SEMICONDUCTORS AND SOFTWARE LEADING THE PATH TO SUSTAINABILITY
Electrification is a broad concept including not only electric vehicles (EVs) of all types, but in fact anything with a plug.
SUSTAINABILITY CHALLENGE
We have heard a lot about sustainability, but what is it, really? The current definition of sustainability in the Oxford English Dictionary is “The property of being environmentally sustainable; the degree to which a process or enterprise is able to be maintained or continued while avoiding the long-term depletion of natural resources.” This is a complex concept, and there are three aspects worth talking about.
First, the impact. In simplest terms, sustainability is about our children and our grandchildren, and the world we will leave them.1 We often talk about the environment as if it were a separate thing, but the reason it matters is because we all share it. In actuality, it’s hard to imagine a more important impact. And as engineers, isn’t that the point of why we make technology?—to make the world a better place. Perhaps this sounds naïve, but only if we don’t consider the following two aspects.
Next, the scope. Certainly, the scope is global. We can improve our local environment, but to truly make the world a better place, we must think and operate globally. This means we can develop our technology in a way that transcends national boundaries and politics, but still operates within the value structures that we have as a society. As engineers, we want our technology to be used globally and this means understanding the business, not just the technology.
This leads to the last aspect, balance. Sustainability implies achieving a balance between the environment, social equity, and the economy.1 We live in a world where our technology creates value, but only if people have access to it. And from an economic perspective, the reality is that consumer buying patterns are changing, and in fact, any product seen as “green” can charge a value premium above equivalent “nongreen” products. Food is one example; companies like Whole Foods are built to capitalize on the green premium. But it’s not stopping there. Sustainability can add to the value that our technology can create, and cars, semiconductors, and software are next.
SEMICONDUCTORS AND SOFTWARE ARE MORE IMPORTANT THAN EVER BEFORE
The role of semiconductors in our lives is becoming very well known. The COVID-19 pandemic shocked many industries around the world, and now, as the world emerges beyond the pandemic, we see a sharp ramp-up in consumer demand spanning from consumer to automotive and beyond. Supplies are tight, costs are going up, and markets are volatile. The semiconductor industry is on a major rebound growing at 26% year over year, now passing more than $600B of yearly revenue.2 That’s nearly $100 per year for every person on Earth.
Does this remarkable growth mean that a drop is coming? That is unclear. However, semiconductors have proven to be highly resilient through economic cycles in the past. In fact, over the past three decades, semiconductor growth has averaged more than 8.5% CAGR. This resilience is due to the growing and profound enablement of semiconductors in key megatrends in electrification, experience, automation, communications, and more.
As large as the industry is, the value created by chips is far larger, estimated to be in the tens of trillions of dollars.3 The reason lies in the way that chips work. It is semiconductor chips that measure the world around us, process the signals, power the cloud, and enable software to run on computers, mobile phones, cars, factories, etc. Simply put, without chips, we don’t have much of the technology on which we have come to rely. And the software that runs on our chips, plus the extra value from the green premium, greatly increases our technology impact.
IMPACT OF ADI TECHNOLOGY
As we drive towards making a positive impact for sustainability, we first need to understand how to measure it. The impact is not just what we do with our own technology, but how customers are using ADI technology to impact the environment. Greenhouse gas (GHG) emissions are one way to measure impact, and in fact, transportation, buildings/manufacturing, and electricity account for 74% of the world’s total GHG emissions.4
We have developed a model for how much emissions savings customers using ADI technology are achieving, and this is shown in the graph above. Customers using ADI technology are on track to save 250 million tons of GHG per year by 2025, and nearly 600 million tons by 2030. To put the 600 million tons in context, it is estimated the world needs to achieve a savings of 51 billion tons per year to reach a “net zero” balance for GHG emissions.4 Of course, there are other types of ADI technology that also make an impact, and these can be added as we go forward. But first let’s dive a little deeper into electrification.
GROWTH OF SEMICONDUCTORS AND ELECTRIFICATION
Electrification is a broad concept including not only electric vehicles (EVs) of all types, but in fact anything with a plug. And it also covers the electric grid to which all things with plugs are connected. From an economic perspective, the automotive industry is fast becoming one of the most significant drivers of impact to the electric grid. In fact, the automotive industry is in its most significant pivot in history. As of today, all major OEMs have announced their investment away from gasoline engines and over to EVs. This is good news for semiconductor and software companies.
Today’s car contains, on average, $450 worth of semiconductor content. However, the equivalent EV contains approximately 3× the content.5 Currently, there are 16 million EVs on the road6 and over the next 5 years, we anticipate this to grow to more than 125 million EVs. This means you can expect that around half of all automotive semiconductors will be in EVs over the next 5 to 10 years.
But it is not only hardware content that is growing in cars. Software content is growing massively. By 2030, it is estimated that software will become the largest revenue driver for the automotive industry, even bigger than car sales.7 This tectonic shift presents a massive opportunity for companies like ADI to build value adding on to semiconductors. In fact, we are capturing this value now. For example, the recent wireless BMS technology that we introduced is built on a complete ADI platform built from the ground up, including not only hardware, but also a completely new wireless protocol stack.8 This system supports over the air updates, and achieves the highest security rating in the industry.
