12 September 2016 Asia Pacific/Japan Equity Research
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors Connections Series
Automotive technology insights: Electrification, Automation, Informatization: Vol.3 Informatization
Figure 1: Autos to become moving data terminals
The Credit Suisse Connections Series leverages our exceptional breadth of macro and micro research to deliver incisive cross-sector and cross-border thematic insights for our clients.
Research Analysts Masahiro Akita 81 3 4550 7361 Source: US Department of Transportation [email protected] Koji Takahashi ■ Summary: Three major trends currently dominate automotive technology: 81 3 4550 7884 electrification, automation, and informatization. We conducted a cross-sector [email protected] survey to explore current developments within these three areas, including Hideyuki Maekawa automotive-sector supply chain trends as well as the activities of increasingly 81 3 4550 9723 critical major suppliers in the industrial electronics, electronic components, and [email protected] consumer electronics industries. After focusing on electrification in the first Akinori Kanemoto installment of this series, Automotive technology insights: Electrification, 81 3 4550 7363 [email protected] Automation, Informatization: Vol.1 Electrification (16 July 2014), and on Mika Nishimura automation in the second installment, Automotive technology insights: 81 3 4550 7369 Electrification, Automation, Informatization: Vol.2 Automation (8 April 2015), in [email protected] this third and final installment we delve deeper into informatization. Yoshiyasu Takemura
81 3 4550 7358 ■ Focal points: In addition to the basic functions of moving, turning, and stopping [email protected] that cars have performed to date, all of a sudden the need for cars that connect Takuma Tsuji is steadily growing. Technology that connects cars was previously called 81 3 4550 9815 “telematics,” but interest recently has been focusing on so-called "connected [email protected] cars" viewed as moving information terminals, and also called “V2X” in connection with vehicle automation. We expect the global informatization market to grow from ¥3.6tn in 2020 to ¥5.8tn by 2030. Due to expansion of the informatization market, a value chain is forming that includes interior and exterior elements such as, (1) auto technology for sending and receiving information, (2) communication infrastructure, and (3) information sent and received. We believe not only auto/auto parts makers, but also companies in a wide range of non-auto sectors (electronics/parts makers, telecommunications providers, Internet service providers, and services companies that handle application
provision), will likely gain opportunities to expand value-added.
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
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12 September 2016 Table of contents
Glossary of informatization terms 3 Informatization stocks and implications 4 Auto sector 4 Auto parts sector 4 Industrial electronics sector 5 Electronic components sector 5 Consumer electronics sector 5 Electrification, automation, and informatization 7 Automotive technology trends mainly in three fields 7 Informatization 8 Autos to become moving data terminals 8 Informatization market outlook 13 History of informatization 16 Laws, regulations, issues related to informatization 17 Trends among carmakers 20 Toyota Motor (7203) 20 Nissan Motor (7201) 26 Honda Motor (7267) 28 US automakers 31 European automakers 32 Informatization technology trends 34 Automotive technology for sending and receiving information 34 Infrastructure for sending/receiving information 43 Information sent/received by users 45 Informatization supply chain 51 Denso (6902, NEUTRAL, TP ¥4,000) 51 Aisin Seiki (7259, OUTPERFORM, TP ¥5,400) 53 Mitsubishi Electric (6503, NEUTRAL, TP ¥1,340) 55 Alps Electric (6770, OUTPERFORM, TP ¥2,900) 55 Murata Manufacturing (6981, OUTPERFORM, TP ¥16,500) 55 Mitsumi Electric (6767, NEUTRAL, TP ¥525) 56 Rohm (6963, OUTPERFORM, TP ¥7,300) 56 Panasonic (6752, NEUTRAL, TP ¥1,100) 56 Pioneer (6773, NEUTRAL, TP ¥240) 56 Alpine Electronics (6816, NEUTRAL, TP ¥1,350) 57 Clarion (6796, NEUTRAL, TP ¥320) 57 JVC Kenwood (6632, NEUTRAL, TP ¥260) 57 Zenrin (9474, Not Rated) 58 Aisan Technology (4667, Not Rated) 58
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 2 12 September 2016 Glossary of informatization terms
Figure 2: A glossary of main informatization terms in this report ADAS Advanced Driving Assistance Systems AGL Automotive Grade Linux ATIS Advanced Traffic Information Service AUTOSAR Automotive Open System Architecture CCC Car Connectivity Consortium CMF Common Mode Filters CVSS Connected Vehicles Support Systems DCM Data Communication Module DSRC Dedicated Short Range Communications DSSS Driving Safety Support Systems ETC Electronic Toll Collection System GPS Global Positioning System HMI Human Machine Interface HUD Head-up Display ITS Intelligent Transport Systems IVI In-Vehicle Infotainment JASPAR Japan Automotive Software Platform and Architecture K.T. Act Kids Transportation Safety Act LCD Liquid Crystal Display LCOS Liquid Crystal on Silicon M2M Machine to Machine MID Multi-Information Display MIMO Multi-Input Multi-Output MLCC Multi-Layer Ceramic Capacitor OAA Open Automotive Alliance OBD-II On Board Diagnostics PMIC Power Management Integrated Circuit PMP Portable Media Player SDL Smart Device Link SPY Car Act Security and Privacy in Your Car Act TFT Thin Film Transistor TPMS Tire Pressure Monitoring System V2I Vehicle-to-Infrastructure V2X Vehicle-to-X (Any target connecting to vehicle) V2V Vehicle-to-Vehicle VICS Vehicle Information and Communication System
Source: Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 3 12 September 2016 Informatization stocks and implications Auto sector Toyota Motor (7203, NEUTRAL, TP ¥6,150) Toyota provides T-Connect (a telematics service) and ITS Connect (an accident prevention, driving support function/service). Big Data, collected via data communication modules (DCMs), which Toyota is increasingly equipping on the cars it sells, is a key element for maintaining the company's competitive advantage. In informatization technology, Toyota has abandoned its policy of acting as a self-contained entity as it strives to win non-auto sector companies, using its considerable financial backing. Nissan Motor (7201, OUTPERFORM, TP ¥1,250) Nissan provides 24/7 links to its NissanConnect CARWINGS telematics service. Centered on its Renault alliance, the company is also developing next-generation connected cars and plans to fit new connectivity applications to vehicles. It is also forging ties with major companies in information technology development and organizations in non-auto sectors such as NASA and Microsoft. Honda Motor (7267, NEUTRAL, TP ¥3,000) Honda provides Internavi, a telematics service that can be used with its navigation system. The company is promoting use of Internavi in information technology in the safety field, such as Safety Map, which it has developed using probe data collected from Internavi- capable vehicles. The company also uses informatization technology in the ITS field for both cars and motorcycles. It is collaborating with Softbank Group (9984) in areas including R&D for connected cars equipped with V2X units and artificial intelligence (AI).
Auto parts sector Denso (6902, NEUTRAL, TP ¥4,000) Denso, as part of its longer-term strategy, is developing next-generation advanced driving support technology involving sensing, IT, and human machine interface (HMI) technology. We see Denso as one of the auto parts sector names most able to benefit from an expanding informatization market. We look for Denso's sales in information safety to grow to around ¥1tn in FY3/21. Informatization technologies handled by the company include head-up displays (HUDs), multi-information display (MID) instrument clusters, V2X modules, and DCMs. Aisin Seiki (7259, OUTPERFORM, TP ¥5,400) Aisin Seiki is focusing on developing various informatization technologies centered on the car navigation business. In FY3/16, the company's car navigation sales accounted for only 3.3% of consolidated sales, or ¥108.4bn. However, the company also sells software in the form of smartphone apps and the shipment value of its car navigation systems has been rising over the past few years. Car navigation functions are also used in cooperative control together with various mechatronics products such as automatic transmissions (AT) and brakes, helping to boost overall value-added for its products.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 4 12 September 2016
Industrial electronics sector Mitsubishi Electric (6503, NEUTRAL, TP ¥1,340) Mitsubishi Electric is pursuing growth in three new areas: EV/HEV, advanced driver assistance systems (ADAS), and next-generation information terminals. The company has a wide range of technologies—including for precision positioning of quasi-zenith satellites, communications, and security—that help give it formidable system proposal capabilities. In the area of informatization, the company is involved in human machine interfaces, 5G base stations, V2X, and high-precision maps for autonomous vehicles. We think the expansion of the automotive market could drive long-term profit growth in these areas.
Electronic components sector Alps Electric (6770, OUTPERFORM, TP ¥2,900) Alps appears well positioned to maximize the benefits of market growth in in-vehicle informatization. The company is the largest manufacturer of in-vehicle Bluetooth modules and Wi-Fi modules. Alps has superior development capabilities for both hardware and software in the in-vehicle connectivity market. The company is also involved in head-up displays (HUDs) and is working with Alpine (6816) to develop cockpit modules. Rohm (6963, OUTPERFORM, TP ¥7,300) Rohm produces backlight LED drivers, LCD drivers, controllers, PMIC, and timing controllers for use in in-vehicle displays. Consultative product design efforts appear to be progressing well and we expect greater earnings contributions from FY3/18. Murata Manufacturing (6981, OUTPERFORM, TP ¥16,500) We expect growth in in-vehicle Wi-Fi modules from 2H FY3/17 and 802.11p modules from around 2018. For passive components, we expect growing demand for CMF, coils, and MLCC with the move to in-vehicle infotainment (IVI) and instrument cluster displays. Mitsumi Electric (6767, NEUTRAL, TP ¥525) Mitsumi is involved in in-vehicle Bluetooth and Wi-Fi modules, as well as antennas; we expect increasing connectivity functionality in cars to drive up antenna added value.
