Author: Lyubing

Once, Bosch, Continental, Delphi, ZF… These international tier 1 suppliers were the ones that domestic auto brands looked up to. They controlled the most core technologies on the vehicle, had absolute bargaining power, and even their development progress directly determined the R&D cycle of the vehicle models.

But in the era of autonomous driving, the tier 1 giants wanted to continue their absolute advantage in chassis control and ADAS, but they did not expect car companies to choose a different approach inspired by Tesla’s demonstration effect. In order to enhance their control over autonomous driving technology, car companies began to collaborate extensively with upstream chip and algorithm suppliers and started to handle the system integration that originally belonged to the tier 1 suppliers. Moreover, car companies also develop their own algorithms, chips, and operating systems…

Against the backdrop of this major reshuffling of the industry chain, the survival space of the tier 1 giants is being squeezed like never before – talent outflow, technological barriers shaken, and brand premiums lost. There is no doubt they are facing difficulties.

Talent outflow

In the context of a shortage of autonomous driving talents, the tier 1 giants, together with various technology companies, have sent a large number of talents to the industry, forming the two major schools of autonomous driving practitioners: one is from the artificial intelligence background, mostly from technology companies like Baidu and Microsoft Asia Research Institute, with strengths in algorithm development; the other is from the ADAS product background, mostly from the tier 1 giants, with strengths in mass production.

In this trend of talent flow, the tier 1 giants are no longer the first choice for industry talent, but have become “Whampoa Military Academy” for talent output.

Scooping up local new forces

On June 25th this year, former senior vice president of Bosch, Jiang Jingfang, joined autonomous driving start-up WeRide as senior vice president and partner; on September 1st, Chen Liming, former president of Bosch China’s Chassis Control System, joined Horizon Robotics as president.

Both local new forces WeRide and Horizon Robotics were founded by people who came from Baidu, and their entrepreneurial teams belong to the first major school from technology companies. They are good at chip and algorithm development, but not experienced in mass production and market development in the auto industry. Therefore, the two big shots Jiang and Chen’s joinings undoubtedly complement their weaknesses and also represent a fusion of the two major schools of talents.

It is believed that as the local new forces become more familiar with the automotive industry, their recognition of the second major school of talents will also continue to rise. It is believed that Jiang and Chen are just the beginning, and the talent scooping of the tier 1 giants will continue.

Joining the Entrepreneurship Army

In addition to flowing to local new forces, another major trend of talent outflow from the tier 1 giants is joining the entrepreneurship army. Let’s just list a few entrepreneurial legends:

• Song Yang, founder of ZhiXing Technology (Tier 1 for Zeekr 001 autonomous driving system), and the founding team come from Bosch China.- Founder of millimeter wave radar start-up Chuhang Technology, Chu Yongyan, comes from Bosch;

• CTO of Future Mobility Corporation, Shen Junqiang, comes from Delphi;

• Founder of Zhui Shi Technology, Ma Guanglin, and the founding team come from Delphi.

The start-up teams that emerge from the Tier 1 giants often have a better understanding of the automotive industry and a practical approach, making them an indispensable force in China’s autonomous driving industry chain.

Shaken Technological Barrier

If the squeezed ecological niche and talent poaching are superficial problems, then the shaking of the technological barrier is a deep-seated one.

Shortcomings Hard to Fill

From powertrain to chassis, the Tier 1 giants have unparalleled competitiveness in these traditional automotive electronic products. They can often provide a full-stack solution from systems to software and hardware, thus gaining orders from independent brands by offering “worry-free” advantages to automobile factories.

In the era of autonomous driving, the Tier 1 giants’ tactics have gradually begun to fail because they have a common loophole – insufficient algorithm capabilities.

In the low-end ADAS of L1/L2 levels, Mobileye’s visual perception algorithm is unparalleled, occupying over 70% of the entire market by itself, and the international Tier 1 giants can only compete for the remaining less than 30% with their own algorithms.

Under Mobileye’s powerful control, some Tier 1 giants (such as Infineon, Continental, Faurecia, Magna, and Wando) wisely chose to “join them if you can’t beat them” and basically gave up on their own visual algorithms by joining Mobileye’s camp. Only a few, such as Bosch and Veoneer, insist on their own visual algorithm development.

At the higher level of L2+ advanced intelligent driving, the Tier 1 giants have basically given up on their own perception algorithms – Veoneer’s TJP development failed and was acquired by Magna; Continental has basically given up on its own visual algorithms; even Bosch had to team up with Chinese local algorithm companies to barely come up with a set of technical solutions.

