THE advent of electric vehicles is turning the structure and inner workings of cars upside down, creating a much stronger fusion between two of the world's biggest industries — autos and electronics.
It is also set to cause disruption on a grand scale. The electronics industry was valued at an estimated US$2.2 trillion last year and employs up to 18 million people. The revenue of the carmakers alone was US$2.2 trillion in 2019, according to S&P Global Market Intelligence.
In March this year the world's largest contract electronics manufacturer, Foxconn, hosted 500 global executives to showcase its gleaming steel and rubber prototype of an EV platform, the star of the first members' meeting of MIH Alliance, an industry alliance founded by Foxconn to offer a complete software and hardware platform for making electric vehicles.
And it was a statement of intent. The company that has been making your iPhone for more than a decade is ready to make your car as well. In a matter of months, Foxconn has assembled more than 1,200 member companies in MIH Alliance, from software giants like Arm Ltd to auto suppliers like German plastics parts maker Konzelmann GmbH.
It has also set up joint ventures with Chinese and Taiwanese carmakers, is working on a partnership with Stellantis N.V. (the Netherlands), the car group formed by the merger of Fiat Chrysler Automobiles and French Peugeot S.A., has a cooperation agreement with Chinese electric vehicle company Byton and signed a deal to manufacture for United States electric vehicle designer Fisker from late 2023. It is also believed to be in talks with Vietnam's Vinfast and Malaysia's MIMCO.
The push by Apple's largest supplier into electric vehicle manufacturing could also make it easier for Apple to enter the electric vehicle market. Their push into the automotive supply chain heralds a turning point in industrial history: the integration of car manufacturing and electronics, which will both change beyond recognition.
A growing number of countries have set dates for the phasing out of petrol and diesel fuel cars, making the rise of electric vehicles inevitable. And although electric vehicles look similar from the outside and perform a similar function for consumers, they are completely different on the inside, leaving traditional carmakers to either rapidly acquire new capabilities in electrical engineering and software or retreat from manufacturing.
The electronics companies targeting the automotive supply chain, meanwhile, need to pick up new mechanical capabilities and entirely different safety concepts.
Both the carmakers and their leading parts suppliers such as Bosch, Continental or GKN are keenly aware of the challenge. As early as 2015, Continental acquired the automotive business of Finnish software company, Elektrobit Corporation, for €600 million, and later bought Israeli cybersecurity company, Argus, for US$430 million in a 2017 deal that helped beef up its software capabilities with the addition of hundreds of engineers.
Volkswagen also wants to develop its own software, as part of a US$30 billion effort to bring more technology in-house. They are also looking into more knowhow in terms of how Volkswagen integrates software and chip design and move into electric vehicles. They are targeting to have fewer, but more powerful chips in their electric vehicles.
Volkswagen and Volvo have come up with their own electric vehicle platform architecture to defend their territory against outsiders such as Foxconn, while General Motors and Honda are set to share EV platforms to minimise the financial burden of developing such structures.
Malaysia has to move fast into these two integrated industries to come out of economic stagnation.
Lack of government drive and investments in new products since 2000 and failure in a number of government industrial projects are the reasons why Vision 2020 was not realised.
We must focus on spending to create and manufacture the Fourth Industrial Revolution 4.0 global products, be it in electric vehicles or related components and software that could generate billions in revenue and millions of jobs.
Maybe it is also time to recruit the best brains that are up to date with the latest economy and technology to strategise Malaysia's new plans for future growth. Failure to act quickly may leave us far behind others in industrial progress, including our Asean neighbours.
The writer is head of Innovative Electromobility Research Lab, School of Mechanical Engineering, College of Engineering, Universiti Teknologi Mara (UiTM)