Asia – New Hotbed for Consumer Automotive Electronics

The automotive electronics market in China and other Asian countries is booming, as consumers there demand everything from vehicle entertainment to on-board navigation systems.

In China alone, the domestic market for vehicle entertainment and navigation systems will be worth at least US$4 billion by 2013, according to a report by Strategy Analytics.

“For international automotive infotainment system suppliers, China offers opportunities to reduce component and system production costs, to increase access to international Chinese vehicle OEM (original equipment manufacturer) joint ventures, and to respond to the growing domestic Chinese OE (original equipment) market,” said Joanne Blight, an analyst with Strategy Analytics.

Blight’s research shows that the market opportunity will be dominated for some time by vehicle OEM business. What’s more, there are significant cost containment opportunities for any international electronics system vendor willing to invest locally. Interestingly, Japanese vendors are leading this field, at least for now.

Demand on the Rise

A significant increase in demand for in-car infotainment products is expected in 2007. The report also said that international automotive infotainment system suppliers should examine the approach of a number of Japanese automotive infotainment system companies operating in the Chinese market, including Clarion, Pioneer, Kenwood and Panasonic. They have set the benchmarks for manufacturing of the parts in China, and distribution to the domestic market.

Next-generation power-train systems and safety control sophistication have increased demand for higher performance processor and memory capabilities. Other safety demands, such as lane departure warning systems, are driving up the sensor business, including camera integrated circuits (IC). Also adding to that sector is the growing number of actuators in comfort and convenience systems, including climate control and seating, and new developments like active steering and adaptive headlamp control systems.

Demand for automotive semiconductor products is also flourishing in the U.S., according to Strategy Analytics. Researchers indicate that the market for automotive grade semiconductors in 2006 will reach $18 billion, a year-to-year growth of 10 percent. Revenues in the U.S. will be $29 billion by 2013.

“The vehicle OEMs will need to continually innovate in order to meet tightening emissions and safety legislation, and to respond to competitive pressure and changing consumer expectations,” said Chris Webber, an analyst at Strategy Analytics. “This is driving up demand in all semiconductor component areas.”

Going Global

The trend has global implications too. Japan, Taiwan and South Korea are also showing growth in the automotive navigation, but are demonstrating different development patterns, according to another new study from ABI Research.

By 2012, the Japanese in-vehicle navigation market will grow by 8 percent per year, ABI Research analyst Andy Bae noted. “The OEM market will gradually dominate in Japan, with a higher growth rate than aftermarket products,” said Bae.

Meantime, in South Korea, with its nationwide cellular network and highly penetrated mobile devices, aftermarket suppliers are growing quite quickly. “Greater participation by major CE vendors such as Samsung, and small and medium-sized vendors for MP3, will boost sales and competition,” explained Bae. “The growth rate in South Korea will be approximately 30 percent by 2012. GPS-enabled handheld devices will outpace traditional in-dash navigation products with a 34 percent annual growth rate.”

Although OEM navigation systems dominate in terms of shipments in 2005, handset-based navigation systems will take the lead in 2006 as result of navigation services launched by China Unicom, predicted ABI analyst Junmei He.

She expects the mainland Chinese market to “experience strong growth” from 2006 to 2011. The Olympic Games, decreasing prices, improving digital map quality and the deployment of the 3G network will combine to fuel growth in the market. “From 2005 to 2011, handset based navigation devices will achieve a [Compound Annual Growth Rate] of 139 percent, while that of PNAV devices is expected to reach 102 percent and that of OEM navigation systems 48 percent,” said He.

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