Ey semiconductor-supplies-hitting-vehicle-sales
- 1. Semiconductor supplies hitting vehicle sales How Supply Chain challenges can be effectively managed through Digital Technology & Solutions for planning
- 2. Table of Contents What semiconductors mean for the industry 04 1 Semiconductor: key enabler for the modern-day automobile 06 2 What is the semiconductor surge story in 2020? 08 3 View of semiconductor global supply chain 10 4 How EY can Help 13 5
- 3. As the world continues to develop new marvels in automobile technology, consumers demand smart and intelligent vehicles. Vehicle manufacturers have been consistently working hard for the last 10 years to incorporate key features like comfort, convenience and functionality and take it to the next level. While consumers in the mass vehicle segment have begun to enjoy the much-evolved modern day automobile, COVID -19 hit the automotive industry hard and impacted the sector adversely. As the first visible effects of the pandemic were being noticed, automobile OEMs projected a decrease in production and sales, and they subsequently recalibrated their demand outlook. Vehicle manufacturers’ projections were initially correct-ꟷ the first three months saw nearly near zero off take in automobile sales. The pandemic was also seen as an opportunity by the manufacturers of high-end TV, mobile phone, entertainment system and laptops to serve “forced to stay at home consumers”. Sectors like IT, consumer and healthcare saw an increased consumer demand. This increase further translated into higher demand of semiconductors. For quite some time, semiconductor companies continued to fulfil the robust demand that arose with the changed world order owing the pandemic. As the world began to recuperate from the impact of COVID-19, auto OEMs started to witness steady increase. At present, the positive demand of automobiles has started to come back and we see that the semiconductor industry is finding it hard to cater to the increasing demand. Automotive players will have to wisely bring back the ball of the pendulum on their side to get hold of the required demand of semiconductors for their continued survival and growth. Foreword 3 Semiconductor supplies hitting vehicle sales?
- 4. What semiconductors mean for the industry 1 4 Semiconductor supplies hitting vehicle sales?
- 5. Today, scenario, semiconductors form the DNA of a wide variety of new age gadgets like smartphones, computers, industrial equipments and cars. They are also sought for emerging markets of AI, computing and advanced wireless networks. Source: Semiconductor Industry Association, 2020 End Use Category Demand Share by End use Total Value ($ Billion) Communication 33% 136.0 Computer 28.5% 117.3 Consumer 13.3% 54.7 Automotive 12.2% 50.2 Industrial 11.9% 48.9 Government 1.3% 5.2 Adjacent industries competing for the semiconductor 5 Semiconductor supplies hitting vehicle sales?
- 6. Semiconductor: key enabler for the modern-day automobile 2 6 Semiconductor supplies hitting vehicle sales?
- 7. New vehicles which auto manufacturers launch in the market increasingly use advanced technological gadgets, thereby increasing the demand for semiconductors. In addition to this, the release of hybrid and electric vehicles require a greater proportion of semiconductors for their manufacturing counterparts when compared to traditional internal combustion engine vehicles. Conventional vehicles contain an average of $330 value of semiconductor content while hybrid electric vehicles can contain up to 3,500 semiconductors worth $1,000.2 In the 1950s less than 1% of the total cost of manufacturing a car was comprised of electronics. Today that cost goes up to more than 35% of the total cost of a car, which in all certainty is expected to increase to 50% by the year 20301 . Of this, the bulk is comprised of semiconductors. 1 https://www.statista.com/statistics/277931/automotive-electronics-cost-as-a-share-of-total-car-cost-worldwide/ 2 https://www.usitc.gov/publications/332/executive_briefings/ebot_amanda_lawrence_john_verwey_the_automotive_semiconductor_market_ pdf.pdf Semiconductors facilitate decision making and intelligent functioning of modern vehicles. They are integral to the emerging areas of ADAS, infotainment, and ever-evolving emission systems. In fact, they form the backbone of upcoming disruptions in the field of electric vehicles. Som Kapoor Partner, Future of Mobility Auto Retail Leader, Automotive sector Autonomous driving sensors, MCUs and actuators embedded, GPUs, mixed signal Cybersecurity Radar, LiDAR, vision, infrared, ultrasonic, V2X, sensor fusion, processing capacity, car control Electric Vehicles power semis Battery units Infotainment Digital and analog tuners, mobile connectivity, GPS, touchscreen, graphics Car as a Platform Services based on car connectivity Car sharing and ride sharing services Car sharing 7 Semiconductor supplies hitting vehicle sales?
