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Global Automotive Chip Market May Nearly Double in Size by 2030

June 12, 2023
New industry forecast says the global automotive semiconductor industry is on track to grow by 8.6% annually over the next seven years.

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The increasing complexity of modern vehicle systems, the growing popularity of electric vehicles (EVs) and the fact that consumers want their vehicles loaded with safety features are just some of the key trends driving up demand for automotive semiconductors (aka, chips) right now. The most recent global chip shortage, which had a major impact on the automotive industry, and the rising cost of chips aren’t making things any easier for the industry right now.

Even with these roadblocks standing in their way, automotive chip makers are expected to produce a record number of semiconductors over the next seven years. According to a new report from Market Research Future (MRFR), the market is projected to reach $85.7 billion by 2030—up from $43.7 billion last year.

Key Market Drivers

If the upward trajectory continues, the automotive chip market will post a compound annual growth rate (CAGR) of 8.6% over the seven-year-period and wind up at nearly twice its current size. MRFR identifies some of the key drivers:

  • Demand for electric and hybrid vehicles is rising exponentially alongside that of vehicles with conventional internal combustion engines.
  • The global sales of battery electric car batteries (processors) increased by 121% in 2021 compared to the year before, with China dominating the market with about three billion processors, up 172% from 2020.
  • Businesses are actively engaged in the mass production of EVs. For instance, Ford, General Motors and other automakers declared that by 2040, sales of entirely zero-emission vehicles will increase significantly. EVs require numerous controls and sensors to ensure effective engine performance; the demand for automotive semiconductors is surging in response. 
  • The auto industry has been advancing steadily towards the innovative integration of electronics into vehicles to improve safety (radar and collision avoidance, automatic braking); infotainment (satellite radio and Bluetooth); navigation (GPS mapping); system monitoring; onboard computers; and many other areas, including the development of self-driving vehicles.
  • Concurrently, the growing popularity of hybrid and battery electric vehicles, particularly in terms of powertrain electrification, necessitates the use of microcontrollers, ICs and other semiconductor modules.

“When compared to conventional internal combustion engine vehicles, the manufacturing of hybrid and electric vehicles calls for a higher percentage of semiconductors,” MRFR adds.

Bullish on the Future

There are some positive signs emerging in the global automotive market as manufacturers shake off the impacts of the global pandemic and get back to business. Both Nissan and Honda recently reported double-digit profit gains, for example, with at least some of the credit being given to the waning chip shortage. 

“Nissan Motor and Honda Motor expect double-digit growth in net profit for the year ending March 2024 as the chip shortage wanes, though the Japanese automakers face challenges from tough competition in China and surging U.S. interest rates,” Nikkei Asia reports. “We expect global sales to increase 18% to 4.35 million vehicles" for the year ending March 2024, a Honda spokesperson said, hinting at a recovery in semiconductor supply toward the second half of the year.

And in their most recent Global Semiconductor Industry Outlook, KPMG and the Global Semiconductor Alliance (GSA) found that 81% of semiconductor executives expect their company’s revenues to grow in 2023 while about 64% say the industry as a whole will experience growth in 2023.

For the first time ever, the KPMG/GSA survey respondents rated the automotive sector as “most important” for driving semiconductor company revenue over the next year. In correlating research, the companies say global automotive semiconductor revenue will reach $200 billion annually by the mid-2030s and surpass $250 billion by 2040.

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.