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Q-Series, Technology, autos
What risks and opportunities do tech brands face as they enter the electric vehicle space?
Automotive supply chains at a crossroads – EV revolution a catalyst for change
Electronic-related content represents >50% of the bill of materials of an electric vehicle (EV) vs <10% in a traditional internal combustion engine (ICE) vehicle. As EV penetration grows and autonomous driving emerges, we see exponential growth within tech supply chains. More than 20 UBS technology, semiconductor and automotive analysts collaborated to assess an opportunity that could dwarf the PC/smartphone market by 2030. We see >US$100bn opportunities in both auto semis and powertrain modules, as well as material growth in lenses and substrates. As tech brands look to enter the EV space, we examine in detail the key issues for the auto supply chain and three key battles: tier-1 vs tech suppliers; open vs closed EV manufacturing platforms; and in-house vs outsourced models.
EVs drive semis content increase; revitalize auto electronics by 2025-26E
Our proprietary models quantify tech suppliers' opportunities in auto electronics, and we examine how tech could impact the auto supply chain as electronics content increases. We expect 2026 to be an inflection point as global electric vehicle (EV) market size surpasses the combined market size of PC + smartphone + server. UBS semi team expects global semi sales to increase >3x from US$30bn in 2015 to US$109bn by 2030E, driven by advanced driver-assistance system (ADAS) and powertrain, with semi content in ADAS/powertrain to see a 19%/11% CAGR during 2021-30E vs. total semi sales CAGR of 9% in the same period. Hardware tech's sales contribution from auto remains small, but we expect it to become meaningful in 2025-26, driven by the automation trend. We estimate EV powertrains will grow 10x to reach US$109bn in 2021-30E. The auto camera lens market was only one-third the size of the handset lens market in 2021, but we expect each market to be around US$5.0bn in 2030E.
Vehicle electrification is driving transformation in the auto supply chain
We identify three areas of change as tech firms enter the auto supply chain: 1) competition between tech and tier-1 auto suppliers as auto OEMs maintain ties with tier- 1 suppliers, but EV brands reduce reliance on tier-1 and work directly with tech firms to better control designs and costs; 2) closed platforms vs. open platforms (emerging) that open the door to tech companies; and 3) in-house production (auto OEMs) vs. outsourcing (common in tech). An outsourcing strategy could foster a smartphone-like contract-manufacturing model, leveraging speed-to- market, cost efficiency and semi expertise to disrupt the EV industry.
How to gain exposure?
We think auto electrification benefits semi the most, whereas tier-1 supplier implications are mixed as those with an all-in EV strategy might transition well while others may struggle.
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