- 8. What is the semiconductor surge story in 2020? 3 8 Semiconductor supplies hitting vehicle sales?
- 9. The COVID -19 pandemic has changed the world order in many ways and has set new normals. The industry ways of the pre-COVID times have been put to test by the current times, and an overhauling has occured in many sectors. COVID-19 has significantly altered the fundamentals of the sector, including customer behavior, business revenues, and numerous aspects of corporate operations. There is an unprecedented demand for IT technologies such as - servers, connectivity, and cloud usage as online collaboration grows. COVID-19 has been surprisingly a good demand driver for three distinct industries – IT, mobile and consumer electronics and healthcare. The tables below illustrate this. 3 IDC, Nov 2020 4 https://www.hospimedica.com/business/articles/294785504/covid-19-acceleration-and-rising-severity-driving-global-ventilator-market.html * Big focus of Indian government is key contributor for exports Product 2020 growth over 2019 Notebook 26% Servers (Edge Computing) 20% Storage 33% IT Hardware (Laptop Server Storage - Driver’s are WFH Cloud adoption)3 Product 2020 growth over 2019 Gaming Console 30% TV 13%* (Q3 performance over previous year) Consumer Electronics Product 2020 growth over 2019 Ventilators 172% Healthcare4 Mobile phone (India*) Product Q32020 growth over Q3 2019 Mobile Phone 8% (50 million units/46.2 million units) 9 Semiconductor supplies hitting vehicle sales?
- 10. View of semiconductor global supply chain 4 10 Semiconductor supplies hitting vehicle sales?
- 11. Source: SIA, Beyond Borders, 20165 It is a complex supply chain Dependency on few global players Semiconductor supply chain 5 Beyond Borders, The Global Semiconductor Value Chain Design Shipment of electronic products IP development Front end manufacturing Silicon cut into wafers Inclusion into electronic products Back end assembly, test packaging Semiconductor design Intellectual Property Physical Goods Electr. Design Automation Raw Materials Equipment IP development Design Manufacturing Assembly, Testing Packaging Distribution Design and development of basic chip architecture ►Chip design to fit client needs using proprietary and licensed technologies Assembly of chips into appropriate package that provides contact leads Shipment to OEM for inclusion in end product Manufacturing of wafers and chips according to design specifications 11 Semiconductor supplies hitting vehicle sales?
- 12. The semiconductor manufacturing process requires very unique, and sometimes scarce raw materials and chemical substances. Due to their unique and specialized character, these tend not to be widely available and can sometimes only be mined in conflict areas. Any disturbance in the supply of these materials has immediate effects on production. Semiconductor manufacturing is a complex global intertwined ecosystem, which has led to a supply chain that is vulnerable to macroeconomics, geopolitics and natural disasters. Semiconductor companies operate in many different countries and jurisdictions, and each of them have country-specific as well as international laws relating to health and environment regulations. As the manufacturing process is complex and the ecosystem of players so diverse, there is a flurry of business models with companies targeting scale through market leadership or specialization. One example is the equipment for lithography, a vital step needed for front-end manufacturing. This is the area where one player commands more than 80% of of market share. Another example is memory chips, which requires steep investments, and which is dominated by a handful of players, who can afford the investments in manufacturing facilities. Historically, humankind has been tested by the forces of nature innumerable times in the past and COVID-19 is one such occurrence that has gripped mankind today. Having said that, mankind has always shown grit, patience and perseverance to surpass challenges and come out stronger. The current crisis has left some scars, but with renewed knowledge and foresight, things will once again attain equilibrium in this ever-dynamic world. The current semiconductor shortage will certainly revive to meet the increasing demands of the present day, provided it is well collaborated with the latest digital technologies such as analytics, machine learning, artificial intelligence, among others. This can tremendously help restore the intelligent and smart supply chain. And yet again, the automotive sector will breathe in greener pastures. Semiconductor capital equipment value chain Source: Source: Semi.org (as per July 2020), Secondary resources Semiconductor equipment value chain Wafer manufacturing (front-end) Assembly, test, pack (back-end) Thermal oxidation Patterning Silicon wafer manufacturing Doping / Diffusion Etching Deposition Wafer testing Passivation Die attach Wire bonding Wafer dicing Package molding Final test Inspection Design Wafer manufacturing Research Development Distribution (OEMs/ODMs) Assembly, Test and Pack 12 Semiconductor supplies hitting vehicle sales?
- 13. How EY can Help 5 13 Semiconductor supplies hitting vehicle sales?