From a technology standpoint, the battery is the enabling system for the EV. EV batteries must connect to the grid to be charged, and they also can serve as storage elements to put energy back into the grid. The business models of how the consumers, charging companies, and OEMs reimburse or pay for this energy are continuing to evolve, and you will see the ecosystem continue to change.
ADI supplies technology on both sides of the charging cable. On the vehicle side, ADI is the market leader supplying semiconductors and software that power the battery management system (BMS) electronics to deliver energy between the battery, the vehicle propulsion system and the grid.
The rise of EVs has a major impact on requirements for how the electric grid is managed. First, consider the electrical load. The maximum load from the 125 million EVs is about ~10 (TWh). Though this is small compared to the expected growth in the world’s total electricity production from 25,000 to 28,000 TWh,9 the load is uniquely dynamic in both time and space as EVs move within the infrastructure. Therefore, not only must the total load be able to be handled, it also must be managed in real time, so the power is delivered seamlessly and with zero interruption to all electrical devices on the grid.
On the grid side of the charging cable, ADI supplies technology for precision measurement, control, and real-time signal processing. In fact, ADI is designed into the world’s most sophisticated secondary substation adding intelligence at the edge of the grid to ensure reliable energy delivery and grid management.10 We expect this type of equipment to become the new standard as the grid continues to become more decentralized and noisier as new energy sources and new energy loads are added.
Lastly, let’s discuss clean energy. While fossil fuels will continue to supply a portion of the world’s energy needs, much of the growth going forward will be from clean energy. The ramp-up is happening at the global level and is driven not only by climate accords but also by economics. Solar and wind are cheaper than oil, and EV consumers enjoy the convenience and savings of paying for miles at the plug vs. paying at the gas station.
However, clean energy sources operate intermittently and must be managed with energy storage systems to provide a smooth supply into the grid. Though the market for energy storage is much smaller than for EVs, energy storage systems are growing even faster than EV production and rely on precision BMS tailored to their specific use cases. This challenge presents significant opportunities for the precision and processing technology developed by ADI.
ACCELERATING THE FUTURE
As we look to the future, we see that the carbon saving impact of semiconductors creates pressure for the upstream supply chains to become more green over time. Getting to a truly zero carbon supply bill of materials is very difficult for semiconductors. However, there is a premium to be made for those who get there first. Today’s consumers pay more for green products, and semiconductors are expected to follow suit. So, let’s ask for it. When will we see a zero-carbon fab? Or a zero-carbon package?
And there are additional initiatives. For example, ADI is building on our industry-leading position in BMS and creating a major new initiative to enable a sustainable battery. Working with partners, we are developing insights into the battery lifecycle to detect anomalies, monitor battery health, and assess value for second life applications outside the vehicle. These are exciting new developments for the industry, ADI, and the path to sustainability.
Our impact on the planet has never been more important than it is today. And our impact here at ADI is enabling us to keep innovating ahead of the industry. We are just at the beginning of making the world a more sustainable place, and electrification with semiconductors is the key technology enabler to accelerate to a net zero future.
References
1 “What is Sustainability?” UCLA.
2 “Gartner Says Worldwide Semiconductor Revenue Grew 26% in 2021.” Gartner, Inc., April 2022.
3 George Calhoun. “Which Companies Add the Most Value in the Semiconductor Industry? (Part 1).” Forbes, September 2021.
4 Bill Gates. How to Avoid a Climate Disaster. Alfred A. Knopf, February 2021.
5 Peter Brown. “Semiconductor Spending in Cars to Rise by 55.6% by 2026.” Electronics360, September 2021.
6 Fred Lambert. “Global Market Share of Electric Cars More Than Doubled in 2021 as the EV Revolution Gains Steam.” Electrek, February 2022.
7 “How Supply-Chain Turmoil Is Remaking the Car Industry.” The Economist, June 12, 2022.
8 “Analog Devices Introduces Automotive Industry’s First Wireless Battery Management System for Electric Vehicles.” Business Wire, September 2020.
9 Key World Energy Statistics 2021” International Energy Agency, September 2021
10 Analog Devices and Gridspertise Join Forces to Advance Smart Grid Resiliency and Electrification Worldwide.” Analog Devices, Inc., March 2022.
About the Author
Dr. Patrick Morgan is the Vice President and General Manager of Automotive at Analog Devices, a leader in analog/mixed-signal ICs, software, and systems. Patrick has more than 25 years of experience successfully developing, growing, and managing businesses in the automotive, consumer, and industrial markets. His prior experience includes NXP and Freescale Semiconductor, where he established and grew its position in advanced driver assistance systems (ADAS). Prior to Freescale, Patrick was the Vice President at Javelin Semiconductor, a power amplifier start-up company, leading its growth from inception to successful acquisition by Avago in 4 years. Patrick also led wireless products at Silicon Labs, growing from zero to $1B+ in mobile handsets in the early 2000s. Patrick holds seven patents and a Ph.D. in electrical engineering from Stanford University.