Consumer electronics sector Panasonic (6752, NEUTRAL, TP ¥1,100) In terms of automotive, Panasonic focuses on comfort products, led by infotainment systems; safety products, which includes sensors and automotive cameras; and the environmental category, mainly batteries. OEM navigation system orders are currently in a fallow period, but orders for delivery from FY3/18 and beyond are showing growth in cockpit systems that integrate infotainment, center display, and head-up display components. We expect OEM navigation system sales growth from FY3/18, following an upfront investment period. Pioneer (6773, NEUTRAL, TP ¥240) OEM navigation system sales contributions starting in 4Q FY3/18 from new orders. Aftermarket conditions are challenging in the audio market and there is risk of sales falling over the medium term. Management is focusing on strengthening interoperability with smartphones to take advantage of the connected car trend. Among its self-driving systems products, we believe there is medium-term growth potential for its 3D LiDAR sensors, advanced map-related systems, and high-precision map data but it will take a few years to start contributing to earnings.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 5 12 September 2016
Alpine Electronics (6816, NEUTRAL, TP ¥1,350) Alpine’s business centers on OEM car navigation systems for luxury sedans, and it is positioned to benefit from the shift toward in-vehicle infotainment systems (IVIs). Company’s use of opportunities to collaborate with Alps and Neusoft is a strength. We expect cockpit systems to take off in earnest around 2019–20. Meanwhile, Alpine plans for its existing OEM navigation system business to start benefitting from new orders around 2H FY3/17, and we expect the trend in fundamentals to bottom out relatively soon. Clarion (6796, NEUTRAL, TP ¥320) Although the pace of sales growth has slowed due to a fading impact from a round of new orders, with its OEM-centered business model, we think Clarion is likely to do well in the shift toward in-vehicle infotainment systems (IVIs). In automotive camera systems, its specialty is surround view monitors that help confirm the position of the vehicle during parking. With demand for driving-support functionality growing, we expect the adoption of Clarion systems to grow as automatic parking options spread to more vehicle models from 2H FY3/18. Clarion has the advantage of being able to collaborate with parent Hitachi and Hitachi Automotive (6501), a member of the Hitachi group. JVC Kenwood (6632, NEUTRAL, TP ¥260) JVC Kenwood’s navigation and audio systems are currently mainly aftermarket, but it has been expanding its dealer option lineup in recent years. It is developing digital cockpit systems that include electronic mirrors, electronic meters, head-up displays (HUDs), and infotainment systems and we understand that it has received orders from some automakers, but sales and earnings contributions are likely to be minor. Over the medium term, growing sales in the aftermarket and car CD/DVD mechanism businesses, will likely require winning additional orders in both dealer option and OEM channels. For more details on LTE and 5G, please see our 21 July and 29 August reports. 5G in the runup to 2020 (Part 1): Standardization and specification (21 July 2016) 5 G in the runup to 2020 (Part 2): Activities of major carriers and equipment vendors in each region (29 August 2016)
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 6 12 September 2016 Electrification, automation, and informatization Automotive technology trends mainly in three fields Cross-sector report series on electronics, automation, and informatization Trends in automotive technology are increasingly focused on the three areas of electrification, automation, and informatization as offering ways to boost environmental performance and enhance user safety and comfort. In addition to researching these three areas of automotive technology, we are conducting cross-sector research aimed at highlighting the important trends within automotive supply chains, while focusing on specific individual stocks in sectors such as industrial electronics and electronic components that are playing critical roles in automotive technology. This—the third and final report in a series of cross-sector Connections reports that examine sectors relating to the three growth areas of electrification, automation, and informatization as they are applied in the automotive field—follows our initial offering, Automotive technology insights: Electrification, Automation, Informatization: Vol.1 Electrification, which focused on electrification technologies, and our second report, Automotive technology insights: Electrification, Automation, Informatization: Vol.2 Automation, which focused on automation technologies. In this installment, we look at the trend toward informatization. Delivering increased environmental performance, safety, and comfort A typical vehicle consists of 20,000 to 30,000 parts, all of which are designed to deliver the environmental performance, safety, and comfort demanded either by users or automakers. The evolution of automobiles can be viewed in terms of the continuous improvement of the various systems and modules that make up the powertrain, drivetrain, brake and chassis, and body (exterior and interior) of the vehicle to deliver increased levels of satisfaction for these three elements. Non-automotive sector supplying high-value-added products in three fields In automotive supply chains, it is the value added to specific parts, systems, and modules that is exerting the major influence on technical trends. The key value creators and drivers of these trends are the companies capable of supplying parts, systems and modules vital to the increasing use of electronics, automation, and informatization by automakers. As the value added via these three trends grows, industrial electronics, electronic components, and consumer electronics players within other non-automotive sectors are seeing their scope of operations increasingly spread out into the automotive sphere. This is almost self-evident, given the increasing adoption of computers, sensors, and electric motors in passenger vehicles. We see players outside of the automotive sector leading some of the shift in auto-related technical value creation, which in turn should generate increasing growth potential for such companies from auto-related operations.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 7 12 September 2016 Informatization Autos to become moving data terminals Autos now have to connect as well as move, turn, and stop The basic functions of autos have historically been to move, turn, and stop, and now demand for cars that connect is growing rapidly. Among car-connectivity technologies, information services and systems that use autos and telecommunications systems have historically been called “telematics” (a portmanteau of “telecommunications” and “infomatics”). Recently, however, attention has increasingly focused on “connected car” technology, which views autos as moving data terminals. Also garnering attention is "V2X" because of its relation to vehicle automation. It seems clear that as a technology that will lead to a new way to boost environmental performance and enhance user safety and comfort, car-connectivity technology will grow significantly in importance. In this report, we explore the key technology trends in the broad category of informatization.
Figure 3: Autos to become moving data terminals
Source: US Department of Transportation
How auto informatization became a focus Auto-related information and communications technology has evolved over the years through the adoption of car navigation systems, ETC (electronic toll collection) systems, and the like. Suddenly, however, auto informatization has become a focus, which we attribute to three factors. First, increases in wireless communication speed and capacity have made it possible to receive and transmit real-time data at high capacity. Second, the cost of in-car information and communications devices has fallen, and there has been progress in substitute devices, such as smartphones with related applications. Third, the spread of cloud computing has enabled high-speed, high-volume data creation, distribution, analysis, and utilization.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 8 12 September 2016
Figure 4: How auto informatization became a focus
(1) Increase in wireless communication speed and bandwidth
Focus on (2) Lower priced in-vehicle communication devices informatization Replacement of devices by smartphones of autos
(3) Substantial increase in Big Data distribution
Source: Ministry of Internal Affairs and Communications, Credit Suisse Informatization defined The definition of “informatization” is somewhat more obscure than that of “electrification” and “automation” (the topics covered previously), which may make it hard to grasp the concept as a whole. Moreover, we think it is not easy to determine which informatization- related technologies and players deserve focus. One reason is that informatization is related to all aspects of auto performance, notably environmental performance, safety, and comfort. Another is that informatization is now a deeply rooted trend not only in the manufacturing sector (particularly among automakers), but also in the services sector (including companies that supply applications). The informatization supply chain encompasses a wide range of companies both large and small, and involves not only the auto sector (automakers and auto parts companies), but also non-automotive sectors such as electronics and electronic components, as well as services-sector companies, including telecommunications carriers, Internet service providers, and application providers. To help clarify the definition of informatization, we have attempted to simplify things by dividing the term into the following three categories and discussing the relevant trends in each: (1) hardware and software for data reception and transmission, (2) infrastructure for data reception and transmission, and (3) the data being received and transmitted. The first category includes not only the data reception and transmission devices themselves (mostly on the car side), but also the interfaces for linking them to smartphones, such as human-machine interfaces (HMI) and tethered in- vehicle infotainment (IVI) systems. The second category includes in-car near-field communications technology and mobile networks for wide-area communications. The third category includes various telematics applications, such as map data, vehicle breakdown and maintenance data, emergency data, infotainment data, and digital e-commerce.
Figure 5: Informatization defined
Source: Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 9 12 September 2016
Figure 6: Continental’s proposed Holistic Connectivity system
Source: Continental Automotive GmbH Telematics applications are crucial to adoption of auto informatization Development of a wide variety of telematics applications will be critical to the spread of auto informatization. Here we would like to discuss those applications, whether for in-car devices or for smartphones, that appear promising at this point. The first is the map data applications required by existing navigation systems. Such applications not only download the most recent road data, but also provide various types of related information, such as up-to-date congestion and traffic information as well as up-to-date route information that utilizes probe data obtained through V2X communications. Above all, there will be a growing need for updates to the high-precision map data required for automated driving. Another promising area is applications that provide vehicle breakdown and maintenance data. Such applications recommend inspections and maintenance depending on vehicle conditions, provide advice prior to and at the time of breakdowns, and make possible online scheduling of maintenance and repair. There is also a growing need for emergency information services such as the eCall system, which is scheduled to become mandatory in Europe. Among the functions of this system is to connect to a dedicated operator following an accident or other emergency, who then dispatches an ambulance or other rescue vehicle based on the vehicle data sent by the car. Another growing set of requirements is vehicle security in areas where cars are frequently stolen. Such applications enable remote checking and operation of door locks and windows and make it possible to have the car’s alarm sound when it is being stolen and subsequently track the car. A further promising service is telematics-based auto insurance, which benefits users in several ways: generating premiums based on mileage data, offering safe-driving tips, and providing support following accidents and other problems through a dedicated information desk. As electric vehicles spread, so too will the use of environmentally friendly applications such as those providing real-time information on recharging stations. Finally, the development of electrification technology by individual automakers will lead to a growing need for driving support applications using vehicle-to- infrastructure (V2I) and vehicle-to-vehicle (V2V) information for use by ADAS (advanced driver assistance systems). As vehicles evolve into moving data terminals, it will become increasingly important to enable users to utilize their existing smartphones to run infotainment applications while inside the vehicle. We foresee adoption of a wide range of applications and services, including music downloads (whether to in-car devices or to the user’s smartphone), weather information updates, search and display of restaurant information, sightseeing recommendations, and digital e-commerce.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 10 12 September 2016
Figure 7: Main telematics applications
Map information On-demand maps, download of latest traffic information
Optimum route suggestions using statistical data including latest traffic information, historical statistics, and real-time driving information of other users
Vehicle break-down/ Information on tests and inspections based on vehicle condition; Maintenance information advice on flashing warning signs
Online booking for maintenance, upkeep, and periodic inspection/tests
Connection to a dedicated operator for reporting accidents and Emergency communications medical emergencies; arrangement of emergency vehicles based on automatic transmission of location info