- 14. Supply Chain Operation practice in EY India has a deep expertise and experience of more than a decade of running large 1 scale Supply Chain transformation projects Team Asterisk is a EY’s RD and delivery organization for supply chain transformation projects. 2 We offer a suite of solution that can help your business build better predictive capabilities, seamless market connect rapid response capability, thereby, create an aligned, tech-enabled 3 supply chain organization. Team Asterisk has a product lead organization structure with capabilities around the supply chain domain project delivery, Predictive and prescriptive analytics, Optimization modelling, AI machine learning, Software development, housed under the same umbrella. 4 With solutions development delivery under one roof. We can help you with: ► Delivery of project modules and analytics ► Development of turn-key technology enabled supply chain planning solutions ► Rapid-fire diagnostics and dashboards ► Running the planning cycles on managed services 5 Solutions consist of a suite of 14 Artificial Intelligence and machine learning enabled integrated planning solutions to build lean and responsive supply chain How can EY help? 2. “ASTERISK” Supply Chain Planning Solution ASTERISK ASTERISK 14 Semiconductor supplies hitting vehicle sales?
- 15. Vinay Raghunath Partner Leader, Automotive sector M: +91-9899003024 Email: [email protected] Ashish Nanda Business Consulting Leader Supply Chain Advisory Service M: +91 9987005803 Email: [email protected] Yugesh Aglawe Partner – Supply Chain, Business Consulting Team ASTERISK – RD Delivery Org for Supply Chain M: +91 9819603988 [email protected] Som Kapoor Partner, Future of Mobility Auto Retail Leader, Automotive sector M: +91-9820024855 Email: [email protected] Amit Punjani Associate Director Automotive sector M: +91-9810147879 Email: [email protected] Nitin Sethi Associate DIrector, Markets BD, Automotive sector M: +91-9811907461 Email: [email protected] Reach out to us 15 Semiconductor supplies hitting vehicle sales?
- 16. EY offices Ahmedabad 22nd Floor, B Wing, Privilon, Ambli BRT Road, Behind Iskcon Temple, Off SG Highway, Ahmedabad - 380 015 Tel: + 91 79 6608 3800 Bengaluru 6th, 12th 13th floor “UB City”, Canberra Block No.24 Vittal Mallya Road Bengaluru - 560 001 Tel: + 91 80 6727 5000 Ground Floor, ‘A’ wing Divyasree Chambers # 11, O’Shaughnessy Road Langford Gardens Bengaluru - 560 025 Tel: + 91 80 6727 5000 Chandigarh Elante offices, Unit No. B-613 614 6th Floor, Plot No- 178-178A, Industrial Business Park, Phase-I, Chandigarh - 160002 Tel +91 172 6717800 Chennai Tidel Park, 6th 7th Floor A Block, No.4, Rajiv Gandhi Salai Taramani, Chennai - 600 113 Tel: + 91 44 6654 8100 Delhi NCR Golf View Corporate Tower B Sector 42, Sector Road Gurgaon - 122 002 Tel: + 91 124 443 4000 3rd 6th Floor, Worldmark-1 IGI Airport Hospitality District Aerocity, New Delhi - 110 037 Tel: + 91 11 4731 8000 4th 5th Floor, Plot No 2B Tower 2, Sector 126 Noida - 201 304 Gautam Budh Nagar, U.P. Tel: + 91 120 671 7000 Hyderabad THE SKYVIEW 10 18th Floor, “Zone A” Survey No 83/1, Raidurgam Hyderabad - 500032 Tel: + 91 40 6736 2000 Jamshedpur 1st Floor, Shantiniketan Building Holding No. 1, SB Shop Area Bistupur, Jamshedpur – 831 001 Tel: + 91 657 663 1000 Kochi 9th Floor, ABAD Nucleus NH-49, Maradu PO Kochi - 682 304 Tel: + 91 484 433 4000 Kolkata 22 Camac Street 3rd Floor, Block ‘C’ Kolkata - 700 016 Tel: + 91 33 6615 3400 Mumbai 14th Floor, The Ruby 29 Senapati Bapat Marg Dadar (W), Mumbai - 400 028 Tel: + 91 22 6192 0000 5th Floor, Block B-2 Nirlon Knowledge Park Off. Western Express Highway Goregaon (E) Mumbai - 400 063 Tel: + 91 22 6192 0000 Pune C-401, 4th floor Panchshil Tech Park Yerwada (Near Don Bosco School) Pune - 411 006 Tel: + 91 20 4912 6000
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