The global automotive industry is in the midst of an automotive IoT wave.

The major wave called Software Defined Vehicle (SDV) is changing the entire automotive and auto parts industry, including not only the world’s major automakers but also Tier 1 and Tier 2 suppliers and below. The automotive industry, which has traditionally grown around “hardware,” or manufacturing, is now shifting its focus to “software,” which is expressed in various functions, services, and related effects that users can see.

The IT industry, as well as the automotive industry, will play a central role in this shift, and IT companies in the United States, which is strong in IT, and IT companies in China, which want to catch up with the United States, are increasing their presence by proposing and implementing a variety of software for the automotive industry. The IT industry is taking the lead in this field, and the competitive map for automobiles is about to change. In addition to their existing software development capabilities, the IT industry is pursuing strategies to add more value based on AI, which is undergoing technological innovation, and is proposing multifunctional automobiles that will change the car from being merely a means of transportation to a living space.

The SDV movement is not new; there was a time around 2015 when GAFA attempted to enter the automotive industry. The goal was to drive change in the automotive industry in the four areas of connected, automated driving, sharing, and electrification, then known as “CASE” from the English acronym, and to participate in the software and service areas where the IT industry has strengths and turn them into profitable businesses. Although this movement slowed down around 2020, it has been gaining momentum since 2023 compared to the CASE era, and the IT industry, armed with SDV, is now encroaching on the automotive industry.

On the other hand, major European and U.S. automakers have been working on SDV development from an early stage, and are trying to compete with IT companies by developing their own software and utilizing their strengths in the manufacturing field. In response, Tier 1 and 2 suppliers and below are also trying to focus on SDV development, and the more the shift to SDV progresses, the clearer the competition will become across industry boundaries in the development and manufacturing fields.

On the other hand, in order to realize SDV, attention is focusing on semiconductors that can handle hardware control and software operation, respectively, and although ultra-high-performance semiconductors are necessary to realize SDV, only a handful of companies are capable of manufacturing them as of 2024. The practical application of high-performance semiconductors is expected to advance in various ways in the future, but the composition of the SDV competition will change dramatically depending on who is able to incorporate such semiconductors first.