Local players face hurdles in auto electronics field

Though the red-hot automotive electronics industry could be a cash cow for local information technology firms, there are still hurdles to overcome if they want to benefit from collaborations with auto companies, industry watchers said yesterday.

"Technology firms are considered newcomers in the rising auto electronics industry and they are not very familiar with the business cycle of automakers," said Yulon Nissan Motor Co (裕隆日產) president Liu Yi-cheng (劉一震).

He was speaking at the 2006 Taipei International Automotive Electronics Forum, held in conjunction with the AutoTronics Taipei -- an auto electronics exposition that started yesterday at the Taipei World Trade Center Hall I. The show will run through Thursday.

In contrast to automakers, technology firms have to churn out products with shorter life spans, offering a short-time-to-market and low cost, he added.

An official from the Hua-chuang Automobile Information Technical Center (華創車電), who asked not to be named, agreed, adding that IT and car firms still face challenges in cooperating.

"Some engineers from the tech firms still have the mindset, `Why should we listen to these auto guys?'" he said.

To ensure success, the auto electronics sector will need to incorporate complementary insights from both industries, and companies should work hand-in-hand, regardless of their own corporate cultures, he added.

Set up last December, Hua-chuang is a joint venture between Yulon Motor Co (裕隆) and the Executive Yuan's Development Fund (開發基金).

The alliance aims to offer a common platform to unite local IT and auto firms in the development of auto electronics products.

Despite the challenges, the potential growth of the industry appeals to local electronics companies, and many plan to increase their investment in the coming years, said Rock Hsu (許勝雄), chairman of the Taiwan Electrical and Electronics Manufacturers Association (電電公會).

So far they have mainly ventured into the area of telematics, which refers to global positioning and wireless systems installed in vehicles to provide drivers with a variety of real-time information and services, such as maps or voice navigation.

According to Mercer Management Consulting, electronics components should account for 34 percent of the global automotive industry's value chain by 2015, or 316 billion euros (US$383 billion).

This compares with only 20 percent, or 127 billion euros in 2002.

However, local auto firms must work harder to make themselves auto makers' first choice in the supply chain for car electronics parts, Hsu said.

"Much of the vital auto technology needed by domestic car makers is still in the hands of their Japanese counterparts, and most auto parts and accessory manufacturers are small and medium businesses," Hsu said.

This makes it hard for local auto part makers to compete with their international rivals in terms of capital, technical know-how, channels and human resources, he added.