More automakers are offering high-end information systems in their cars, spiking demand for infotainment modules in the electronics supply chain.
High-end applications, such as running smartphone applications on a dashboard console or dictating emails with voice commands, were previously limited to BMW, Mercedes, and other luxury brand cars. Now more advanced offerings have begun to trickle down into the mainstream car segment. Demand is ramping up from the likes of General Motors, Ford, Toyota, and Chrysler in the United States and PSA Peugeot-Citroen, Renault, and Volkswagen in Europe.
On average, when offering components to big-volume producers, electronic suppliers are also able to maintain margins similar to what they commanded for high-end cars, according to the European Association of Automotive Suppliers.
The margins are largely maintained by achieving supply chain operational efficiencies, often on a worldwide scale. System integrators must also often adapt their production capabilities, for example, so that they can produce and supply many components for information-related applications locally on a just-in-time basis whether in the United States, Europe, or elsewhere, the European Association of Automotive Suppliers says.
The focal point of in-car infotainment in the United States remains the smartphone and the in-car console on which smartphone apps run in the United States. US carmakers increasingly seek consoles that can run and display smartphone apps, often with voice-activated commands.
Electronic systems integrators such as Bosch, Continental, and Delphi supply the consoles with the components that they procure from component makers, in much the same way that PC makers do.
According to a Frost & Sullivan report (registration required), 25 percent of the cars sold in North America in 2011 ran smartphone apps on a car console. That percentage should more than double within five years.
Ford was the first mainstream automaker to roll out high-end systems that run smartphone apps in cars with its Sync system. Two years ago, it began to offer consoles that ran smartphone apps with voice-activated commands, such as email dictation, after luxury carmakers such as BMW and Mercedes began offering similar applications.
Following Ford's lead in the United States, other mainstream US carmakers have developed or are developing car systems that run smartphone navigation, communications, and a range of other apps. These systems include GM's MyLink, Chrysler's UConnect, and Toyota's Entune.
Europe's mainstream carmakers are taking a less smartphone-centric approach. For example, Renault is rolling out its R-Link system in its high-volume selling Clio, Captur, and other models. Car owners download apps directly to a tablet-style computer screen embedded in the console. In addition to the standard navigation and music apps, R-Link allows drivers and passengers to send and receive emails and tweets.
PSA/Peugeot-Citroen offers its Connect Apps in its Peugeot 208, 2008, and other models. The user plugs a connection key into a USB port to access content such as weather reports, traffic conditions, prices at nearby filling stations, parking lot locations, restaurant and hotel information, and even a Michelin guide.
Volkswagen, Europe's largest carmaker, offers a touchscreen system that features a WiFi hotspot that permits in-car Internet access for smartphones, tablets, and laptops.
For the European market, Bosch, Continental, Delphi, and Omega are the leading electronics system integrators.
The fact that drivers in the United States will increasingly be able to access and interact with information and applications raises obvious safety concerns. However, distracted driving is a subject of another discussion. Those involved in the automotive supply chain can expect significant demand for components that go into car entertainment systems in the near and middle term.