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


I feel that the idea of artificial intelligence should really be put to work to solve many of our problems in government. The self driving car is great but I would like to see the computer based artificial intelligent solution for health care so that both the Democrats and the Republicans could vote on it based just on it's content and not Party affiliation. The same could be used for many of the problems we face. I trust artificial intelligence to a certain point to base everything from.

Anyone who actually thinks autonomous vehicles will EVER be legal is an idiot. It is not just that computer vision is about 100 million times slower than human vision because humans have over 100 billion parallel processors, but because programmers won't be able to anticipate many real driving situations, computers in vehicles will often crash, sensors will not be maintained, etc. There is no way they can deal with even an inch of snow. And there is no way to compete with mass transit.

A technically feasible concept may be derailed by other constraints. In 1968 I saw new Cessna 172s for sale at $12,500, but by In the late 70s, major light aircraft manufacturers quit building single engine planes. Higher priced light twins continued to be built, but product liability had increased prices beyond what customers would pay for singles. Autonomous cars may be ten times safer than a human driver, but every time one causes a fatality the lawyers will fight to handle the suits.

Self driving cars are indeed changing the supply chain. The primary reason is that the whole concept is fundamentally " a solution chasing a problem", rather than a rational creation by the auto companies. This time it should be clear to all that it is a case of those with things to sell have found a good target, in that self driving cars require lots of assorted electronics. It will be much more profitable than the internet of everything connected. But it won't work out. Just watch.

I think this "supply chain disruption" can been seen not as tier 2 suppliers jumping the chain as much as the creation of a new class of tier 1 suppliers. The concept of tier1 suppliers being able to subcontract presupposes that there are multiple tier 2 contractors that are essentially interchangeable. These new suppliers have patented or proprietary hardware/software sensors that the automakers want, which allows them to avoid being treated as an easily replaceable commodity.

Several harsh comments here about autonomous cars, but cars are already becoming semi-autonomous with lane following, adaptive cruise control, automatic stopping, etc. These are features that the automakers believe customers want. As more features are implemented, the definition of "autonomous" gets increasingly fuzzy.

Add new comment

By submitting this form, you accept the Mollom privacy policy.