Road assistance; arranging emergency rescue unit during vehicle breakdown or accidents
Remote check/operation of door lock and windows; anti-theft Vehicle security alarm, tracing of stolen vehicles, dispatch of security staff
Operator service Information search/communication through dedicated operators
Auto insurance calculation based on actual driving data; advice for Auto insurance safe driving, support for accidents/issues through a dedicated reception desk
Driver assessment for eco-driving, real-time recharging location Environmental compliance data for EVs
Driver assistance based on Vehicle-to-Infrastructure (V2I) and ITS Vehicle-to-Vehicle information
Music download through in-vehicle device or smartphone, auto Infotainment search/playback of tunes suited to actual location based on current vehicle position and navigation data
Weather updates
Search/view of restaurant information
Guides for tourist spots by type and location
Search/list stock market information; voice updates for pre- registered stocks
Source: Toyota Motor, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 11 12 September 2016
Informatization: a differentiator for autos The possibility cannot be dismissed that the evolution of cars into moving data terminals will result in major structural change to auto sector business models. Once autos have always-on network connections and users are able to utilize various telematics services, many new earnings opportunities are likely to arise. Moreover, for users buying a new vehicle, the kind of telematics services that are available (and not merely whether the vehicle has telematics services) is likely to become one element of the purchasing decision. From the automaker’s perspective, this means that what type of compelling applications and content they provide will become a differentiator. As this happens, the added value of vehicles (which are ultimately a type of asset) will not come just through the conventional functions of a vehicle—to move, turn, and stop—but also through the “connect” function. There could be a shift toward services that contribute to the added value of vehicles through this function. If automakers do not recognize this shift in added value and fail to exploit the related earnings opportunities, companies in non-automotive sectors (such as services companies that provide applications) would be in a position to take advantage of such business opportunities. Pinpointing informatization value-added Progress in auto informatization will likely result in formation of a value chain containing interior and exterior elements. We think the chain will comprise informatization technology associated with the existing automobile supply chain, communication infrastructure that connects cars with external networks, and the information content sent and received by cars and networks. On the automobile side, the increased adoption of IVI systems including sending/receiving equipment and HMI systems such as HUD and cluster MID, leads us to believe that value-added will likely increase at the auto parts makers and electronics/parts makers that supply these systems and components. In communication infrastructure, we think companies will strive to tap value-added in the area of vehicle information systems and in the area of telecom carriers and platforms, mainly via collaboration with automakers. However, for information that leads to user enjoyment and convenience such as infotainment and digital e-commerce, although automakers and some Tier 1 auto parts makers will likely try to get involved, we think service providers that supply applications will likely benefit the most from growth in opportunities for use by drivers and passengers. We look for growth in value-added at map makers that handle precision map data such as 3D maps—a must-have for next-generation autonomous driving technology. However, while we think investors will likely worry about the absence of automakers from areas where new value-added will likely emerge, we think automakers, especially the larger ones, as they reap Big Data by monitoring the cars they sell, will likely benefit the most in terms of value-added from growth in the informatization market. As automakers have suddenly started to incorporate communication modules into their vehicles, we think Big Data, which can be obtained by collecting running information sent by vehicles sold by the millions (or even tens of millions) per year, could become the source of new business opportunities, including development of next-generation traffic systems and automated vehicles, insurance, and after-sales service. An automaker that sells 10mn vehicles a year will be able to gather around a trillion kilometers' worth of data over 10 years assuming a total distance driven per year of 10,000km. With non-auto sector companies gaining presence in the automobile value chain, auto Big Data is one of the most important areas for automakers to maintain a competitive advantage.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 12 12 September 2016
Informatization market outlook Informatization market likely to expand from ¥3.6tn in 2020 to ¥5.8tn in 2030 We expect the global informatization market to grow from ¥2.4tn in 2015 to ¥3.6tn in 2020 and ¥5.8tn in 2030. Among the three categories in our definition of automobile information, our market projections focus on hardware and software for sending and receiving information in automobiles and associated components—they do not include value-added generated by infrastructure for sending/receiving information or the information itself. We expect substantial demand growth in the informatization market driven by increasing demand for a more pleasant driving experience including environment, safety, and comfort. Using informatization technology to find optimum routes leveraging map and car data is a typical example on the environmental front. Examples in the safety area include autonomous driving support using V2X and emergency communication via telematics and GPS. On the comfort front, we expect growth in applications to give passengers a more enjoyable journey via expansion of user interfaces equipped with communication functions such as IVI. Demand for information sending/receiving hardware and software and for their constituent components should increase in tandem with an expanding informatization market. We expect the global sales volume for connected cars (defined as vehicles capable of communicating externally via short-range or narrow/broadband communication technology) to rise from 20mn units in 2015 to 36mn in 2020 and 58mn in 2030
Figure 8: Market expansion from ¥3.6tn in 2020 to ¥5.8tn in 2030 8,000 Billion Yen Thousand Units 70,000
7,000 60,000 6,000 50,000 5,000 40,000 4,000 30,000 3,000 20,000 2,000
1,000 10,000
0 0
Informatization Market (LHS) Connected Car Volume (RHS)
Source: Company data, Credit Suisse estimates Connected cars likely to expand centered on vehicles equipped with IVI In this report, we divide user interface systems with communication functions into four categories: (1) embedded IVI, (2) mobile-linked tethering IVI, (3) telematics-compatible car navigation systems, and (4) telematics-compatible display audio. We position IVI (in- vehicle infotainment) as a human-machine interface (HMI) that functions as a transmitter and receiver of internal and external car information including navigation, location, Internet, multimedia, and vehicle diagnosis. IVI units therefore include all components such as navigation systems and displays as well as communication equipment. Embedded systems differ from mobile-linked tethering systems in that embedded systems have all components including communication equipment built into the vehicle, whereas mobile tethered systems have mobile phones and the like act as conduits for external connection. Telematics-compatible car navigation systems have a large market share in Japan, where
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 13 12 September 2016 a high proportion of vehicles are fitted with systems that are factory-installed by automakers. However, we expect car navigation systems to gradually merge with IVI in the informatization market, where we expect further diversification. We position telematics- compatible display audio simply as an automotive monitor that can engage in telematics communication but which does not have navigation functionality. Although functionality is limited compared with the other systems described above, we expect demand for display audio as a lower-priced option. In fact, we look for growth in connected cars as a whole, especially vehicles fitted with IVI systems having a wide variety of communication functions. We think the number of vehicles fitted with IVI systems (both embedded and mobile-linked tethered systems) will grow from 13.6mn units in 2015 to 25.0mn in 2020 and 42.0mn in 2030.
Figure 9: Growth in connected cars centered on IVI-equipped units 70,000 Thousand Units
60,000
50,000
40,000
30,000
20,000
10,000
0
Display Audio + Telematics Car navigation System Mobile Driven IVI System Embedded IVI System Source: Company data, Credit Suisse estimates
Figure 10: System differentiation among connected cars Embedded Mobile-related tethered Telematics compatible Telematics compatible System type IVI system IVI system car navigation system display audio
Integrated Infotainment system. Vehicle navigation system with A comprehensively integrated telematics module. Simple audio monitor Telematics communication that Definition system including navigation, Integrated system with GPS enabling telematics relies on mobile IVI audio, telematics/mobile-related, communication module, map communication apps, vehicle data (V2X, etc.) data, display audio
Display audio ○ ○ ○ ○
Navigation unit ○ ○
GPS for vehicles ○ ○
Navi data ○ ○
Telematics communication equipment ○ ○ ○ Structure parts Short-range automotive communication ○ ○ equipment (WiFi) Short-range automotive communication ○ ○ equipment (Bluetooth)
V2X automotive ○ ○
HUD Option Option Option Option
Cluster MID Option Option Option Option
Source: Company data, Credit Suisse estimates
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 14 12 September 2016
For communication equipment, we expect growth in V2X/short-range; for HMI, HUD and cluster MID Due to growth in IVI systems, demand is also likely to increase for software including map data used on such systems, communication equipment, and the HMI components that users interact with. Among communication equipment, we anticipate increasing demand for components such as V2V (vehicle to vehicle) and V2I (vehicle to infrastructure) equipment, short-range wireless equipment (Wi-Fi and Bluetooth modules), GPS equipment, and telematics communication equipment. We look for especially strong growth in demand for V2V and V2I equipment, which support autonomous driving. HMI includes cluster MIDs (multi-information displays), HUDs, car navigation units, and display audio. Cluster MIDs are high-performance displays incorporated in instrument clusters that display various kinds of information. The need for MIDs has been growing due to diversification of automobile information that drivers connect with. We expect MIDs to replace existing analog instruments. HUDs are displays that present data including navigation data and driving information without drivers having to take their eyes off the road. They are being promoted as a means of improving safety as they eliminate the need for drivers to frequently look down at monitors. Car navigation units and display audio are already equipped in many cars and we expect firm growth in the number of units fitted due to growth in the IVI systems in which they are included. By our estimates, the global market for informatization-related communication equipment (including software such as the map data mentioned above) will grow from ¥300bn in 2015 to ¥560bn in 2020, and ¥1,560bn in 2030. Similarly, we think the market for HMI components (the four products mentioned above) will expand from ¥2.15tn in 2015 to ¥3.30tn in 2020 and ¥4.50tn in 2030.
Figure 11: Outlook for V2X demand growth; trend toward Figure 12: Continuous volume growth in car navigation an expanding communications equipment market units and display audio from their IVI-equipped vehicles 2,000 Billion Yen 5,000 Billion Yen
1,600 4,000
1,200 3,000
800 2,000
400 1,000
0 0
Map Data V2I Transmitter V2V Transmitter Cluster MID HUD Navigation Unit Display Audio Unit Short Range Wireless Units GPS / Telematics Module Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 15 12 September 2016
History of informatization Surprisingly long in Japan The history of auto informatization in Japan is surprisingly long, going back to the Advanced Traveler Information System (ATIS) and Vehicle Information and Communication System (VICS), operated under the direction of the government. ATIS, which went into operation in 1995, involves transmission of traffic information distributed by Tokyo’s Metropolitan Police Department and other sources to enable car-navigation systems. The VICS, which began operations in 1996, is based on the Intelligent Transport Systems (ITS) concept from the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) and is widely known as a system that distributes road congestion information obtained from FM multiplex broadcasts, radio-wave beacons, and optical beacons. In the late 1990s, Japanese automakers began operating various telematics systems. In 1997, Toyota Motor launched Gazoo, which distributed various types of auto-related information, as well as Monet, a telematics service. In 1998, Nissan Motor and Honda Motor began operating the Compasslink and Internavi systems, respectively. In 2002, Toyota Motor merged the Gazoo and Monet systems and introduced a new telematics system called G-Book. At the same time, it began installing communications modules enabled for this system as standard equipment data in its car navigation systems. In 2005, it began operating G-Link, a one-stop service for operators of Lexus vehicles. In 2002, Nissan introduced an updated service called Carwings, and in 2010 it began operating the EV-IT system for its Leaf electric vehicle, which has management functions such as recharge information. In 2015, Toyota launched ITS Connect, the world’s first commercially viable driving support system using V2I and V2V communications on the 760MHz band (a frequency used exclusively for ITS).
