Eyeing the massive potential in the automobile electronics industry, electronics firms and automobile makers have joined forces and industry watchers say the momentum will show no signs of easing this year.
"This will be a bustling year for the auto component industry, especially the auto electronics segment. We will see more electronics firms moving into the space to create new market opportunities," said Allen Cheng
His remark was supported by Boston-based consulting firm Strategy Analytics, which expects the global auto electronics market to grow to US$163.46 billion in 2008 from US$134.13 billion last year.
In addition, Scottsdale, Arizona-based IC Insights Inc also forecast that electronics components will account for 40 percent of the total cost of a car in 2010, up from the current 20 to 25 percent.
The huge market potential has therefore attracted the attention of local electronics companies.
"As they are faced with low-margin plights in the contract manufacturing business, they are now finding ways to diversify into new areas to boost revenues," Cheng added.
However, the road to the cash cow is not so easy to travel, especially when electronics and auto firms intend to work hand in hand.
"The industries have different natures. For electronics firms to fare well in the auto electronics market, they should gain a thorough understanding of the cycles of the car industry," said James Wang (
Wang said that electronics firms should be prepared to invest in auto product development for at least three years without expecting returns.
"They have to get rid of their old mindset of producing electronics products within a short timeframe, as these rules don't apply to the auto industry. Car components may need a life cycle of up to 20 years, which is much longer than just a few years of consumer electronics," he said.
For auto and electronics makers to click, they must find mutual needs on a common platform, he said.
Wang is a member of the Automobile Electronics Consortium (汽車電子產業聯盟), which was launched last Wednesday by the Taiwan Electrical and Electronic Manufacturers' Association (電電公會).
The alliance aims to build up a platform integrating the supply chain of the local auto electronics industry, and formulate standards for both Taiwanese and Chinese industries to make them better fit into international supply networks.
The Automobile Electronics Consortium is just one recent example of these organizations tapping into the industry. The nation's leading automakers, Ford Lio Ho Motor Co
To Ford Lio Ho, this will be a year of aggressively linking up local firms with international auto electronics heavyweights.
"There is a high entry level for the auto electronics industry and most technicalities are mastered by major US firms. We will help local electronics firms to connect with tier-one suppliers under the resourceful supply chain of Ford Motor Co," said Grace Lee
The firm is thus open to discussions with any electronics firms for partnerships, hoping that this will gradually increase competitiveness in the local industry, she said.