Strategy Analytics previously reported (in the blog, Automotive Electronic Design Heads East) on the expansion in research and development to support the recovery in the automotive industry during 2010 and the growth in the emerging markets.  However, caution was advised because of growing uncertainty in 2011, such as the ending of government incentives, rising inflation in China and the threat of a currency crisis occurring in Europe.

While the demand continues to grow, albeit at a lower rate, in the emerging markets, Tier 1 vendors are turning more of their attention towards diversifying their customer base and towards growth application areas, such as ADAS (Advanced Driver Assistance Systems) and electrified powertrains.

Tier 1 vendors are keen on diversifying their customer base, in order to increase revenue and to lower the risk of a future economic downturn. 

• The 2009 recession heavily affected North American operations, particularly the “Detroit Three” car makers and their suppliers. 
• In 2011, the earthquake has heavily affected the Japanese car makers and their suppliers.  By spreading business on a more global scale, the Tier 1 vendor is able to offset the loss of business in one region.  It could also be argued that Japanese suppliers would not have been disrupted as badly if they could transfer production capacity to operations outside of the affected areas in Japan.

Evidence of this trend, over the last six months, can be seen in the latest Strategy Analytics "Tier 1 Vendor Regional Design Center Database".

Examples of diversifying the customer base include the opening of new technical centers outside the home market and the expansion of existing ones:

• Bosch recently completed an expansion of its Kanagawa facility, where it develops braking systems, ECUs and gasoline fuel injection systems for Japanese customers. At Memanbetsu, it intends to expand its capabilities in developing stability controls systems, to be completed by 2013.
• Garmin opened a new technical center in Novi, Michigan, having made its OEM navigation business a strategic priority - to bring about global opportunities and to win new business, such as the uConnect system for Chrysler, the integrated navigation system on the new Aston Martin Virage and navigation software for Daimler.  With an initial 20 staff, it aims to build relations with the auto makers before expanding the facility.  The company is already a leading brand in PNDs (Portable Navigation Devices).
• Johnson Controls completed its expansion of its European headquarters in Burscheid, Germany, to raise its technical competence in order to increase its business from European customers.

Examples of growth application areas affecting technical centers include:

• Bosch, in its collaboration with the Reutlingen University of Applied Sciences and the University of Stuttgart, opened a new technical center to develop power electronics for electrified powertrains in return for students attaining their PhD degrees.
• Continental recently acquired the Ottobrunn technical center from Magna International, which develops automotive radars.  It also expanded its capability in transmission control systems by opening a new center in Nuremberg, where it has also hired another 240 staff from a US$100 million investment in expanding its existing facilities in the same city, some of whom will be developing systems for electrified powertrains.
• Valeo is planning to expand its facility in Tuam, Ireland, over the next three years.  The center specializes in developing software for camera-based ADAS systems, as in the optional 360Vue system fitted to the BMW 7-Series.

Meanwhile, new technical centers are continuing to open in the emerging markets.

• China has seen at least seven new centers being opened.  Bosch, Faurecia and Key Safety Systems have opened new facilities in Shanghai, while TRW is planning a larger replacement center to open in 2013.  UAES (a Bosch joint venture) has opened a new center in Chongqing, while Valeo’s Interior Controls division aims to double the staffing levels at its newly-transferred Shenzhen center.
• In India, Bosch is to add Diesel and Gasoline Systems Electronic Controls (DGS-EC) capability to its Bangalore center.  The expansion will be completed by 2013, culminating in the hiring of 800 additional staff.  Panasonic has recently opened a technical center in Gurgaon to develop energy management and infotainment systems to its Indian customers.
• Visteon has also expanded operations at its Guarulhos facility in São Paulo State, Brazil.

Strategy Analytics believes that with increasing competition, development activity will expand towards a more global scale, not just to service the needs of new customers in new markets but also to utilize a wider pool of talent and to speed up the rate of development in a race against rivals.  However, such investments will be costly and may require collaboration with other vendors, as is the case with OEMs in electrified powertrains.

From the model launches in 2010, Passive Keyless Entry (PKE) systems are increasingly found in compact models outside Japan.

• Ford in Europe have launched many compact models, such as the Fiesta, with its "Key-Free System".  Ford in North America will follow suit with the MY 2011 Fiesta and MY 2012 Focus.
• The Nissan Juke is a compact SUV assembled in the UK - the Tekna trim level comes with the "Intelligent Key" system. 
• The Volkswagen Golf comes with "KESSY" - the system only activates on the front doors in order to lower cost. 

Evidence of this trend, over the past year, can be seen in the latest Strategy Analytics "Advanced Entry and Start System Supply and Fitment Database": http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5942. This shows that certain OEM and supplier strategies aim to spread the availability of PKE, in the hope of raising volumes and lowering cost through economies of scale. And in assisting cost reductions, suppliers, both at system and at semiconductor level, aim to integrate components and functionality in order to reduce module size.

• TRW launched a module that can combine the RF functionality for a PKE system with that for a Tire Pressure Monitoring System (TPMS).  The latter system is mandated in many markets, thus the module can offer additional functionality at minimal cost.
• Atmel has integrated the immobilizer functions onto the same chip for a PKE system, as well as transceiver ICs integrating remote start and TPMS functions.
• Continental and Kathrein have developed an integrated antenna for all kinds of features, such as radio and navigation, as well as PKE.
• Maxim's MAX1441 touch sensor IC has 5 passive components instead of the 16 used by competitors. 

Furthermore, some RKE designs are using push button engine starts as a base for their PKE designs:

• The MY 2009 Audi A4 has a slot with which the RKE fob is pushed further in to start the engine.  Slots for PKE systems are used when the battery in the fob is depleted.
• Established brands with this kind of RKE system, and can also come with similar PKE systems, include BMW, Mercedes-Benz, Renault, Volvo and the Volkswagen Passat.  Some of these models may have a separate starter button for both RKE and PKE systems.

But despite this, almost all PKE systems are offered as an additional cost option to the consumer and because of its higher cost, few are deployed.

• According to Strategy Analytics, only 8.1 million units of PKE (equating a penetration rate of around 11 percent) are being deployed for 2010.

Forecast data can be found in the "Automotive Electronics System Demand Forecast 2008 to 2017: Q3 Update": http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5815.   Strategy Analytics believes that further cost reductions are needed before PKE can see widespread deployment.