Taiwan auto parts suppliers are expecting more opportunities in the lucrative and booming auto-electronics arena.

ITIS project manager spells out four action plans

Changing lifestyles and popular culture have demanded the ubiquitous car to evolve into more than a personal transport, but an integrated platform offering security, safety, information, telecommunication, and entertainment functions, many of which owe their incredible convenience and high-technology to automotive electronics, according to Y.M. Tai, project manager of the Industry & Technology Intelligence Services (ITIS) project run by the Industrial Economics & Knowledge Center (IEK), a government-sponsored program to help collect and analyze industrial information.

Statistics do not lie as Tai points to the obvious importance of the auto-electronics industry. In recent year, the production value of the global automotive-electronic sector reached about US$37.9 billion and such figure is expected to jump to US$53.8 billion by 2010, when auto-electronic devices will likely account for about 40% of a new car`s total value, due mainly to increasing demands for safety, comfort and convenience features.

Studies by Strategic Analysis reveal that the majority of automotive innovations today and tomorrow will be related to automotive electronics and auto-sensing technologies, which shows that auto-electronics is a hotbed of business opportunities for the various global automakers and parts suppliers as they try to stay afloat in the fiercely competitive car industry, one that has recently seen a reshuffling of leading positions between GM and Toyota.

Despite having certain historical disadvantages in its way such as a non-existent homegrown car brand and the relatively small domestic market of about 400,000 new cars annually, the auto-electronics segment in Taiwan has a couple of positives: strong support from the mature infrastructure in the information and communication technology (ICT) and electronics industries, so Tai says that the country stands a good chance of striking gold in the lucrative, booming sector.

Global Market

According to the research manager, the annual global sales of new cars are steady at over-60 million units with an average growth of less than 5%; but such figures may ring hollow as the business potential to be realized by auto-electronics may be beyond estimation due to new cars being developed with increasingly more e-functions to serve demands for recreation, entertainment, travel, business, etc.

Statistics compiled by Strategic Analysis show that the global production value of automotive electronics was US$35.8 billion in 2004 (up 8.3% from previous year), US$37.9 billion in 2005, US$40.8 billion in 2006, US$44.2 billion in 2007 and is expecting to continue to rise in the next few years, including an estimated US$47.4 billion in 2008

By 2013, the leading international business research firm forecasts that the global value would hit US$60.8 billion with a compound annual growth rate (CAGR) of 7.3% from 2004 to 2013, relatively rosier compared with the 3.8% growth in global new-car sales.

For major automotive-electronic sectors, Strategic Analysis data shows that the drive-train (28%), body (20%), and drive information (20%) systems currently account for the highest ratios, with the other systems sharing between 5% and 15%; while safety, body, chassis, and drive information systems account for the highest CAGR of 12.1%, 7.8%, 7.4%, and 7.1%, respectively.

Products With Potential

Taiwan companies, according to Tai, will have relatively limited opportunities in auto-electronics related to chassis, drive-train, and body due to the island`s lack of indigenous car industry. However, she stresses, auto-electronics related to safety systems are becoming key features, especially considering that auto safety is a priority in the litigation-happy U.S. and the world`s largest car market. On the other hand, Taiwan suppliers can play a part in developing newer and better auto-electronics for driver information and other systems, which effectively become auto products and accessories with added value.

A. Intelligent Airbag
The first product category that may have room for Taiwan players, according to the ITIS project manager, is the intelligent airbag.

Official regulations, especially in the U.S., are creating both urgent and potential demands. For example, the National Highway Traffic Safety Administration (NHTSA) required all automakers to adopt airbags as necessary equipment in 1993; asked that both the driver and front passenger seats of all new passenger cars and light trucks be equipped with airbags in 1997; required in 1999 the installation of intelligent airbags on new cars (the regulation became effective in September 2003 in two stages-including a 20% adoption rate from September 2003 and 100% by September 2005); and announced in 2004 that it would sanction side-collision safety laws and codes, with a 100% adoption rate to be in force by September 2011.

The global demand for airbags also seems to be promising, Tai says, with the worldwide demand reaching 196.2 million units in 2004 and expected to grow to 268.8 million by 2013, with a CAGR of 8.1%.

In addition, airbags for front and rear compartments have become standard equipment on many new cars, with rapid growth in the demand for side-impact and intelligent airbags, which offer the best protection for drivers and passengers of different weight, height, sitting position and posture.

B. Vehicle Warning System
The global vehicle-warning system demand was 6.45 million sets in 2004, most of which were parking-assist systems, but is expected to soar to 12.78 million in 2007, 20.46 million in 2009, 30.82 million in 2011, and 42.01 million in 2013 at a CAGR of 25.9%, much higher than other major automotive-electronic product categories.

Due to extended development, the parking-assist system has become a mature product with wide-ranging technologies and applications, Tai says. The U.S. market should be observed as sales of such systems have developed later than those in other major markets, hence major changes may still take place.

Other vehicle warning systems with business potential, according to Tai, are the lane departure warning system (LDWS) and the adaptive cruise control (ACC) system, with the former to see CAGR of 114.1% between 2004 and 2013 and 49.5% for the latter. Such forecasts are plausible as many major brands, such as Nissan, Mitsubishi, Honda, Toyota and Citroen, are equipping their cars with such advanced warning systems. Most of the said systems in use adopt charge coupling device (CCD) cameras, with others using metal-oxide-semiconductor (CMOS) or infrared cameras, whereby these devices warn drivers with audio, visual and vibratory signals.

Tire Pressure Monitoring Systems (TPMS)
Another auto-electronic product with increasing business opportunity for Taiwan companies is the tire pressure monitoring systems (TPMS). In U.S., the American market has made TPMS standard on most new cars. The figures for 2007, 2008, 2010, and 2013 are expected to outstrip 20 million, 30 million, 40 million, and 50 million, respectively, with a CAGR of 39.4% between 2004 and 2013. The original equipment manufacture (OEM) equipped TPMS is expected to see the highest growth.

Taiwan Suppliers

Taiwan suppliers, with commendable track records in their existing fields, have the potential to overcome disadvantages and earnestly work on their strengths as they try to explore the auto-electronics sector. And any successful example set would pave the road for others to follow-opening more windows of opportunity in the lucrative and booming auto-electronics arena.

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