Bosch, ZF, others poised to gain from sensor market boom

From the first simple wired sensors in the mid-20th century that detected fuel level or oil pressure, a car's ability to monitor its own condition has become more and more important.

Dozens of sensors per car, working alone or in groups, now provide functions as simple as detecting an open fuel cap to as complex as identifying a pedestrian at night and activating automatic emergency braking.

The prospect of true self-driving cars is opening up other frontiers and business opportunities for suppliers, such as long-range lidar that creates complex, 3D “point clouds” to accurately measure distances, or in-car biometric monitoring to adjust the temperature of each seat.

"If you start looking into the car where the sensors are hidden it's amazing, really, the number of applications is going through the roof," said Frank Findeis, vice president for automotive sensors at the German semiconductor maker Infineon, which along with Robert Bosch is one of the top two suppliers for the automotive semiconductors that are the "brain" of modern sensors.

"If you go into an entry-class car, you probably end up with 20 to 50 sensors that use semiconductors," Findeis said. "If you go to a high-end car you easily end up with 100."

Tier 1 suppliers such as Bosch, Continental, Valeo and ZF Friedrichshafen are pushing the sensor market forward, offering their customers everything from single sensors or the software needed to activate them, to a complete system that integrates different sensors such as cameras and radar.

It can be difficult to measure the size of the sensor market because nearly every supplier considers it from a different angle, according to their strengths. All agree that the sector will continue to grow strongly for the next decade in most, but not all, areas, because the automotive megatrends -- electrification, automation, mobility as a service -- are not possible without sensors.

A recent study by Roland Berger found that the overall bill for the electronics in a midsize premium car with an internal combustion engine was $3,185 in 2019. By 2025, that cost will rise to $7,030 for a comparable battery-electric car. A significant chunk of that increase, about $413, will be for radar, lidar, camera and ultrasonic sensors to facilitate driving assistance, the consultancy said.

The consulting company McKinsey estimates that the overall sensor market will grow by 8 percent annually until 2030, outpacing the overall automotive market (see chart, below). 

Infineon's Findeis said that while the radar sensor market might grow fivefold over the next decade, the market for internal combustion engine sensors could decline by 10 percent -- with overall annual growth of about 10 percent.
 
Guillaume Devauchelle, head of innovation at Valeo, estimates that the overall market for sensors is in the range of 10 billion to 12 billion euros ($11.8 billion to $14.2 billion) a year, a figure that will rise to 35 billion to 40 billion euros annually by 2030. Devauchelle said that sensors accounted for about 20 percent of Valeo’s global automotive sales of $18 billion in 2019.

Valeo started in the sensor market in the early 1990s, supplying ultrasonic sensors for optional parking alerts on the BMW 7 Series. Now the company sells 100 million sensors a year, Devauchelle said, including those in systems for remote parking.

"At the beginning it was only rear sensing, with four sensors, and the take rate was very low," he said. "Now to achieve the compete story for automatic parking maneuvers, super-premium cars can be equipped with 25 sensors," he said, including cameras producing images that are stitched together to form what he described as a cocoon around the car.

McKinsey says a typical mid-range car with advanced driver assistance systems (ADAS) has 20 sensors, which includes cameras, to enable those features. Two are up front: a long-range radar sensor and a single camera for adaptive cruise control, emergency brake assist as well as lane departure warning and assist. At the back there are two medium-range radar sensors for blind-spot detection. In addition, there are four cameras and 12 ultrasonic sensors to create a 360-degree view for the parking assist system.

A true self-driving car, SAE Level 4 or 5, will have up to 50 such sensors, McKinsey says.

Among those sensors will be lidar, which stands for light detection and ranging, which uses laser pulse to measure ranges. It's seen as essential for higher levels of autonomous driving, but the market remains small in the absence of government regulations that would allow even so-called "eyes-off" Level 3-capable vehicles on public roads.

Valeo is one of the few suppliers that has commercialized a lidar system, shipping about 100,000 units to Audi, among other automakers. Ibeo Automotive Systems, a subsidiary of ZF, has signed a contract with China's Great Wall Motor to provide lidar developed with the Austrian supplier AMS.

Aine Denari, senior vice president and general manager, global electronics ADAS at ZF, which incorporates sensor technologies, says the overall ADAS market will grow to more than $20 billion by 2030 from $8 billion in 2022.

Denari said the sweet spot in the sensor-based ADAS market is "Level 2 plus," meaning that SAE's Level 2 features (steering, braking and acceleration support, adaptive cruise control, lane-keeping) are overlaid with AI to enable automated maneuvers such as lane changes as well as entering or exiting a highway. 

"This is where we see a lot of the comfort functions being added, because it can be done for a relatively low cost, given that the sensors are already there anyway to comply to regulatory requirements," she said. 

Thomas Irawan, senior vice president driver assistance systems business unit at Bosch, agreed. "The market is shifting Level 3 a little further into the future, so Level 2 plus is growing in importance," he said. Irawan is responsible for assistance systems up to Level 2 plus; another unit covers Levels 3 to 5. 

"We expect sensors to become more and more relevant in all areas of the vehicle. Specifically in the ADAS area we have been seeing increasing installation rates for years," he said. Bosch has sold more than 700 million sensors for driving assistance systems in recent years, Irawan said, and Bosch has doubled its sales in the area in the last three years, although he would not provide figures. 

Irawan said safety regulations were one of two key drivers in the sensor market. "On the one side, we have customer and consumer demand for more comfort, which leads to more advanced driver assistance systems as standard equipment," he said. "On the other side, we have legal requirements and NCAP assessment standards that are really pushing the safety functions in the vehicle."

Safety guidelines and requirements, such as those from the European New Car Assessment Program (EuroNCAP), which assigns stars based on safety features, or the EU's General Safety Regulations (GSR), are mandating more and more sensor-based systems such as automatic emergency braking, drowsiness detection, stability control and tire pressure monitoring. 

So far, the coronavirus crisis has not had a major effect on the market for sensors, outside of a temporary dip in auto production, suppliers said. That is partly because safety regulations are non-negotiable; another reason is the length of development time, with products planned four to five years before production starts. 

"Certainly there has been some discussions about how timelines may or may not change, some investigations by customers as to whether they want to push out SOPs [starts of production] by six months or a year, or whether they want to potentially consider refocusing," said ZF's Denari. "But for the most part we are not seeing huge dramatic changes."

Looking ahead, suppliers pointed to an increasing need to devote resources to development and validation costs as a hurdle, as applications become more safety-critical.

"The tech that we have now is pretty good, but one of the bigger barriers is around the development cost," Denari said. "Every potential use case and scenario has to be captured in the testing."

Confirmation algorithms with AI technologies could help lower development time and costs, she said, adding that ZF has recently established an AI and cybersecurity center in Saarbrücken, Germany. 

Lowering development time and costs "will make the payback [on investment] easier and penetration rates higher across a broad spectrum of vehicles," she said.

Irawan said that regional differences were another challenge in sensor development. "For example, lane markings or traffic signs are different around the world,” he said. "That is a challenge for driving functions becoming increasingly automated."

Suppliers said that combining different kinds of sensors in a single module, along with AI, would lead to greater sophistication and safety, for example allowing a vehicle to find the edge of a road even without lane markers. "Every sensor has a technical limit, advantage or disadvantage," Irawan said. 

Such sensor suites will also be crucial for future uses such as so-called V2X communication, in which cars will interact with other cars and road infrastructure, Devauchelle said: "This is the next door to much more sophisticated and complex applications."