Figure 13: Major informatization-related events in Japan 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ★ATIS service started ★VICS service started ★Toyota Gazoo and Monet started ★Nissan CompassLink started ★Honda internavi started ★ETC service started ★Toyota G-Book started ★Nissan Carwings started ★Isuzu Mimamori-kun started ★Toyota G-Link started ★Nissan EV-IT started ★Toyota PHV Drive Support started ★NissanConnect Carwings Itsudemo Link started
★Toyota T-Connect started ★Toyota ITS Connect started Source: Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 16 12 September 2016
Laws, regulations, issues related to informatization Laws, regulations, and standards have limited direct effect The electrification and automation trends have been fueled in part by the strengthening of environmental and safety-related laws, regulations, and standards. In contrast, we think these mechanisms have only a limited direct effect on auto informatization. However, certain laws, regulations, and standards are having an indirect impact by affecting the hardware, software, and infrastructure related to the connection function (i.e., the means of informatization). Simple examples include laws and regulations in developed countries essentially prohibiting the use of mobile phones while driving, as well as guidelines being issued by the relevant authorities in Japan, the US, and Europe for preventing drivers from losing focus and becoming distracted. These can all be viewed as laws, regulations, and standards deeply related to the HMI. The Kids Transportation Act in the US, which makes rear cameras mandatory, is an example of a regulation closely connected to HMI. In addition, while not a regulation per se, the Euro NCAP (new car assessment program) recommends the adoption of HUDs to prevent drivers from taking their eyes off the road. In addition, starting in 2018, new cars in Europe have to come equipped with the eCall emergency information system. Similar functionality could win adoption in other markets as part of a larger set of informatization services. Moreover, in the US and several other markets, efforts are under way related to cybersecurity, which is increasingly recognized as one of the most important issues related to auto informatization.
Figure 14: Major laws, regulations, and standards related to informatization Japan US EU Key regulations/standards Made a punishable offense in 2004. Regulations vary by state; currently German traffic laws prevent use of concerning mobile phone use while banned in 38 states. North Carolina objects that hinder the eyes or ears driving. also restricts hands-free of the driver. Use prohibited in communication and imposes fines for France, the UK, and Italy. violations.
Main regulations/standards JAMA's guideline on handling image Visual-Manual NHTSA Driver Harmonization of ARR Roadside and concerning driver distraction display devices specifies standards Distraction Guidelines for In-Vehicle Driver Information In Europe for device/image display mount Electronic Devices regulates position (HARDIE) project specifies standards position, display function, visual of visual displays (downward angle of for map and text display in navigation operation of image display while 30 degrees), text size, restrictions on systems. driving, and provision of information certain information while driving, and service to users. feedback related to device operation.
Other regulations/standards Following the amendments to the The Security and Privacy in Your Car Emergency communication system Safety Regulations for Road Vehicles (SPY) bill was introduced in the US (eCall) made mandatory for all new in June 2016, automakers are Senate in July 2015 in pursuit of autos in EU from 2018. allowed to design/manufacture stronger cybersecurity measures for mirrorless vehicles if equipped with a autos. camera monitoring system compliant with international standards.
Source: JAMA, Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 17 12 September 2016
Technical issues: standardization, cooperation, and establishing specifications As auto technology increases in sophistication and diversity, increasing the efficiency of R&D investment and improving reliability through standardization, cooperation, and the establishment of specifications are becoming issues. For example, the Automotive Open System Architecture (AUTOSAR) is a global standardization body whose aim is to establish common in-car software, an area that is only increasing in complexity. In Japan, the Japan Automotive Software Platform and Architecture (JASPAR) aims to design standard specifications for electronic technology. The goal of both bodies is to design standard architecture, thereby enabling automakers and parts suppliers to focus on designing the applications that will be their areas of competition. At the same time, various alliances are forming to tackle the urgent issue of standardization, cooperation, and establishing specifications in informatization-related technologies. In 2009, the GENIVI alliance was established to create an open infotainment platform for IVI systems. GENIVI has determined middleware specifications for the alliance area, as well as areas of competition for various applications, OS function extensions, various libraries, and user interfaces. Participants in this alliance include automakers (Honda and Nissan) as well as suppliers (Denso, Aisin AW, Mitsubishi Electric, Clarion, Pioneer, Alpine, and Alps Electric). The Car Connectivity Consortium (CCC), established in 2011, is pursuing standardization related to linking smartphones and other mobile devices with in-car IVI systems and is broadening adoption of a specification known as MirrorLink. Participating in CCC are a wide variety of automakers (e.g., Toyota, Honda, Fuji Heavy Industries (7270), and Mazda (7261)) and suppliers (e.g., Denso, Aisin AW, Mitsubishi Electric, Fujitsu (6701), Sony (6758), Panasonic, Clarion, Pioneer, JVC Kenwood, Alpine, and Alps Electric). Other mobile-related alliances include the Google-led Open Automotive Alliance (OAA), which is working with the goal of linking Android devices with autos, and to have Android devices installed in cars. Alliances related to in-car OSs include Automotive Grade Linux (AGL), which is pursuing an automotive version of the open source Linux OS, as well as the OPEN Alliance, which is working to establish specifications for Ethernet-based automotive networks.
Figure 15: Major standardization bodies related to informatization Alliance GENIVI Car Connectivity OPEN Alliance Automotive Grade Open Automotive Consortium (CCC) Linux (AGL) Alliance (OAA)
Established Date 2009 2011 2011 2012 2014 Standardization Area IVI Open Mirrorlink In-Vehicle In-Vehicle OS In-Vehicle Mobile Infotainment Ethernet Platform Platform Specification (Android) BMW x x Daimler x x x x FCA x x Ford x x GM x x x Hino Honda x x x x Hyundai/Kia x x x x Isuzu Jaguar Land Rover x x x x Mazda x x x MMC x x PSA x x x Renault/Nissan x x x x Subaru x x x Toyota x x x Volkswagen/Audi x x x Volvo x x x Others x x x Suppliers x x x x x Source: Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 18 12 September 2016
Auto data security an issue following Fiat Chrysler recall In 2015, risks related to information security—which had already become a concern amid advances in auto informatization—turned into a real issue as a result of a recall by Fiat Chrysler Automobiles (FCA). In July 2015, FCA discovered vulnerabilities in its data security and issued a recall of around 1.4mn vehicles. Specifically, FCA found that its in- car LAN could be accessed externally, enabling remote operation of a vehicle’s air conditioner, windshield wipers, engine, and brakes. This apparently necessitated an update of vehicle software. With auto technology becoming more sophisticated and diverse, the amount of software is increasing while network connectivity expands. Moreover, automotive systems are becoming more open owing to the adoption of Windows and Linux for auto OSs and a shift to Ethernet and TCP/IP for in-car LANs. While this has enabled the provision of various services to users, it has also made it less difficult to breach auto data security. In a publication entitled Approaches for Vehicle Information Security, the Information- Technology Promotion Agency, Japan (IPA) identifies several specific threats that could result from external intrusion. These include an attacker unlawfully unlocking a vehicle by spoofing the door-lock signal, eavesdropping on vehicle status data (e.g., vehicle speed and position data) by capturing vehicle communications data, sending an abnormality warning from the tire pressure monitoring system (TPMS) or other such systems by spoofing a data transmission, and using an On Board Diagnostics II (OBD-II) port to send an improper command to (or improperly overwrite) the program of the drivetrain or chassis system via the onboard LAN. Although security measures are rapidly being introduced to counter such threats, it will be increasingly important to utilize such security functions as encryption of data transmission routes and the data content itself; verification of users, communication partners, and add-on programs; and management of user effectiveness and the effective range of functions and transmissions.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 19 12 September 2016 Trends among carmakers Toyota Motor (7203) From G-Book to T-Connect In 1997, Toyota launched Gazoo, an automobile portal site that supplied car-related information via the Internet and a special terminal, as well as a car telematics service called Monet, which provides information via linked navigation systems and mobile phones. In 2002, the company developed a new vehicle telematics service called G-Book that combined Monet and Gazoo technology. The first version was deployed in the WiLL Cypha vehicle, which came standard equipped with a G-Book-compatible vehicle navigation system and a dedicated data communication module jointly developed with Denso and KDDI (9433). The service offered driving information about parking, leisure facilities, weather forecasts, etc., and additional functions such as email, an online message board, and a car-trouble notification service. Starting in 2003, G-Book was installed in a steadily widening range of vehicles, and the number of compatible navigation systems also increased. Toyota also strove to make the system more convenient, for example, by allowing connection via mobile phones, which sped up market penetration. In 2005, Toyota launched the G-Book Alpha service, which offered faster transmission speeds and features such as the Helpnet function that enabled emergency notification in the event of an accident or medical emergency. The G-Link vehicle telematics system launched by Toyota in August 2005 was introduced for Japanese-market Lexus vehicles when the Lexus brand was first rolled out in Japan. The system incorporated a one-stop response service by human operators for customer inquiries and requests. In 2007, Toyota evolved the system into G-Book mX, which featured functions such as map-on- demand, which updated navigation system maps automatically, and more precise traffic information reflecting the G-Book member's current driving situation. In 2010, Toyota launched G-Book Biz, a vehicle management support system aimed at corporate customers of Toyota rental and lease dealers. For G-Book, Toyota entered into tie-ups with Fuji Heavy Industries and Mazda Motor, which began service in 2004 and 2005, respectively. In 2014, Toyota replaced G-Book with a new telematics service called T-Connect. The company appears to be turning its focus towards T-Connect and away from G-Book, especially in Toyota-brand vehicles. T-Connect enables drivers to talk to agents via communication with Smart Centers (information centers) through dedicated data communication modules (DCMs) or mobile phones including smartphones. The company also introduced an information service in which the agent predicts routes and destinations from the car's driving history, even without the driver setting a destination, and provides information about accidents, traffic delays, weather, and remaining fuel via the car's navigation system screen. Toyota also provides an extensive online care service and apps that can be downloaded to vehicle navigation systems as selected by the driver. With packages that use DCMs, always-on communication without mobile phones or smartphones is possible. There is also a vehicle security service that issues an alarm notification and tracks the vehicle if it is stolen. Toyota has also developed apps that can only be used on smartphones, such as agent services and online care services. While G-Link comes standard equipped on Lexus models, T-Connect is mostly a manufacturer or dealer option. Since October 2015 Toyota has also provided ITS Connect, a function or service that supports driving and accident prevention. ITS Connect supports safe driving by obtaining signal information and information about pedestrians and cars which are not visible to the driver and which sensors equipped in vehicles cannot detect on their own. This is accomplished via a road-to-vehicle communication system (a driving safety support system) that uses the ITS-dedicated 760MHz waveband and a vehicle-to-vehicle communication system (a connected vehicles support system) and notifying the driver.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 20 12 September 2016
