Advanced driver-assistance systems: Opportunities and challenges ahead

Advanced driver-assistance systems: Opportunities and challenges ahead Demand for advanced driver-assistance systems (ADAS)—those that assist with monitoring, warning, braking, and steering—is expected to rise over the next decade, driven primarily by regulatory and consumer interest in safety applications that protect drivers and reduce accidents. Both the European Union and the United States, for example, have mandated that all vehicles be equipped with autonomous emergency braking systems and forward-collision warning systems by 2020. According to a recent McKinsey survey, car buyers are becoming increasingly interested in ADAS applications that promote comfort and economy, such as those that assist with parking or monitor blind spots. Although ADAS applications are still in their infancy, OEMs and their suppliers recognize that they have the potential to become the primary feature distinguishing automotive brands, as well as one of their most important revenue sources. The same technologies that enable today’s ADAS offerings could also be used to create fully autonomous vehicles, which are now a major focus of R&D at OEMs as well as high-tech players that have recently entered the automotive sector, such as Google. Any ADAS technology that receives early support may thus have an advantage when self-driving cars hit the market. Many semiconductor companies, including some that have never previously worked in the automotive industry, now offer or are developing ADAS products. However, much uncertainty remains about the market, including how consumers will respond to more advanced applications in which a computer controls or assists with steering and other critical driving functions, as with any new technology. The first section of this article addresses some of the most pressing ADAS questions, including future demand, technical challenges, and the evolving competitive landscape. The second section of the article examines ADAS from the standpoint of semiconductors, describing how companies can increase value by expanding their offerings beyond hardware, collaborating directly with OEMs, and differentiating their technologies based on safety and security features. The opportunities and challenges ahead Although ADAS technology has the potential to transform the automotive industry, its current annual revenues—roughly $5 billion to $8 billion, according to most sources—are modest when compared to those of other automotive systems. For example, revenues in audio and telemetric were around $30 billion in 2015, while revenues in climate control were around $60 billion. Part of the issue is that many of the most promising ADAS applications are still being refined or have not yet been released to the public Others are more expensive and only available in high-end vehicles. However, one of the most significant factors impeding demand may be a lack of consumer awareness. According to a recent McKinsey online survey of over 4,500 car buyers in five countries, many respondents were unfamiliar with ADAS applications, and few purchased vehicles equipped with this technology (Exhibit 1). However, the survey revealed that the repurchase rate for those who did purchase a vehicle with ADAS was quite high, ranging from 87 to 89 percent. This finding implies that once consumers become acquainted with ADAS, they will prefer vehicles equipped with these features.