Automotive Semiconductors Set to Skid in 2009, but This is no Industry Heading for a Crash

March 11, 2009 - PRLog -- ELECTRONICS.CA PUBLICATIONS, the electronics industry market research and knowledge network, announces the availability of a new report entitled "Automotive Market for Semiconductors".

There can be few greater indicators of the troubles facing the automotive sector than the warning from Toyota Motor Corporation, the world's largest vehicle maker and one of its most profitable, that for its current financial year it will make an operating loss, its first in over seventy years. With production plants on extended shutdown and unsold vehicles waiting for buyers, there can be no doubt that 2009 will be one of the most challenging years ever for automotive semiconductors.

It is forecast that 2009 will see the largest fall in automotive semiconductor revenues ever recorded, according to the report. However history shows that automotive is one of the most consistent and stable markets for semiconductor suppliers and according to the report, with the passing of the current global financial troubles, automotive semiconductor revenues will return to, and exceed, levels seen in recent years.

The most recent analysis, which looks at the automotive semiconductor market's recent past and assesses the industry's fundamentals, concludes that suppliers should remain committed to the automotive sector and attention should remain firmly on the road ahead. Key issues related to the past, present and future are discussed below.

The Past:

The study presents historical data for the worldwide automotive semiconductor market, from 1998-2007, together with worldwide light vehicle production over the same period. One of the most telling facts is that automotive semiconductor sales decreased only once over that period, by around 2% in 2001, a year in which overall semiconductor sales declined by close to 35%. Crucially, 2001 was also the only year in which vehicle production fell, largely in response to uncertainty caused by the dot.com crash. Production then rose steadily again from 2002 to 2007 and with it the automotive semiconductor market. The link between growing semiconductor sales and rising light vehicle production is wholly unsurprising; more vehicles produced means more semiconductors used.

A second key point that should be noted from the past is that the automotive semiconductor market grew at a faster rate than light vehicle production; indeed, the growth rate for the automotive semiconductor market from 1998-2007 averaged 9.0%, compared with 3.7% for light vehicle production. This trend, which comes about as a result of the pervasion of semiconductors into almost all of the main systems in the vehicle, still has many years left to run and offers much of the certainty of a return to growth for automotive semiconductors in the near term.

The Crisis Years:

The beginning of the troubles in the world financial markets in mid-2007 set in motion a chain of events which brought us to where we are today. A loss of consumer confidence saw vehicle sales drop early in 2008, but it was almost certainly the collapse of Lehman Brothers in September 2008 and the corresponding freezing of the credit markets that caused the unprecedented trouble now being witnessed by the automotive sector. With little or no access to affordable credit and with unemployment rising rapidly, many consumers have chosen to defer big ticket purchases, especially cars. This has led to a sudden and dramatic fall in light vehicle sales and production, and a corresponding decline in the automotive semiconductor market. With the 2009 automotive semiconductor market forecast to will decline. The key question for suppliers therefore is "Will 2009 be the exception to the rule, or is this the beginning of a permanently reduced automotive semiconductor market?".

The Future:

The report does not foresee a return to the horse and wagon any time soon, so the eventual passing of the financial storm, stabilizing of the global economy and gradually decreasing levels of unemployment will almost certainly result in normal order being resumed in the automotive industry. The consensus of industry opinion suggests that global light vehicle production will decline to around 60 million in 2009 (roughly equivalent to 2004 levels) but then to rise steadily thereafter, with production growing most strongly in the BRIC countries and in China in particular. One key trend regards regional production; while North America, West Europe and Japan collectively accounted for two-thirds of global production in 2007, this is forecast to fall to one-half by 2015. Semiconductor suppliers looking to benefit from the upturn in the automotive market should pay particular attention to this trend, especially the implications of an over-reliance on developed regions, which could result in slow growth.

Looking ahead to the future of the automotive industry, automakers remain committed to the adoption of intelligent electronic systems which make their vehicles more environmentally friendly (through the use of advanced hybrid power trains to improve fuel economy and reduce tailpipe emissions), safer to drive (with advanced driver assistance systems such as lane departure warning, blind spot detection and intelligent cruise control) and more pleasurable to travel in (with advanced entertainment systems). The advanced capabilities of these systems are made possible not only by the use of ever more complex electronics, but by the adoption of ever faster, more powerful semiconductors. It is apparent therefore that the ability of automakers to comply with ever more stringent safety and environmental legislation and to satisfy the increasing expectations of the driver and passengers is wholly dependent on ever increasing use of semiconductors. As a result, as confidence grows and consumers return to buying new cars, so it is predicted the automotive semiconductor market will revert to growth.

Details of the new report, table of contents and ordering information can be found on Electronics.ca Publications' web site. View the report: http://www.electronics.ca/reports/automotive/semiconducto...

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