The system currently has limited effectiveness as ITS Connect sensors and communication networks have so far only been rolled out in a few locations such as greater Tokyo, and few vehicles have communication functionality. However, the system is expected to help reduce accident rates as it becomes more widely adopted. Toyota is also developing its eConnect system for plug-in hybrid vehicles. This system supports electric vehicle operation and eco-friendly driving by monitoring battery status and whether cars are being driven in an eco-friendly fashion. Accelerated efforts to develop "connection" technology, full-fledged Big Data collection/use In January 2016, Toyota Motor announced an acceleration in its connected car technology initiatives. The company plans to further promote the manufacture of "ever-better cars" via connected car technology in view of the changing environment (informatization). Specifically, the company plans to boost the proportion of cars fitted with a data communication module (DCM) starting with model changes in 2017 for the US market. It will then expand availability to additional regions and countries and enhance the ability to transmit data. By boosting the proportion of vehicles fitted with DCMs, which send vehicle data, the company will be able to use collected data more effectively in product development and after-sales service. In vehicles fitted with DCMs, emergency information systems linked with airbag deployment in accidents are fitted as standard, supporting a swift initial response if the worst happens. The company is also building a Big Data center (the Toyota Big Data Center) in its current Toyota Smart Center, which will substantially expand IT infrastructure in order to process the huge amount of data generated by growth in the installed base of DCMs. It intends to analyze and leverage the data collected from DCMs in development of various services, while protecting customers' private data with a high level of security. The company aims to draw up a global standard for DCMs (standards currently vary by country and region) by 2019, and steadily move over to them. To achieve this, it will add global integrated management of DCM communication to the functions performed by the Toyota Smart Center. Toyota will thus at last start to collect and use Big Data in earnest. The collection and use of what is by far the most data from the DCMs, fitted to the 10mn or so cars the company sells each year, is not something other companies be they IT companies in non-auto sectors or automakers can easily emulate. We think this could be a key element in maintaining Toyota's edge amid stiff competition to develop next-generation automobiles including automated vehicles. However, when using a smartphone with an in-car system it is important to ensure safety when driving and to protect vehicle and customer information. Toyota plans to jointly develop standard middleware with UIEvolution (UIE), which has a track record in this area, and roll it out globally. Via this alliance, UIE will be able to develop smartphone apps that use vehicle data and supply it to third party providers of services and apps, who are authorized by Toyota within UIE’s service environment. This should enable smartphones to access vehicle data in a highly secure environment through the Toyota Big Data Center, and Toyota should be able to offer customers safer and more secure smartphone-car connection services. Corralling non-auto sector partners by forgoing self-reliance, leveraging financial strength Historically, Toyota has given the impression that it prioritizes self-reliance in its technology development efforts. In informatization technologies, however, the company is forgoing this sort of self-reliance, and instead is steadily corralling partners (including other companies in non-auto sectors, research institutions, and human talent) by leveraging its formidable financial strength. In our view, this is enabling Toyota to make advances in R&D in a more efficient and comprehensive manner. In September 2015, Toyota announced that it had agreed to form partnerships in artificial intelligence (AI) research with Massachusetts Institute of Technology’s (MIT) Computer Science and Artificial Intelligence Laboratory (CSAIL), and with Stanford University’s Stanford Artificial Intelligence Laboratory (SAIL). Toyota will invest $50mn over the next five years to
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 21 12 September 2016 establish collaborative research centers with CSAIL and SAIL. Both collaborative research centers will carry out research, with the aim of applying the results to autos and robots by seek to achieve (1) recognition of objects in a variety of environments, (2) advanced judgment of surrounding conditions, and (3) mutual strengthening of safety for both man and machine. Toyota also announced that it had invited Dr. Gill A. Pratt, former Program Manager of the DARPA Robotics Challenge, to join the Toyota team, and that this collaboration with Dr. Pratt will strengthen the company’s auto- and robot-related AI research. Dr. Pratt was involved in the establishment of the two collaborative research centers, and Toyota intends to obtain advice from him in conducting and applying these centers’ research. In January, Toyota announced that it will invest around $1bn over the next five years to establish a new company, Toyota Research Institute (TRI) in California’s Silicon Valley, to function as a new AI technology R&D base. Toyota will accelerate its AI technology R&D efforts using TRI as a base for technology innovation. Specifically, the company intends to plan and develop revolutionary products aimed at (1) solving the various issues that will soon confront society by utilizing Big Data through the use of AI technology and (2) achieving a society in which all can live a more abundant life, in safety and freedom, by enabling a sustainable “mobility society.” Toyota plans to make Executive Technical Advisor Dr. Gill A. Pratt as CEO of TRI, attract distinguished researchers, and strengthen its research system through such means as collaboration with the research centers established at MIT and Stanford. Note that in April, TRI announced the establishment of a third research base (joining those in California and Massachusetts) in Michigan, and in August, it announced its collaboration with the University of Michigan on research in the AI field, including safety improvement, “lifestyle-support” robots, and autonomous driving. Also in January, Toyota announced the establishment of Toyota Connected (TC) in cooperation with Microsoft. The aim of TC is to collect and analyze data obtained from vehicles already in use and to incorporate the results of these efforts in product development. TC is a joint venture between Toyota Media Service (Toyota’s IT business) and Microsoft, and operates the Toyota Big Data Center, which collects various data from Toyota and Lexus vehicles equipped with data communication modules (DCMs). TC also studies and utilizes Big Data with a view toward creating better vehicles. In May, Toyota announced that it had concluded a memorandum of understanding with Uber Technologies, under which it will consider collaboration in the field of ridesharing. Taking into account users’ needs, the business climate, and the regulatory environment, Toyota and Uber will search for ways to collaborate in overseas locations where the ridesharing business is expanding, starting on a pilot basis. We also understand that through this agreement, Toyota Financial Services (TFS) and other companies have made strategic investments in Uber. Among specific initiatives, the two companies will create a service in which TFS leases out vehicles to program participants, who then pay lease fees to TFS from the income they receive as Uber drivers. This service is based on Uber’s Vehicle Solutions program, in which Uber provides support to existing drivers to enable them to acquire vehicles. The new service plans to make use of flexible leasing periods to suit users’ needs. Pursuing collaboration with other companies in infrastructure and apps Toyota is gradually strengthening its system for collaborating with KDDI in the field of infrastructure required for vehicle informatization. In 2015, Toyota and KDDI jointly developed a vehicle information system compliant with the new oneM2M standard for machine-to-machine (M2M) communication. To enable high-quality, stable communications on a global basis between vehicle DCMs and the cloud (required to make the “connected car” a reality), the two companies announced in June that they are pursuing the creation of a global communications platform that does not rely on conventional roaming services and the like. In pursuit of vehicle connectivity, Toyota intends to establish a common global standard for DCMs by 2019 (DCM specs currently
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 22 12 September 2016 differ by country and region) and to equip virtually all passenger cars sold in Japan and the US with such DCMs by 2020 (to be followed by other major marks in rapid succession). Since the global communications platform being jointly developed by Toyota and KDDI will use the location data of vehicles equipped with the global common DCM to connect automatically and switch between the telecom providers selected for each country/region and monitor communications conditions. This will enable the kind of high-quality and reliable communications needed for connected vehicles to be maintained. Connection and switching is done not through roaming, but by using a signal to overwrite the settings of the SIM within the DCM. This enables direct connection with the designated communications carrier, enabling high quality communications at a lower price. This platform is being planned and designed by Toyota and KDDI jointly, but development and operation will be conducted by KDDI only. Toyota and KDDI will jointly select and procure communications lines in each country, leveraging KDDI’s relationships with over 600 overseas telecom carriers, and incorporate these into the global communications platform. In the app field, Toyota and Ford have an agreement under which they will cooperate in Toyota’s adoption of Ford’s Smart Device Link (SDL) system, an open source platform that enables use of a smartphone app in conjunction with a vehicle’s in-car system, and jointly create a framework for spec development and management. Toyota and Ford plan to invite other automakers and app developers to participate in SDL-related planning, and Toyota intends to commercialize an in-car system that uses SDL. SDL is an open-source platform for connecting an automaker’s smartphone app with its vehicles. By having both automakers use SDL and tailoring their smartphone apps in accordance with the special characteristics and interfaces of their in-car systems, automakers will be able to provide systems that can be used more safely and comfortably. As the number of automakers adopting SDL grows, app developers will be able to use SDL to develop apps compatible with multiple automakers’ in-car systems, making it possible for them to provide a greater number of apps over a short period of time. Developing new operations in the telematics-based auto insurance field Moreover, Toyota is developing new operations for use in telematics-based auto insurance. In April, Toyota, Toyota Financial Services (TFS), and Aioi Nissay Dowa Insurance (AD) announced the establishment of Toyota Insurance Management Solutions (TIMS), a jointly owned company for the purpose of contributing, on the insurance side, to the creation of the safe, secure, and convenient “mobility society” envisioned by Toyota. The new company aims to provide insurance services that achieve greater customer satisfaction by bringing together the expertise of Toyota Connected (TC; established by Toyota in January) in leading-edge data analysis, TFS in financing, and AD in telematics-based auto insurance. TIMS plans to provide support to the development of telematics auto insurance for Toyota customers, to link dealers and distributors, and to help provide new services that achieve greater customer satisfaction. To that end, TIMS will analyze insurance- related Big Data, develop algorithms, and conduct marketing and similar activities. TIMS will initially operate in the US and then be rolled out by coupling it with Toyota’s global operations. In addition, plans call for TIMS to collaborate with Toyota Research Institute (TRI), which was established by Toyota to make use of its accumulated insurance data and to act as a research base in AI and robotics. In August, Toyota and AD launched a service for fleet policyholders (those with 10 or more vehicles) in which they receive a discount on premiums for using an accident-reduction program employing the TransLog telematics service.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 23 12 September 2016
Figure 16: Main T-Connect packages and services Services Device used T-Connect Navigation T-Connect Navigation DCM Package
Communication method Wi-Fi tethering DCM Bluetooth connectivity、 Wi-Fi hot spots etc.
