A recent study by Electronics.ca Publications (Quebec, Canada) found that the worldwide automotive electronics market hit $74 billion in 2006. Despite slowing auto sales, the company predicts that figure will grow to $110 billion by 2011. While those

statistics bode well for the automotive electronics industry, they don't reveal the challenges manufacturers and their suppliers face in this increasingly competitive market.

Consider that the automotive environment is especially harsh in terms of temperature, vibration, moisture and electromagnetic interference. Additionally, there are all the passengers and pedestrians whose lives depend on the many systems within a car. Manufacturers, therefore, must carefully balance the demand for more sophisticated, feature-loaded vehicles against their ability to appropriately address safety while handling the increasing system design complexity that inevitably arises.

Couple this with the array of new automotive standards and the continued consolidation and global competition that manufacturers face, and it's easy to understand why all the segments of the supply chain are under pressure to rapidly adapt. This holds especially true for semi-conductor companies.

The traditional OEM design practice of assembling electronic platforms on circuit boards built from off-the-shelf parts is fast becoming obsolete.

Instead, OEMs are pushing that assembly back to their semiconductor suppliers that integrate at the chip level using semiconductor intellectual property (e.g., complex functions such as networking, inter-chip interfaces, power management and on-chip debug in IP form). Using this IP, semiconductor companies can quickly and reliably form leading-edge parts for the lowest possible price and the highest possible reliability.

A new IP model
The idea of using small amounts of IP in the design process is not new. However, the concept of reusing what four years ago was a whole chip as an IP core in a system-on-chip (SoC) is emerging as a best practice.

For years, leading semiconductor companies in automotive electronics have been developing these cores for internal use. Now they are beginning to expose that technology to other corporations through licensing companies like IPextreme (Campbell, Calif.).

By making high-value IP widely available across the entire supply base, this model offers many benefits for the automotive community. Semiconductor companies, for example, benefit from accelerated adoption of new standards, which, in turn, decreases the time from initial research to production revenue.

In addition, they can use their IP to demonstrate their technology leadership to the OEM with first-to-market products. Licensees of the IP also benefit, enjoying lower risks thanks to the silicon-proven nature of the IP.

Looking ahead
One of the key trends driving the use of semiconductor IP in the automotive industry today is consolidation--both in the automotive industry itself as well as IP com- panies. To better understand this issue, consider what happened to Ford Motor Co.

In the 1930s, it was an incredibly vertically integrated company, owning both rubber plantations and steel production. Over time, specialization and economies of scale forced ever-increasing supplier fragmentation. By 1990, Ford had 1,250 suppliers, and, like its competitors, faced the problem of how to manage them all.

To deal with this challenge, Ford took action in two areas. First, the car company automated its systems with the help of CAD, electronic data interchange and more recently, product data management and product life cycle management solutions. Next, it consolidated its suppliers by focusing on tier-one subsystem suppliers. By 1996, Ford had cut its number of suppliers in half.

By partnering with its tier-one suppliers, instead of just buying gauges and knobs in bulk, Ford was able to receive just-in-time delivery of complete and jointly developed dashboard assemblies. Over the years, other car makers followed in Ford's footsteps and developed a well-tuned supply chain that today involves the outsourcing of automotive electronics from semiconductor companies.

In much the same way that the automotive manufacturers transformed themselves to overcome an industry challenge, semiconductor companies are now being forced down a similar path. The recent consolidation of IP suppliers reflects the automotive supplier consolidation.

Like the automotive concerns with their tier-one suppliers, semiconductor companies are now turning to IP consolidators that deliver larger subsystem IP to handle complexity. Rather than buying multiple chips from different companies and trying to integrate them into a solution, automotive manufacturers can now purchase semiconductor IP cores that provide virtually the same functionality.

A prime example of this model comes from Toyota. Rather than keep its hybrid technology in house as a key differentiator in the market, the company chose to license it to other car manufacturers. The benefits to Toyota were huge. Licensing allowed the company to build its hybrid brand, economies of scale and total world revenue. For a company like Ford, which would have been hard pressed to design this functionality from scratch in a reasonable time, the benefits are obvious: faster, more efficient time-to-market and substantially decreased risk.

A question of standards
Another compelling reason automotive manufacturers are turning to semiconductor IP providers is that they offer a cheaper, easier, faster and less risky approach to implementing complex new standards. Considering the large number of global, country-specific and industry standards that now characterize the automotive industry, those benefits can be significant.

Many of these standards are driven by consumer demand for better fuel economy, concerns over the environment and safety. Future car technologies, intelligence and high-performance requirements of next-generation automotive applications like anti-lock braking and vehicle stability systems will likely force the emergence of even more standards.

While some would argue that such standards are bad for the industry due to their notoriously slow acceptance and tendency to become obsolete before they have had a chance to take hold in the industry, others point to a laundry list of advantages. Automotive standards enable a vibrant industry ecosystem by ensuring interoperability across the supplier base, increasing the number of players by leveling the playing field and ensuring multiple "winners."

Standards also make the automotive industry more efficient by lowering costs across the board and encouraging continual improvement through competition. Furthermore, standards increase safety by establishing a baseline that can be independently verified. They enable a replacement-parts industry for products with very long life spans.

Today, many semiconductor companies feel strategic pressure to see their technology adopted as the industry standard. They may choose to work with a technology licensing partner to not only make their IP available throughout the supply chain, but also to help accelerate its market adoption. Doing so could reduce the risk that some other company or consortium of companies will come along with a competing technology and force it to change its direction.

This is the benefit that Freescale (Austin, Texas) realized with its FlexRay advanced automotive network technology. Though anyone is free to implement to the FlexRay spec, this process would take at least 30 good engineers a couple of years to complete. Freescale has several chips with FlexRay interfaces on the market, but the company knows that they will not sell in volume until there are other FlexRay devices, such as sensors and actuators, with which they can talk.

Instead of waiting two or three years for others to implement FlexRay, Freescale and NXP Semiconductors (Eindhoven, Netherlands) opted to make their technology available through IPextreme, thereby hastening the standard's adoption. FlexRay has quickly gained industry momentum and is expected to become the de facto standard for high-speed control applications within vehicles.

Germany's Infineon Technologies AG also followed this route, opting to push its multicore debug solution out across its entire supply chain so that more people can use it, rather than maintaining it as a proprietary solution. Tier-one suppliers like this approach because they can offer this technology to a range of companies.

The growing sophistication of automotive electronics, increasing integration complexity, new standards and industry consolidation continue to put pressure on automotive manufacturers and semiconductor companies alike.

To remain competitive in this dynamic environment, manufacturers must take advantage of the advanced automotive functionality now available as semiconductor IP from companies like Freescale, Infineon and NXP. Increasingly more often, that IP will come from collaborations between semiconductor companies and technology licensing companies such as IPextreme.

Warren Savage is president and CEO of IPextreme. He is a well-known and published authority in the field of semiconductor intellectual property. Savage can be reached at savage@ip-extreme.com.