Software and cloud data will accelerate the decline of the microchip within the automotive industry

The industry is steadily moving towards software-defined vehicles, despite high costs and limited access to the technology for economy class manufacturers. Estimates from a 2021 McKinsey study suggest that one in three manufacturers already has software-define vehicles in development, with a further fifth of those also developing their own cloud-based services.

The technology is already seeing some applications within the luxury vehicle segment. The limited availability of microchips is beginning to force some luxury vehicle manufacturers to lean more on software and cloud-based services from Tier 1 suppliers. A 2020 study by Deloitte theorises this could be part of growing trend, with manufacturers looking to mitigate the limitations imposed by the component shortages. The study also anticipates a drop in price of software-based and cloud data solutions, estimating a 15% decline in the next five years.