Basic subscription fee Free Free for the first year (data and airtime (¥12,960 from Year 2) charges borne by user)
Agent Voice communication service ○ ○ Anticipatory information search service ○ ○ Apps Weather news, Gurunavi restaurant locator, Rurubu Drive travel guides etc. ○ ○ Online service On-demand maps ○ ○ Operator service ○ ○ Helpnet ○ ○ Car security (alarm, location trace, others) × ○ Remote maintenance service (remote maintenance mail, others) △ ○ T route search (with probe data) ○ ○ ESPO (eco-driving support) ○ ○ Web search ○ ○ Information on CD titles ○ ○ Tsunagaru Auto Insurance ○ ○ G Memory ○ ○ Live Navigation (drive plan) ○ ○ Information (local information, parking information, NHK news, etc.) ○ ○ Communication (Cocodayo memory) ○ ○ T-Connect Safety and security (road assistance 24) ○ ○ Smartphone apps Car information (car finder) △ ○ Smartphone navigation (agent, navigation, others) ○ ○ Disaster-related services (offline maps, Helpnet, others) ○ ○ Odekake (around-town) apps (Go-tochi Chara-kore, Rekido, others) ○ ○ Eco-drive application ○ ○ Note: Circles =compatible, triangles = option, X = not compatible Source: Toyota Motor, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 24 12 September 2016
Figure 17: Recent informatization events at Toyota Date Event
Jan-2015 Toyota, along with Park24 (4666) announced it will trial Time Car PLUS TOYOTA i-ROAD Drive, a car sharing service combines Times Car Plus (a service developed by Park24 that allows customers to make use of a fleet of share-cars at any time of the day), a system utilizing the Ha:mo urban transport template that Toyota is due to trial in Toyota City, and the TOYOTA i-ROAD personal mobility system, over 6 months from 10 April 2015 to end-September mainly in central Tokyo. May-2015 Toyota, jointly with KDDI, develops auto information system that complies with oneM2M standard, the new M2M (machine to machine) communication standard. Jun-2015 Toyota announced the launch of a 10-inch model T-Connect navigation system specially for the Alphard/Vellfire. Toyota, together with Ford, announced an agreement to consider introducing Smart Device Link (SDL), an open source platform that makes it possible to use Ford smartphone apps with automotive systems, in future Toyota/Lexus vehicles. Toyota and Nihon Enterprise unveiled automotive chat app Fivetalk on appli store Apps, a core Toyota T-Connect service. Sep-2015 Toyota announced the launch of a dedicated web page introducing the concept of using automobiles such as the Prius plug-in hybrid as an emergency generator aimed at creating regions & society resistant to disasters via using external power supplies. Toyota, together with MIT and Stanford University, announced a tie-up agreement in artificial intelligence research and the establishment of a research center linked to the two universities with a total investment by Toyota of around $50mn over the next five years. Toyota, along with Park24, announced it will trial Times Car PLUS x Ha:mo, a car sharing service using Toyota Auto Body's COMS and Toyota's personal mobility system TOYOTA i-ROAD, mainly in central Tokyo over around six months from 20 October 2015 to the end of March 2016. Toyota, at the 22nd ITS World Congress Bordeaux 2015, showcased systems including a new cooperative ITS-based safety package combining vehicle-to-vehicle and vehicle-to-infrastructure communication technologies aimed at realizing a safe traffic society, automated driving and advanced driving support systems designed specifically for highway driving conditions, and the Ha:mo next-generation transport system, an advanced mobility sharing solution that is currently being tested alongside public transportation in France. Toyota announced the launch in Japan of vehicles equipped with ITS Connect, a driver support system that uses Japan's standardized ITS frequency of 760 MHz to receive and share data transmitted by external infrastructure and other vehicles. The company said it would roll the package out to three models by the end of the year, making it the world's first automaker to bring a driver assist function that uses a dedicated ITS frequency to market. Oct-2015 Toyota announced it would highlight its driver support system ITS Connect, which should help reduce road traffic accidents, and Ha:mo, its next-generation traffic system, which supports convenient, comfortable travel, at the 44th Tokyo Motor Show 2015 organizer themed project SMART MOBILITY CITY 2015. Toyota, using Highway Teammate, an experimental autonomous vehicle currently under development aimed at commercialization around 2020, ran trials on the Tokyo's Shuto Expressway testing the car's functions including merging onto and exiting the highway, and maintaining and changing lanes. The company named the concept behind its autonomous driving efforts to date Mobility Teammate Concept and said it would use the name henceforth. Nov-2015 Toyota in January 2016 announced plans to invest around $1bn over the next five years in establishing a new company, Toyota Research Institute (TRI), as an artificial intelligence R&D base, in California's Silicon Valley. Toyota and Honda, together with specific nonprofit corporation Emergency Medical Network of Helicopter & Hospital (HEM- Net), announced start of trials of D-Call Net, an automated emergency notification system aimed at increasing rescue rates. Dec-2015 Toyota announced development of TransLog, a new telematics service for corporate car lease users that supports management of driving data. The company said it planned to provide the service via its nationwide network of Toyota Rent a Car dealers from 20 January 2016. Toyota and Preferred Networks (PFN) announced an agreement that Toyota would invest ¥1bn in PFN with the aim of promoting joint artificial intelligence R&D, mainly in mobility business. Toyota announced plans to unveil an automated map-generation system, which automatically generates high-precision road maps required when driving autonomously, using GPS and cameras, at the 2016 International CES. Jan-2016 Toyota announced an acceleration in its connected car technology initiatives to provide customers with a safer and more convenient driving experience. The company said it would promote its connected car framework by installing its Data Communication Module (DCM) in a broader range of its vehicles, create a Toyota Big Data Center (TBDC) to deploy connected services accompanied by big data processing, improve communication quality and security while protecting customer data, and form a business alliance with UIEvolution (UIE) to provide safer and more secure connection services. Toyota agrees with Ford to establish a framework for joint specification development and operation in order to collaborate on development of Smart Device Link (SDL), an open source platform that enables the use of Ford's smartphone app with automotive systems. Toyota announces its Kymeta Concept, a concept connected car that uses communication satellites at the North American International Auto Show 2016. Mar-2016 Toyota announced an extension of joint testing with Park24 of Times Car PLUS x Ha:mo car sharing service to March 2018. Toyota develops SafetyMeister, which analyzes Big Data from automobiles to pinpoint dangerous driving and accident hot spots, and teams up with Osaka City to calculate danger via the analysis of driving data and publicize the results via its application programming interface (API). Apr-2016 Toyota, jointly with Microsoft, announced the establishment in Texas in the US of a new company, Toyota Connected (TC), aimed at reflecting the results of the analysis of data collected from vehicles in product development. Toyota said Toyota Research Institute (TRI), which is engaged in artificial intelligence R&D and was set up in the US in January 2016, would establish a new base (its third) in Michigan. Toyota Motor, Toyota Financial Services, and Aioi Nissay Dowa Insurance announced the joint establishment on 1 April 2016 of Toyota Insurance Management Solutions USA (TIMS). They said the company would contribute on the insurance front to the creation of a safer, secure, and more convenient mobility society, which is Toyota's vision. Toyota announced the addition of queuing information (T-probe traffic data) and traffic restriction data (provided by JARTIC) to its public passable route map that enables safe driving after disasters. May-2016 Toyota announced the conclusion of a memorandum of understanding (MOU) with Uber Technologies to the effect that the two companies would consider collaborating in the area of ride sharing. Toyota announced it had provided a new experimental automated vehicle "Urban Teammate" currently under development aimed at autonomous driving on ordinary roads to the 42nd G7 summit. Toyota announced that at the Smart Community Japan 2016 exhibition it would showcase cutaway bodies of the new Prius PHV and Mirai fuel cell vehicles, and introduce future possibilities and current services using various information obtained from moving vehicles as Big Data. Jun-2016 Toyota and KDDI announced that they will promote the creation of a global communication platform that does not depend on existing roaming services to secure the worldwide high-quality, stable communication between the cloud and Toyota's Digital Communication Module (DCM) required by connected cars. Aug-2016 Toyota said Toyota Research Institute (TRI, established in January 2016, engaged in artificial intelligence R&D) would form an alliance with Michigan University in AI research and engage in initiatives including collaborative research in the areas of improving vehicle safety, daily life support robots, and automated driving. Toyota and Aioi Nissay Dowa Insurance launch an insurance discount service via the provision of an accident reduction program using the Translog telematics service for fleet policy holders with at least 10 vehicles. Source: Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 25 12 September 2016
Nissan Motor (7201) NissanConnect Carwings: link free for ten years In 1998, Nissan launched Compass Link, a telematics service which used a vehicle navigation system and mobile phones to communicate with human operators. In this service, drivers informed operators at information centers about what information they needed. The information centers then used mobile phone networks to transmit the data, providing spoken information including news, weather, and restaurant information as well as displaying this information on navigation screens. The system also supported vehicle navigation systems, including the searching and setting of destinations by operators. In 2002, Nissan initiated its Carwings integrated telematics service, Japan's first, which combined human-operated and automated services linked with vehicles, mobile phones, and PCs. The Carwings system consisted of the main unit, a switch on the steering wheel that made it easy to operate, a hands-free, voice-command microphone, a speaker for audio output of emails and other communications, a GPS antenna for receiving GPS signals, and a dedicated mobile phone holder with built-in connection cable. The system featured voice input and information output, so that drivers could obtain information without looking at a screen. In 2010, Nissan launched EV-IT, which can manage battery and other information for the Leaf electric vehicle. EV-IT offers charge timer functionality not only while running but also when parked. It also allows drivers to turn on the air conditioning and adjust cabin temperature remotely before driving, . In 2013, Nissan started operating Anytime Link to its new communication service NissanConnect Carwings. One of the system's special features is that customers could use the 3G packet communication for the content and communication service for free for 10 years from the initial date of service registration. It is also possible to search for the fastest route to one's destination by obtaining regularly updated traffic information and easily set destinations by sending them to the vehicle navigation system from a smartphone. The system can also display Facebook articles, Twitter timelines, and new email (from Gmail) on the navigation system screen and read them aloud. The driver can also set destinations based on data obtained from Facebook. Two-way communication is another feature. Nissan distributors can send maintenance notifications based on the vehicle's condition to the navigation system, and owners can use their navigation system to ask distributors to book their vehicles for maintenance. Acceleration of connected car development based on Renault-Nissan alliance Next-generation connected car development has been accelerating, centered on the Renault-Nissan alliance. In January 2016, the alliance announced plans to equip more than 10 models with automated driving technology over four years through 2020. New connectivity applications will enable users to work in their vehicles, enjoy in-car entertainment, and connect to online social networks. As specific efforts in the connectivity field, in 2016 the alliance plans to widely introduce new applications for mobile devices that can communicate with cars remotely. In 2017, it expects to introduce the Alliance Multimedia System, a vehicle navigation system linked with smartphones and which can update map data through wireless connections. In 2018, the company will introduce a dedicated platform for individuals and corporations which supports a new type of Virtual Personal Assistant. The alliance is ramping up deployment of human resources, and has appointed Ogi Redzic, former auto division vice president at Nokia's digital map business, as alliance senior vice president for connected car and mobility services. Numerous tie-ups with major companies outside of automotive Nissan has been ramping up formation of alliances in informatization technology, including areas involved with automated driving. In January 2015, the company announced the conclusion of a five-year partnership agreement with NASA to engage in joint R&D aimed at developing an automated driving system and commercial applications of the technology. As a result, Nissan and NASA are working on development of numerous types of technology including automated driving and human-machine interface (HMI), network