In short, due to the shortcomings in perception algorithm capabilities, the Tier 1 giants have collectively lost the ability to provide a full-stack solution in the field of autonomous driving, and their closed ecosystems must be opened up.

Weakening Strong Points

The absolute advantages of the international Tier 1 giants in chassis and powertrain technology were important chips in their past promotion of ADAS system solutions. If independent brands did not choose this packaged solution, they would definitely encounter “neck-blocking” problems in the integration of ADAS and chassis and powertrain electronics.

However, in the era of intelligent network-connected electrification, the Tier 1 giants’ absolute advantages in chassis and powertrain have also been significantly weakened.Firstly, there is the Engine Management System (EMS) which is monopolized by Tier 1 giants but is directly replaced by the Vehicle Control Unit (VCU) in new energy vehicles. Car companies also have the ability to independently develop VCU control algorithms, which will not be constrained by Tier 1 giants.

In terms of steering and braking systems, Tier 1 giants still maintain an absolute advantage. However, with the continuous efforts of local suppliers such as Beru, Xiangbin Electronics and especially Huawei’s entry into the market, Tier 1 giants have already heard the footsteps of catching up.

Finally, the increase in the capacity of the Chinese market and sales of independent brands has also strengthened the confidence of independent brands to communicate with Tier 1 giants. It has become an inevitable trend for Tier 1 giants to abandon monopolies and increase the openness of the chassis and the total electric control system.

Weakening of Brand Premium

In the past, Tier 1 giants could win orders from independent car companies with prices much higher than their domestic counterparts. In addition to their advantages in technology and quality, another factor was the brand premium of the Tier 1 giants themselves.

“Bosch ESP”, “ZF Transmission”, “Magna Chassis”, these high-quality brands can add value to independent car companies’ products, and are still effective marketing points for independent car companies even today.

However, in terms of autonomous driving technology, you can hardly see any car company promoting the autonomous driving technology of Tier 1 giants. Almost all independent car companies are emphasizing independent research and development, either with “full stack self-research” or “strategic cooperation” with local suppliers such as Huawei, Baidu and Horizon Robotics to jointly develop the technology.

Even if they use the “full-stack self-research” solution, car companies still hope that the Tier 1 suppliers who provide technology can be willing to remain anonymous in the background to allow the car companies to enjoy the reputation of “independent research and development”.

At present, in China, pursuing core technology autonomy and innovative research and development has become an unshakeable consensus throughout society. It is believed that it will be difficult for any independent car company to use Tier 1 giants’ autonomous driving technology as a selling point. Tier 1 giants will no longer have brand premiums in autonomous driving.

The Breakout of Tier 1 Giants

Are there still advantages?

Although Tier 1 giants face many difficulties in autonomous driving, they still have many cards to play.

• Rich in financial resources and deep roots

For a long time, Tier 1 giants have controlled the discourse power of the automotive parts industry and have enormous resource advantages. Even in the short-term difficulties encountered in autonomous driving, they can still rely on the profits of other products to support investment in autonomous driving. In other words, autonomous driving is definitely a long-term competition, and Tier 1 giants have enough connections and financial strength to play to the end.

• Relatively “safe” research and development systemSafety is always the core issue in the development of autonomous driving, especially as China’s requirements for intelligent connected vehicles and product access become clearer. Functional safety, expected functional safety, information security, and data security are all essential in autonomous driving development.

Each of these “Four pillars” of safety will fundamentally influence the development system of autonomous driving, and building a development system that meets all of these requirements is a common challenge for independent automakers and local autonomous driving suppliers.

Compared with independent automakers, the Tier 1 giants have obvious advantages because they have directly participated or even led the writing of many safety standards. If independent automakers choose to cooperate with Tier 1 giants, they not only can avoid certain risks but can also learn from them.

• Long-standing technical advantages
  Although Tier 1 giants have obvious shortcomings in perception algorithms, they still have significant technical advantages in areas such as millimeter-wave radar, ultrasonic radar, wire-control steering, and wire-control braking.

These advantages are the anchor that ensures Tier 1 giants will not be eliminated and will also be the bridgehead for their counterattack.

How to address the shortcomings?

If Tier 1 giants want to break through, they must address the shortcomings of visual perception algorithms. It can be seen that Tier 1 giants are doing everything in their power.

