Are Autonomous Cars Disrupting the Supply Chain?

In the development of self-driving vehicles, Tier Two suppliers say they’re communicating directly with automakers in ways they hadn’t previously.

During a two-week period in early February of this year, Chris Jacobs of Analog Devices, Inc. (ADI) criss-crossed the country, visiting the offices of virtually every major automaker to discuss such technologies as radar, Lidar, and microelectromechanical sensors.

A decade ago, Jacobs wouldn’t have gotten his foot in the door with the automakers to discuss such subjects. But thanks to the emerging importance of self-driving cars, Jacobs says he and his colleagues have suddenly become very important.

“Just in the last year, it’s been insane,” Jacobs, general manager of ADI’s advanced driver assistance systems and automotive safety, recently told Design News. “Now, the OEMs [automakers] want to develop non-disclosure agreements with us. And they want us to develop prototypes for them without a Tier One [supplier], so they can try them out on their test tracks. This would have never happened 10 years ago.”

Indeed, the time-honored order of the automotive supply chain seems to be changing, and the autonomous car may be behind it. In the past, Tier Two vendors, such as Analog Devices, didn’t communicate with automakers. Rather, they reported almost exclusively to the Tier Ones, such as Delphi Automotive PLC, Robert Bosch GmbH, Visteon Corp. and Continental AG. The Tier Ones, in turn, worked with the automakers to build bigger products, integrating sensors, software, semiconductor chips, and other parts from the Tier Twos. Under such arrangements, Tier Twos were generally discouraged from contacting the OEMs (the automakers) directly.

“We would want to talk to them, and they would say, ‘Talk to the Tier One,’” Jacobs said.

Now, that’s changing. Today, Tier Two electronics suppliers say they’re connected directly to the automakers on a separate dotted line – at least when it comes to autonomous cars. They’re neither more nor less important than the Tier One. Rather, they’re on an equal footing. So instead of handing over their semiconductor chips and sensors to the Tier One, they’re now laying them out on a table in Detroit or somewhere else to be examined by vehicle engineers.

Automakers are communicating directly with Tier Twos to meet the growing need for radar sensors. Analog Devices rolled out Drive360, an autonomous vehicle radar technology, in February, 2017. (Source: Analog Devices, Inc.)

The underlying reason comes down to intellectual property. In the arena of self-driving cars, automakers are furiously seeking an edge. The best way to do that is to go directly to the source of the innovation, which is, in some cases, the Tier Two.

“The auto manufacturers want to determine their own future, rather than being dependent on what a Tier One provides to them,” noted Ian Riches, director of Strategy Analytics , an industry analyst. “They want to do the work themselves, understand what’s required, and develop it, so that their technology is relevant going into the next 20 or 30 years.”

A Patchwork of Partnerships

Evidence of that phenomenon is easy to find. In January, BMW Group, Intel Corp., and MobilEye N.V. announced they were partnering on autonomous technology. Both Intel and MobilEye are considered Tier Two suppliers. Similarly, General Motors

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