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 26 12 September 2016 compatible applications, software analysis and testing, and advanced hardware and software used in road traffic environments and outer space. At the January 2016 Consumer Electronics Show (CES), Nissan announced that all Leaf and Infiniti models in Europe will have Connect Telematics Systems (CTS) powered by the Microsoft Azure cloud platform. The adoption of Azure will enable remote connection with vehicles, making it possible without being physically present to turn on car air conditioners using Internet- enabled mobile phones and charge cars even when they are powered down. In May 2016, the company decided to adopt road experience management (REM) technology, a mapping system provided by Mobileye that collects data in the cloud via real-time communication of road information gathered via on-board cameras, including lane information, signals, and signs. In apps, Nissan joined Google in July 2016 to announce plans to start providing Android Auto software for automotive systems, which makes it possible to use smartphone apps on car navigation system screens. Figure 18: Carwings and NissanConnect Carwings: main Anytime Link packages and services Services Device used Carwings NissanConnect Carwings ItsudemoLink
Communication method Bluetooth and cable DCM connectivity
Basic subscription fee Free on registration Free for 10 years (operator service ¥3,240)
Navigation Fastest route search ○ ○ Services linked to Google (download Google Map location info, others) ○ ○ Service to send destination info to car navigation ○ Apps Information channel (weather information, food/leisure search, others) ○ ○ Internet information channel ○ ○ Omakase Saisei player ○ ○ Google Calendar link function ○ Gmail link function ○ Social media link function (Twitter) ○ Online Operator service ○ ○ Service to send current location by email via navigation system ○ ○ Incoming email ○ ○ Car-related email notifications ○ Smartphone apps Parking search ○ ○ Gas station search ○ ○ Route search ○ ○ Traffic congestion map ○ ○ Voice guidance e-system/display of other guides ○ ○ Spot icon ○ ○ Nissan DriveCollector ○ Source: Nissan Motor, Credit Suisse Figure 19: Recent informatization events at Nissan Date Event
Jan-2015 Nissan announced the conclusion of five-year partnership agreement with NASA to engage in joint R&D aimed at developing a self-driving system and commercial applications of the technology. Oct-2015 Nissan at the Tokyo Motor Show announced the Teatro for Dayz concept car aimed mainly at Share Natives, defined as younger people who enjoy connecting and sharing experiences with friends. Nissan announced that together with Kanematsu it has been officially selected by the New Energy Industrial Technology and Development Organization (NEDO) to analyze electric vehicle use patterns in Northern California. Nissan at the Tokyo Motor Show announced the Nissan IDS Concept car, which realizes the Nissan Intelligent Driving future mobility self-driving car concept the company has been developing. Jan-2016 Nissan at the Consumer Electronics Show announced that all Nissan Leaf and Infiniti models in Europe will have Connect Telematics Systems (CTS) powered by the Microsoft Azure cloud platform. The Renault-Nissan Alliance announced that new connectivity applications will be installed and autonomous drive technology will be adopted in at least ten models over the next four years. The Renault-Nissan Alliance announced it had hired technology executive Ogi Redzic to lead the global car group’s connected car initiative as Alliance Senior Vice President, Connected Vehicles and Mobility Services. Redzic served as Senior Vice President, Automotive at Nokia HERE, Nokia's digital map business division. May-2016 Nissan decided to adopt Mobileye's real-time road mapping system Road Experience Management (REM). Jul-2016 Google, along with Honda, Nissan, Panasonic and others, announced it has started to supply Android Auto software for automotive systems, which enables users to operate smartphone apps via car navigation system screens. Source: Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 27 12 September 2016
Honda Motor (7267) Internavi has become established over the long term In 1998, Honda launched Internavi, which can be used on vehicle navigation systems. Internavi is a telematics service that uses mobile phones' communication functions to provide information useful for driving, transmits location information to navigation systems, and provides route guidance. In 2002, Honda started operating Internavi Premium Club, a service that included provision of traffic, driving, and maintenance information. Unlike existing information services that only enabled drivers to obtain data in a limited reception area via a vehicle information and communication system (VICS) consisting of FM multiplex receivers and beacons, the Premium Club road traffic information service would pass the data through mobile phones. This difference enabled the service to realize an on- demand VICS through which it could obtain traffic data for all prefectures in Japan and provide dynamic route guidance that obtained information on traffic jams and slowdowns and then guided drivers along the optimum route to their destinations in response to conditions. In car maintenance information, the Internavi information center (part of the system) notified drivers of when maintenance such as oil changes is required by using user-entered "Aisha memo" maintenance profiles and maintenance records based on distance driven as obtained from the odometer. In car navigation information, drivers could call areas and facilities using voice commands, as they were able not only to set destinations but also to have the system read content aloud such as news, email, and the weather at the destination. The system was also able to provide information on driving and maintenance via the linking of PCs and mobile phones. In 2003, Internavi was able to distribute the traffic information service to areas where VICS information was not provided by sharing "floating information" gathered from vehicles on the road. A weather information service was added in 2004 and a disaster information service in 2007. Via the free communication service Link Up Free, which started in 2010, Honda vastly increased the amount of data collected, enabling the company to provide not only traffic information for car navigation systems but also various ways of using the system. In Internavi Route, a route advice function, adding restrictions data and toll fee data to toll data made it possible to offer advanced navigation functions including real-time calculation of the fastest routes or fuel-saving, eco-friendly routes in line with users' needs. A service that provides a map of actual vehicle passings, which informs the public of roads that traffic has passed along after a disaster, played a significant role as a support tool to help find evacuation and rescue routes after the March 2011 earthquake. The system uses location information on traffic delays and frequent braking to detect locations where new traffic measures are needed, in order to verify the effects of road infrastructure and support proposals for traffic safety as means of boosting the efficiency and quality of road administration. Honda's Internavi system has become established over the long term. It now also provides Link Up Free, which is equipped with dedicated communication equipment, and Internavi Pocket in combination with smartphones for low-priced cars such as minivehicles. The basic services provided include Honda's proprietary Internavi traffic information, which combines VICS data with traffic information collected from Internavi-compatible vehicles, and Internavi Route, in which users can select the route that meets their needs from a range of different routes. Cars equipped with specialized automotive equipment can also use the smart map update service. Honda also provides services including parking select, which searches a desired area for a place to park that meets requirements such as the vehicle's size and the parking fee, and safe driving coaching, in which the car notifies the driver via sounds and onscreen messages when they near dangerous junctions. Other services include many application-related services such as Drivenote, which manages driving data for each drive, including eco data such as fuel economy and consumption, links with smartphone music apps, and provides weather information; My Spot, which records Internet data as destinations; My Feed, where users can see news and blogs; and Drive Share, which can share location data with Facebook. The system also supports
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 28 12 September 2016 emergency information services that can call police, fire, and other emergency services after informing operators about accidents or medical emergencies via simple button operation, and with the QQ Call service, which contacts insurance companies, tows vehicles, and arranges road service when cars run out of fuel, their batteries are flat, etc. Internavi also provides services including the Internavi safety confirmation system, which sends emails to family members and others when information about a disaster is released, Internavi warning light support, which indicates brake and battery problems and suggests solutions via the car navigation system screen, and services that notify users by email when the car requires maintenance. Safety Map and other informatization increasingly adopted in safety area Honda has aggressively promoted use of information-related technology in the field of safety. Safety Map is a typical example. This service, which was publicly released in 2013, is a project started by Honda based on its desire to make the world safer for pedestrians, drivers, and passengers by knowing about dangerous locations in advance. This web- based map service shows locations where sudden braking is often applied and accidents frequently occur based on probe information collected from Internavi compatible vehicles driven throughout Japan. For its efforts in using probe data collected via Internavi, Honda received the Scientific Technology and Economics Group Chairman Award at the 4th Technology Management and Innovation Awards presented by the Japan Techno- Economics Society (JATES) in February 2016. In March 2016, Honda concluded an agreement with Osaka prefectural police headquarters concerning the promotion of traffic accident prevention measures and collaboration to ensure the safety of road users by utilizing Honda's Safety Map. In the safety field, starting in October 2015, Honda and Toyota Motor, together with the Emergency Medical Network of Helicopters and Hospitals (HEM-Net), a certified nonprofit organization, initiated trials of D-Call Net, an automated emergency notification system for dispatching air and ground ambulances to accidents, with the goal of increasing passenger rescue rates. Tie-ups with other companies in ITS, app development Honda informatization technology is also put to advance use in ITS. In May 2016, the company announced commercialization of a driving support system that receives signal information from advanced light beacons installed at traffic signals and notifies drivers of optimum cruising speed and when to slow down according to the timing of traffic light changes. The company said it will introduce the system in the new Accord Hybrid model. In motorcycles, in October 2015, Honda, Yamaha Motor, and BMW Motorrad announced the launch of a Connected Motorcycle Consortium to further development of Cooperative- Intelligent Transport Systems (C-ITS) for motorcycles. Tie-ups with companies in non-auto sectors have also been established. In August 2015, the company announced a V2X unit for automobiles that shares information with nearby vehicles via public wireless LAN Wi-Fi, developed jointly with Softbank. In July 2016, Honda announced collaboration with Softbank in research on connected cars featuring AI. The company has also formed tie- ups in apps. In September 2013, it unveiled TripDip, an Internavi-compatible smartphone app developed jointly with Softbank, Yahoo Japan (4689), and Agoop that provides useful daily life and travel information. In app-related services, Honda appeared at Smart Community Japan 2015 where it showcased items including Road Hints, a telematics service that uses Big Data to transmit information about nearby restaurants, etc., and With Honda, an application that connects the Internavi system and display audio to an iPhone and displays a variety of information on an Apple Watch. In July 2016, Nissan and Google announced the start of provision of Android Auto software for automotive systems, which makes it possible to use smartphone apps on car navigation system screens.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 29 12 September 2016
Figure 20: Main Internavi packages and services Service Equipment used InterNavi
Communication method DCM, Bluetooth/cable, etc.