• Cooperating with Mobileye

ANBOS, ZF, Faurecia, and other companies have long joined Mobileye’s visual perception camp on low-end ADAS products, becoming Mobileye’s killer partners.

However, considering that Mobileye has gradually moved to the forefront and directly provided a complete set of solutions to automakers since EQ5, Tier 1 giants will find it difficult to survive in this mode of cooperation unless they are willing to become a hardware manufacturer for Mobileye.

• Cooperating with domestic algorithm companies

As early as 2018, ANBOS announced a deep cooperation with the domestic algorithm company MAXIEYE to jointly develop ADAS products with multiple camera and millimeter-wave radar fusion.

In March 2021, domestic leading autonomous driving algorithm company Momenta announced that it had obtained Series C financing led by SAIC, Toyota, and Bosch. This is not Bosch’s first investment in Momenta.

In June 2021, ZF announced a strategic cooperation with Hikvision, and the two sides will jointly develop autonomous Valet Parking (AVP) technology.

• Cooperating with Horizon Robotics

In addition to algorithm companies, Horizon Robotics, which integrates packaging chips, algorithms, and solutions, is also an optional partner for Tier 1 giants.

In April this year, the mainland signed an agreement with Horizon Robotics to establish a joint venture for autonomous driving.The ultimate success of these collaborations is still uncertain and remains to be seen; however, it is clear that partnering with Chinese perception algorithm solution providers has become a choice that Tier 1 giants cannot afford to ignore.

What lies ahead?

It is too early to determine the role that international Tier 1 giants will ultimately play in China’s autonomous driving industry, but their respective paths to success have become increasingly apparent.

System Integrators

For example, ZF chose Mobileye early and abandoned their own visual perception algorithm, which spared them from historical baggage and sunk costs. Additionally, ZF’s strong voice within their domestic autonomous driving research and development team has enabled them to maintain significant flexibility in selecting high-end autonomous driving solutions, and as a result, they have not refused any mainstream solutions.

ZF has partnered with chip companies such as Mobileye, NVIDIA, TI, and Horizon Robotics, and, in addition to their strategic partnership with Hikvision, has fully demonstrated the capacity to provide autonomous driving solutions to automobile manufacturers as a system integrator.

Still, whether this path is sustainable remains to be seen and depends on whether it matches with the development direction of the entire industry chain and whether automobile manufacturers are willing to purchase their services.

At present, the outlook is not optimistic.

Autonomous vehicle makers now have increasing demands and want to take a leading role in autonomous driving research and development. Fast-moving autonomous vehicle makers tend to integrate their systems themselves, such as Geely EK-THOR, Great Wall Haval Dagou, and SAIC Lingofield. Slow-moving vehicle makers also hope to find a closely cooperative integrator, such as GAC’s strategic investment in HiRain Technologies.

Being a giant such as ZF with a huge and substantial presence, the company’s ability to establish a long-term, tight cooperative relationship with domestic car manufacturers will be their greatest challenge in breaking through.

Hardware Providers

In order to seek a breakthrough, the domestic team on the mainland pushed for cooperation with Horizon Robotics and established a joint venture company.

In cooperation with Horizon Robotics, the main technology provider, mainland China appears to only be a hardware contract manufacturer. From Horizon Robotics’ perspective, they have many hardware partners domestically, and there was nothing special about the four hardware partnering companies they introduced at a release conference for the Journey 5 chip in July.

Solution Providers

Whether as system integrators or hardware providers, both mean a decline in status and operating profit, yet Bosch, accustomed to being a leader, is not willing to follow this path.Bosch China has rebuilt a team this year and launched a new advanced autonomous driving project. The project is mainly aimed at Chinese domestic brand customers, led by the Bosch China team, and will introduce resources from Chinese local algorithm companies. In terms of specific technical solutions, the NVIDIA Orin-X chip will be selected and two versions, single Orin-X and dual Orin-X, will be provided.

Bosch hopes to continue to play the role of a solution provider that can provide a complete system with this new solution, but whether car manufacturers will eventually foot the bill remains to be seen.

Conclusion

No matter what route the Tier 1 giants ultimately choose to break through in China, the premise of success must be that their domestic teams have a high degree of autonomy and local research and development capabilities.

If any Tier 1 giant wants to continue using the model of foreign research and development and domestic application, then it will be difficult to win this battle. Because in this era, to serve the Chinese market well, it is still necessary to rely on domestic teams.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.