise in the demand for more electric/hybrid fuel-based vehicles which, in turn, helps the semiconductor market for this segment to grow exponentially during the forecast period. Since EVs and HEVs demand more semiconductor content in the powertrain application due to electrification of the system, the average semiconductor content consumed by an EV/HEV is almost double than of an internal combustion engine (ICE) vehicle which include both gasoline- and diesel-powered vehicles.

Market in APAC is estimated to grow at the highest CAGR during the forecast period

Asia Pacific held the largest share of the overall automotive sensors market, followed by Europe, and North America, respectively. The automotive sensors market in Asia Pacific is projected to grow at the highest CAGR from 2021 to 2026. Countries such as China, Japan, and India are considered major automotive manufacturing hubs in Asia Pacific, thereby propelling the growth of the automotive sensors market in the region. 

The growth of the automotive sensors market in Asia Pacific is attributed to factors such as the increasing use of electric vehicles and the growing adoption of advanced driver-assistance systems (ADAS) and autonomous cars owing to the stringent vehicle emission standards. Moreover, major OEMs have invested in the Chinese market, which is inclined toward small and affordable passenger vehicles. This, in turn, is expected to drive the growth of the automotive sensors market in the region.

Demand for Advanced Features: Modern cars are brimming with features like ADAS, EVs, and in-car entertainment systems, all heavily reliant on unique automotive semiconductors. These chips are the brains behind collision avoidance, battery management in EVs, and keeping passengers entertained on the go.

Electrification Drives the Market: The booming electric vehicle segment is a major contributor to market growth. Electric vehicles require a different set of semiconductors compared to traditional gasoline-powered cars, creating a whole new market for chipmakers.

Safety First: Increased focus on automotive safety is another key factor. Semiconductor-based technologies like airbags, ABS, and ESC are becoming even more sophisticated, demanding more powerful chips.

Challenges on the Road: Despite the positive outlook, the market faces some bumps. The global chip shortage continues to impact the automotive industry, with manufacturers struggling to secure enough chips for production. Additionally, geopolitical tensions and reliance on specific regions for chip production can create vulnerabilities and price fluctuations.

The Future of Mobility: The automotive semiconductor market is poised to play a critical role in shaping the future of transportation. Collaboration between automakers, chipmakers, and governments will be crucial to address supply chain disruptions, foster innovation, and ensure a smooth ride ahead.

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