Jensen Huang is not wanting for self-confidence. “If a problem is easy to solve, it doesn’t interest me,” the president, CEO and co-founder of California chip manufacturer Nvidia said in Munich on Tuesday. Seven years ago, the engineer set his sights on the seemingly impossible task of building the brain of a self-driving car.
Now the billionaire believes he’s on the verge of reaching his goal. “We still need to invest heavily for two or three more years, but then we will have achieved something really groundbreaking,” Mr. Huang said. With chips from Nvidia, he expects that by 2021, many cars will be able to pilot themselves while their drivers can lean back and take a nap.
Nvidia and the entire microchip industry are about to enjoy a gigantic upswing, thanks to the development of more and more electric and autonomous cars, analysts say. These cars of the future will need microchips to connect them to mobile wireless networks, process and store vast amounts of data, detect obstacles and regulate electricity consumption.
Electronics industry association ZVEI predicts that sales of microchips used in cars will increase worldwide, from just under $40 billion in 2016 to more than $51 billion in 2021. But this will only be the beginning of the boom. That’s when Mr. Huang expects electric and self-driving vehicles to achieve mainstream adoption. Today, the average new car contains just over $450 worth of semiconductors, three times as much as at the beginning of the century. According to the ZVEI, it will increase to just under $500 in five years’ time. “There is no end in sight to the trend,” the association said.
This is currently benefiting mainly established semiconductor manufacturers such as Infineon, listed on Germany’s blue-chip DAX index. The company promises its investors an 8 percent average annual increase in sales, the majority of which it expects to earn from its automotive business. With a worldwide market share of just over 10 percent, the Munich company is the No. 2 player in the auto chip industry, behind Netherlands-based NXP.
The sunny outlook is attracting powerful competitors. Qualcomm is currently trying to acquire NXP for more than €30 billion ($35.6 billion), but the European Union has not yet approved the deal. US-based Qualcomm, the world’s largest provider of mobile phone chips, sees the acquisition as a good opportunity to link its core business to a huge growing industry.
Intel is also pushing into the auto chip business. The world’s largest semiconductor manufacturer traditionally earns its money from processors, the control center of every computer. Already accustomed to processing enormous amounts of data, Intel sees autonomous driving as a prime opportunity to do business with car manufacturers.
“Autonomous cars need a powerful and reliable electronic brain to ensure the safe flow of traffic,” said Dieter Hoffend, in charge of the BMW business at Intel. Intel has been cooperating with the Bavarian brand for some time now, and the company has also acquired development partners including Fiat-Chrysler, Continental and Delphi. Auto parts maker Magna joined the consortium at the beginning of the week.
“Autonomous cars need a powerful and reliable electronic brain to ensure the safe flow of traffic.”
In the spring, Intel acquired camera specialist Mobileye for €15 billion. The technology made in Israel is now used in many vehicles to assist with driving. Mobileye’s cameras keep watchful eyes on road traffic, measuring the distance between the vehicle and any obstacles to ensure autonomous vehicles drive safely.
But cameras are just the first step. One of the most promising developments in the microchip industry is LIDAR, a laser technology that measures distance. Car manufacturers have been loathe to use this technology so far: Mechanically adjusted mirrors are used to align the lasers, which makes LIDAR too bulky. But this is expected to change with new chip-based technology.
“Infineon wants to make LIDAR a cost-effective option for every new car worldwide,” said Ralf Bornefeld, head of Infineon’s Automotive Sense & Control division. The new Audi A8 contains an advanced LIDAR system, the first time it’s been used in a vehicle on the market. Market research firm IHS expects LIDAR sales of semiconductor manufacturers worldwide to skyrocket to $1.8 billion in 10 years from $100 million dollars last year.
This week Nvidia CEO Huang was in Munich to introduce a new microchip unit for autonomous vehicles that serves companies including Deutsche Post. The Bonn-based delivery company wants to test self-driving models of its StreetScooter electric van.
The announcement was met with enthusiasm among investors on Monday, and Nvidia’s share price gained almost 2 percent on Wall Street in an otherwise stagnant market. To date, Nvidia has made the most of its money with processors for high-performance computers used primarily by gamers. The automotive industry accounts for only 7 percent of its revenues.
Investors assume this will change in the coming years. Nvidia’s share price has tripled within a year, and the company has a market capitalization of €96 billion. By comparison, BMW is only worth about €53 billion, although the car manufacturer made more in profit last year than Nvidia made in sales.
Other chip producers are also in demand. Infineon’s share price has climbed by about 30 percent since the beginning of the year, making it one of the top performers on the DAX. Its shares are trading at about €21, the highest level in 15 years.
This story was adapted for Handelsblatt Global by Christopher Sultan and Grace Dobush. Joachim Hofer covers the high-tech and IT sectors as well as the outdoor and recreational industries for Handelsblatt from München. To contact the author: firstname.lastname@example.org