There is also legacy technology carried over from older vehicle models for cost reasons. How constraining is that?
The major shift in the car design happening now is moving from the original distributed intelligence based on many microcontrollers but not connected to each other to the new architecture where we have a central computer CPU that is controlling all the different elements. Because it is high performance and you can control so many elements, there is also an evolution in the technology.
Does that mean now is the time to redesign the tech?
Of course, automakers want to reuse as much as of the existing architecture as possible but the move to electrified cars is the opportunity to start again because they need to redesign the chassis, the car and all the different peripherals. That is why this is all happening now.
What is the danger if they don't undergo a complete redesign?
The question is whether the old technology with the microcontroller architecture can really support the new chassis. We don't think so. Before the elements can talk to each other, they need to exchange data -- in real time -- to understand what is happening inside and outside the car. With the existing computer, you cannot achieve autonomous driving or even Level 2.
Do you make your own chips?
No, we don't have foundries.
Who makes your chips and what is the situation with the supply of your chips?
Diversification of the supply chain is critical now. We work with foundries such as JMC in Taiwan, Samsung LSI, GlobalFoundries and UMC. We work with all of them. First of all, the picture is improving a lot in 2022. There is still some stress, but we expect to have an even better situation especially in second half of 2022.
What is your European market share of this side of the autos business and what would you hope to build it up to?
I don't know about the share. I can tell you that in telematics we have a very good position because of the transition to 5G. We are in more than 150 million cars worldwide.
You say you have a pipeline of awarded contracts in automotive worth $13 billion. Can you break that down for Europe?
Europe is a big contributor because of the numbers. Most of the innovation in terms of automakers is happening in Europe.
What sort of services can 5G bring to enable automakers to ramp up digital services income?
5G is helping in the services but also in terms of over-the-air software updates so that it’s possible to achieve the software-defined platform without changing hardware. That is a benefit for the car platform. There is also a huge bandwidth that 5G is serving so that impacts the infotainment because you can download a video or whatever in a short period of time.
Monetization is difficult if the device they are downloading into doesn’t belong to the car, right?
There are new business models that can be applicable to the car only. For example, you can affect the performance of the engine for three or four hours by adding another 50 hp highway driving. That's something we can do in real time. But we see a lot of activity in the direction of entertainment.
Are you on a revenue-sharing model?
No. This is done under the classic business model, but the car industry is in many discussions about introducing innovation in the business model. We are participating in the discussion.
Continental believes what the car industry lacks is an overriding software platform that everybody can just plug into. This would be a bit like what Android is for mobile phones. Do you agree with this idea?
At the moment, we are using an approach based on a hypervisor, a kind of interface that is enabling us to use more than one OS [operating system], such as Android, Linux, QNX together with the main OS environments. Thanks to this hypervisor software we can interface multiple environments. We want to have an open hardware platform that is able to support many OS environments, many software ecosystems. It's healthy to have a fragmented system environment because innovation is happening in many directions. Based on what we have experience in the smartphone business, we consider the fragmented software ecosystem as a way to accelerate innovation. Of course, is important to identify a common element on the hardware and on the software because this can create economies of scale.
Does that mean you don't want to see automakers going down the Apple route?
Well, Apple is another customer… Because our business model is horizontal, we want to make the platform available to everybody. We do not support the vertical model where a player is doing whatever he does, but not making it available to anyone else.