Software, Chips, and Batteries

Dr. Hagen Radowski, Senior Partner at the management consultancy Porsche Consulting, explains why software must come first in the electric car of the future. He is convinced that closer collaboration between carmakers and the semiconductor industry promises better end products.


A look back though the time tunnel: The first cars with combustion engines debuted almost 140 years ago. With the switch to electromobility and the dominance of semiconductors and software, players from outside the industry are playing a key role in developing the vehicle of the future: the software-defined vehicle.Porsche Consulting/Thomas Kuhlenbeck

Let’s take the year 1886 and Carl Benz, who invent­ed the first inter­nal com­bus­tion engine for the car. Or the year 1912, when Henry Ford intro­duced assem­bly-line pro­duc­tion in auto­mo­tive engi­neer­ing. Whichev­er date we start from, more than 100 years have passed since then. Now, for the first time world­wide, new play­ers have entered the stage and dis­card­ed the time-test­ed tra­di­tion­al approach of first design­ing a car, then adding elec­tron­ic com­po­nents, and final­ly devel­op­ing soft­ware intend­ed to unite these very dif­fer­ent com­po­nents under one user inter­face. As a result, the auto­mo­tive indus­try is fac­ing what is prob­a­bly the great­est upheaval in its history.

Today’s mod­ern all-elec­tric vehi­cle is equipped with a mul­ti­tude of elec­tron­ic con­trol units. The func­tions of these devices range from unlock­ing the doors to autonomous dri­ving. And the elec­tron­ic com­po­nents come from a wide vari­ety of sup­pli­ers. It is not only becom­ing increas­ing­ly dif­fi­cult to com­bine all these devices into a sin­gle soft­ware plat­form, but also to update this plat­form at appro­pri­ate inter­vals with rea­son­able amounts of data. It will not be enough to accom­pa­ny this process with a tech­ni­cal evo­lu­tion­ary approach.

In search­ing for a term that best describes what truly needs to hap­pen, a book writ­ten 61 years ago by the emi­nent philoso­pher and his­to­ri­an of sci­ence Thomas Kuhn helps. The title is rather dry: The Struc­ture of Sci­en­tif­ic Rev­o­lu­tions. In it, Kuhn coined the term that so aptly and accu­rate­ly describes how the “old auto­mo­tive indus­try” must now act in order to survive.

The term is “par­a­digm shift.” Accord­ing to Kuh­n’s def­i­n­i­tion, a new par­a­digm can prompt new but rel­e­vant ques­tions about old data. In a par­a­digm shift, you are not only “solv­ing puz­zles” using the pre­vi­ous par­a­digm, but also chang­ing the rules of the game and the “work plan” for arriv­ing at new solu­tions. To explain the basics of the par­a­digm shift, Kuhn had his audi­ence gaze at a duck for 10 seconds …

… and then said: “’This is not a duck, this is a rab­bit side­ways.’ From that moment on, no one saw the duck any­more; every­one saw the rab­bit. Look­ing at the same thing with a fresh new per­spec­tive.” In the con­text of the auto­mo­tive indus­try, this means that it has to approach things differently.

Code is the new clearance

Man­u­fac­tur­ers need to move away from first design­ing the car with per­fect clear­ance, i.e., an even dis­tance between the pan­els on the out­side of the vehi­cle, then adding a seem­ing­ly end­less num­ber of con­trol units, and then try­ing to write the right soft­ware. Instead, soft­ware devel­op­ment must come first. Or in other words, “flaw­less code is the new clear­ance.” This new approach for the auto­mo­tive indus­try has a name: the soft­ware-defined vehi­cle, or SDV.

Why is all this nec­es­sary? Many of the new play­ers have proved that a soft­ware-cen­tric approach makes it eas­i­er to sep­a­rate the soft­ware — which nor­mal­ly devel­ops more quick­ly — from the hard­ware, which advances at a slow­er pace. At the same time, this increas­es flex­i­bil­i­ty in terms of hard­ware replace­ment. The new rules for the SDV par­a­digm, accord­ing to Thomas Kuhn, are there­fore: Explain the prin­ci­ples. Add to this the user expe­ri­ence and the abil­i­ty to use a solu­tion immediately.

A great exam­ple to illus­trate the impact of user expe­ri­ence comes from Tesla, whose cus­tomers fre­quent­ly com­plained that they could­n’t leave their dogs in the car when they went shop­ping because it got too hot in the car; or peo­ple came up to the own­ers and berat­ed them for leav­ing their dog in an over­heat­ed car. So Tesla intro­duced DOG mode. When this mode is acti­vat­ed, the win­dows are rolled down so that the dog can get some air, and the fol­low­ing mes­sage appears: “I’m fine. My owner is out shop­ping and will be back soon.”

