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Chip Giants Struggle to Break Into Cars

Reliability standards for chips are a hurdle for newcomers
The 2015 Hyundai Genesis
The 2015 Hyundai GenesisCourtesy Hyundai

Hyundai Motor’s 2015 Genesis luxury sedan is brimming with semiconductors that do everything from automatic braking to detecting blind spots. Chips pop open the trunk when they sense the owner’s arms are full and sniff for carbon dioxide to determine if the cabin needs more fresh air. The companies that pioneered semiconductors for use in computers and phones produce few of the thousands of microprocessors in the Genesis. Intel contributed only a handful, and Qualcomm just one chipset; Nvidia chips don’t even make the list.

Those three companies are struggling to break into the market for automotive chips, which is projected to grow 6.1 percent this year, to $27.9 billion, says researcher IHS. The cost of the semiconductors inside a new car model averages $329 per vehicle, according to a June 23 report by Bloomberg Industries; by comparison, the chips inside the iPhone 5 add up to less than $20. The business of supplying chips to automakers is dominated by a small group of manufacturers whose relationships with their customers go back years: The top five—Renesas Electronics, Infineon Technologies, STMicroelectronics, Denso, and Freescale Semiconductor—have almost 43 percent of the market, according to data compiled by Bloomberg Industries. Intel, Qualcomm, and Nvidia don’t even figure in the top 10.