Chip shortages to drive top automotive OEMs to design their own by 2025: Gartner

Chip shortages and trends such as electrification and autonomy will drive 50 per cent of the top 10 automotive original equipment manufacturers (OEMs) to design their own chips, according to Gartner, Inc.

This will, in turn, provide OEMs with more control over their product roadmap and supply chains.

“Automotive semiconductor supply chains are complex,” said Gaurav Gupta, research vice president at Gartner.

“In most cases, chipmakers are traditionally Tier 3 or Tier 4 suppliers to automakers, which means it usually takes a while until they adapt to the changes affecting automotive market demand. This lack of visibility in the supply chain has increased automotive OEMs desire to have greater control over their semiconductor supply,” added Gupta.

Additionally, the current chip shortage is primarily with mature semiconductor technology node devices fabricated on smaller 8-inch wafers, where capacity expansion is difficult.

“The fact that the automotive industry has been conservative in qualifying older devices on larger wafer sizes has also hurt them and will likely motivate them to take chip design in-house,” said Gupta.

This model of moving chip design in-house, or popularly known as ‘OEM-Foundry-Direct’, isn’t unique to the automotive industry. It will further intensify among tech companies as some changes happen in the semiconductor market.

“Semiconductor chip foundries, such as TSMC and Samsung, have provided access to cutting-edge manufacturing processes, and other semiconductor vendors have given access to advanced intellectual property that makes custom chip design relatively easy,” as per the report.

“We also anticipate that the lessons learned from the microchip shortage will further drive automakers to become tech companies,” said Gupta.

By 2025, the average sale price of new vehicles will exceed $50,000 in the U.S. and Germany, Gartner further predicted. This will lead to greater repair and upfit of older vehicles.

“This price acceleration will likely shrink the overall number of sales of vehicles and increase the market for parts and upgrades as people seek to keep existing vehicles on the road longer,” said Mike Ramsey, research vice president at Gartner.

Gartner analysts expect the market for new vehicles to remain flat or even decline in the face of rising prices. Meanwhile, automakers will push new services and upgrades of equipment and computers to extend the lives of existing vehicles.

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