But soft­ware always runs on hard­ware. This is where the semi­con­duc­tor indus­try comes into play. Just as for writ­ing good car soft­ware, proven process­es are used for hard­ware and chip archi­tec­ture as well. Experts call this the elec­tri­cal and elec­tron­ic archi­tec­ture, or E/E archi­tec­ture for short. It is the soft­ware-based E/E archi­tec­ture that makes the soft­ware-defined vehi­cle pos­si­ble in the first place.

The most impor­tant pre­req­ui­sites for soft­ware-defined vehi­cles are cre­at­ed in the semi­con­duc­tor indus­try. Sev­er­al thou­sand chips are used in a mod­ern bat­tery-pow­ered vehi­cle. If we com­pare this with the 60 or so high­ly indi­vid­u­al­ized chips in an Apple iPhone, we can see that we are still a long way off. It may be pos­si­ble to reduce the num­ber of con­trol units to around a fifth, but with a high­er pro­por­tion of cus­tomized chips. But why go to all this effort? Because dig­i­tal­iza­tion and elec­tri­fi­ca­tion will con­tin­ue to drive the demand for chips in cars. The auto­mo­tive indus­try is the sec­tor for which the semi­con­duc­tor indus­try needs to grow the most quick­ly in the years to come. And car­mak­ers need more direct part­ner­ships with the semi­con­duc­tor indus­try to man­age this growth.

Direct partnerships with the semiconductor industry

An apt exam­ple comes from the mobile com­mu­ni­ca­tions indus­try: By work­ing par­tic­u­lar­ly close­ly with the semi­con­duc­tor indus­try and mar­ket­ing direct­ly, phone man­u­fac­tur­ers were able to move from a “stan­dard­ized” approach along the lines of Nokia to what we see today in mod­ern Apple iPhones: greater speed and flex­i­bil­i­ty in the devel­op­ment process, cost sav­ings that should not be under­es­ti­mat­ed, and the abil­i­ty to trans­late avail­able chip tech­nol­o­gy into fea­tures that con­sumers are will­ing to pay for. These are a few of the ben­e­fits that come from a direct part­ner­ship between the semi­con­duc­tor and auto­mo­tive indus­tries. But there are dif­fer­ences as well. Above all, the auto­mo­tive indus­try needs chips that are “car-proof” under very exact­ing con­di­tions. This means cre­at­ing trans­paren­cy and mak­ing strate­gic invest­ments in tech­nolo­gies that the mar­ket demands.

All car man­u­fac­tur­ers will need to put in con­sid­er­able effort to pre­pare for and embrace this par­a­digm shift. For this rea­son, Porsche Con­sult­ing has devel­oped the Strate­gic Semi­con­duc­tor Man­age­ment Frame­work. This model helps com­pa­nies to gain com­pre­hen­sive semi­con­duc­tor know-how and at the same time to visu­al­ize the impact of semi­con­duc­tor pro­cure­ment. This, in turn, helps in devel­op­ing a long-term strat­e­gy for semi­con­duc­tors. More­over, it facil­i­tates the exchange with the semi­con­duc­tor indus­try by agree­ing on a lan­guage that both sides under­stand. This model applies to many dif­fer­ent sec­tors, as a semi­con­duc­tor strat­e­gy is not only urgent­ly need­ed in the auto­mo­tive indus­try. How­ev­er, it is the auto­mo­tive indus­try that is fac­ing the great­est challenges.

The time is now for the auto­mo­tive and semi­con­duc­tor indus­tries to work even more close­ly togeth­er. For the auto­mo­tive indus­try, three fac­tors will deter­mine whether it is com­pet­i­tive: soft­ware, chips, and bat­ter­ies. Car man­u­fac­tur­ers want to lead in these three areas. This does not mean that they want to pro­duce only their own chips. How­ev­er, they must col­lab­o­rate with the semi­con­duc­tor indus­try in a man­ner that leads to a bet­ter end product.

About the author
Porsche Consulting/Jörg Eberl
Dr. Hagen Radowski, Senior Partner at the management consultancy Porsche Consulting, has more than two decades of experience in the IT industry. He received his doctorate from the Department of Economics at the University of Siegen. After studying information management in Stuttgart (BA) and business administration in the USA (MBA) and working for Procter & Gamble and Otis Aufzüge, he served as managing director of an international IT and engineering consulting company for fourteen years. This position was followed by seven years at the management and IT consultancy MHP as partner and CEO of the Porsche subsidiary MHP Americas. Radowski has been with Porsche Consulting since October 2019, initially as President and CEO of the US subsidiary Porsche Consulting, Inc. in Atlanta. He is now responsible for international consulting projects in the semiconductor sector and for supporting the VW software subsidiary CARIAD.
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