Basic fee DCM data usage is free
Navigation InterNavi traffic information ○ InterNavi route ○ Smart map update service △ Car park select ○ Safe driving coaching △ Application Weather, disaster prevention data ○ Music apps for smartphones (Sockets Music, MIXTRAX)-related functions ○ eco information △ Drivenote △ My Spot ○ My Feed (news, blogs) ○ Drive planning ○ Drive sharing ○ Online Emergency information service △ QQ call △ InterNavi safety confirmation system ○ InterNavi warning light support △ Car chart △ Mail notification △ Smartphone applications Route search ○ Departure/arrival due time check ○ Navigation ○ Car park select ○ Drivenote ○ Fuel consumption record ○ Maintenance record ○ Note: Circles = compatible, triangles = option Source: Honda Motor, Credit Suisse Figure 21: Recent informatization events at Honda Date Event Jun-2015 Honda showcased items at Smart Community Japan 2015 including Road Hints, a telematics service that uses Big Data to transmit information about nearby restaurants, etc., and With Honda, an application that connects a car navigation system to an iPhone and sends various information to an Apple Watch. Aug-2015 Honda, jointly with Softbank, developed a V2X Unit, which uses public wireless LANs (Wi-Fi) to share information with other nearby vehicles. Oct-2015 Honda supplied Drive Box equipment that uses terrestrial digital broadcasting infrastructure for traffic jam- busting trials in the Philippines. Honda, Yamaha Motor, and BMW Motorrad announced the launch of a Connected Motorcycle Consortium to further development of Cooperative-Intelligent Transport Systems (C-ITS) for motorcycles. Nov-2015 Honda and Toyota Motor, together with certified nonprofit organization Emergency Medical Network of Helicopter and Hospital (HEM-Net), initiated trials of D-Call Net, a system designed to make quick decisions to dispatch air and ground ambulances aimed at increasing rescue rates. Dec-2015 Honda was the first automaker producing cars in India to announce the introduction of an automotive communications service that connects cars with the internet. Jan-2016 Honda introduced its concept of a robustly-connected world even in disaster situations via the combination of broadcasting and V2X at the Ministry of Internal Affairs and Communications' (MIC) study group to examine ways of securing means of communication in emergency situations such as large-scale disasters. Feb-2016 Honda announced that its efforts to create a comfortable, safe, and reassuring driving environment using Honda InterNavi's probe data won the "JATES Chairman Award" at the 4th Technology Management and Innovation Awards presented by the Japan Techno-Economics Society (JATES). Honda and US credit card major Visa announced they had jointly developed a settlement service for automobiles enabling drivers to make payments at service stations and car parks easily and safely via a screen facing the driver seat. Mar-2016 Honda announced the conclusion of an agreement with Osaka prefectural police headquarters concerning the promotion of traffic accident prevention measures and cooperation to ensure the safety of road users by utilizing Honda's Safety Map. May-2016 Honda announced commercialization of a driving support system that receives signal information from advanced light beacons installed at signals and notifies drivers of optimum cruising speed and slowdown timing according to the timing at which traffic lights change. The company said the system will be introduced in the new Accord Hybrid model. Jun-2016 Honda announced the establishment in September 2016 of Honda R&D Innovation Lab Tokyo as a venue for collaboration with external experts and other research institutes in order to further strengthen its research and development of artificial intelligence (AI). Jul-2016 Google, along with Honda, Nissan, Panasonic and others, announced it has started to supply Android Auto software for automotive systems, which enables users to operate smartphone apps via car navigation system screens. Honda announced collaboration with Softbank in research on connected cars featuring AI. Source: Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 30 12 September 2016
US automakers At the hub of the informatization market, US automakers fast-track telematics North America, particularly the US, sits at the hub of the informatization market, which includes the connected car and telematics fields. Subscriptions to telematics services for auto users are growing faster in this market than elsewhere, which we mainly attribute to four factors. First, US automakers have been strategically fast-tracking the introduction of various services as a means of differentiating their informatization technology. Second, auto travel in North America often involves long distances or long driving times, making demand for in-car infotainment inherently high. Third, the market is characterized by a high concentration of IT and leading IT companies such as Google and Apple). Fourth, Japan and Europe treat North America as a testing ground for their informatization services, introducing these services in this market before doing so elsewhere. On the hardware side, the Kids Transportation Safety Act in the US mandates the installation of rear monitor cameras, which creates a likely outlook of strong demand for IVI systems having the required rear-view displays. Among US automakers, General Motors (GM) in 1996 began providing the OnStar telematics service, now the world’s largest such service by number of subscribers. OnStar previously required the installation of a communications terminal called the OnStar Head Unit, but today the GM IVI systems MyLink, IntelliLink, and Cadillac User Experience (CUE) (the specific name differs by GM brand) all connect with the OnStar system, enabling owners of cars with these IVI systems to also use the OnStar system. Not using an in-car display such as the navigation display, OnStar was primarily a voice system at the start and provided such services as security and emergency reporting, road assistance, vehicle location information, traffic information, and parking space search. MyLink, an OnStar service for Chevrolet vehicles that went into service in 2011, is an IVI system that is tethered to the user’s mobile device. MyLink offers various infotainment services such as in-car playback of music utilizing technologies such as Apple’s CarPlay and Android’s Auto, as well as Internet radio services such as Pandora. The CUE system, available in Cadillac-brand luxury vehicles, is an IVI system with even more advanced HMI (human-machine interface) functionality. Ford offers a telematics service called SYNC, which provides services such as hands-free communications through the user’s mobile device, voice-direction music playback, a radio tuner, an emergency reporting service called 911 Assist, and satellite radio. SYNC with MyFord Touch, an offshoot of the original SYNC IVI system using a dual display, makes possible voice direction, commands issued via steering-wheel buttons and touchscreen displays, and on-screen vehicle information. Another offshoot, SYNC Connect, is operated using a smartphone and adds additional functionality such as air conditioner and engine startup, as well as door lock/unlock, all operated from outside the vehicle. Note that Ford and its Livio subsidiary have an agreement with Toyota to cooperate in Toyota’s adoption of Ford’s SDL system, an open source platform that enables use of a smartphone app in conjunction with a vehicle’s in-car system. Notable partnerships, car-sharing initiatives US automakers are also pursuing partnerships with other companies, both within the auto sector and outside it, with a view towards expanding the informatization market. Ford’s efforts in this area are not limited to the aforementioned Toyota agreement related to SDL adoption by Toyota. In January, Ford announced that it would employ AT&T’s 4G communications modules for the SYNC Connect service and otherwise strengthen the two companies’ partnership. In the same way, Ford also announced a partnership with Amazon. Ford users are now able to use Amazon Echo, a voice recognition device designed for home use, together with SYNC Connect. This platform offers not only vehicle-dispatch service, but can also route a vehicle through less-congested roads, search and find empty parking spaces within 10 to 15 seconds, and provide driver guidance. Ford and IBM are also strengthening their relationship at the management level—in January, IBM announced the appointment of Ford CEO Mark Fields as an external director.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 31 12 September 2016
Of particular significance is that Ford CEO Fields took the opportunity in January at the North American International Auto Show in Detroit to publicly declare that Ford is transforming itself into a “mobility company,” i.e., a company that provides mobile solutions, and unveiled a Ford basic policy to that effect. In accordance with this policy, Ford is launching a new platform called FordPass. One platform service, FordPass Marketplace, enables users to use programs such as car sharing, ride sharing, and smart parking. GM is making similar efforts in such services. In January, it announced a full-fledged entry into the field of car sharing services through a $500mn investment in Lyft, a major car sharing service, as well as the development with Lyft of an on-demand network of self-driving vehicles. Moreover, apart from the joint development with Lyft, GM is developing its own Maven car sharing service and is conducting test operations in New York and Michigan. Figure 22: Recent informatization-related events among US automakers Date Event May-2015 Shanghai On-Star Telematics, a telematics JV set up by GM, SAIC, and Shanghai General Motors, announces the launch within the year of LTE (4G) high-speed data modules, starting with the Cadillac brand. The company aims to expand the number of users of the technology in China to 10mn by 2020. Jun-2015 Ford announces an agreement to consider introducing Smart Device Link (SDL), an open source platform that makes it possible to use Ford smartphone apps with automotive systems, in future Toyota/Lexus vehicles. Jan-2016 Ford announces strengthening of ties with US communication major AT&T. Plans to fit AT&T communication modules to 10mn new Ford vehicles for the North American market. Ford agrees to construct a framework for specification development and operation jointly with Toyota Motor in order to collaborate on SDL development. Ford announces formation of an alliance with Amazon to develop systems for voice operation of autos from home. Ford announces joint development with IBM of a platform to support more efficient transportation decisions. The platform is expected to feature not only a car allocation service but also be able to search for routes with little congestion and car parks with available spaces in 10–15 seconds and advise drivers. GM announces $500mn investment in Lyft, operator of a smartphone-based peer-to-peer ride-sharing service. The two companies will join forces to build an autonomous car ride-sharing network. GM announces Maven, a car-sharing service using a smartphone app. Cars used in the service are expected to feature the OnStar auto information system, fee-based satellite radio, and wireless internet developed by GM, as well as smartphone software such as Apple Carplay and Android Auto. Mar-2016 GM announces acquisition of autonomous vehicle technology (AI, sensors, maps) developer Cruise Automation. Ford announces the establishment of subsidiary to handle development of and invest in new services using autonomous driving technology and the internet. Jun-2016 GM announces expansion of its R&D base in Canada to strengthen development of autonomous driving and vehicle communication systems. Source: Company data, Credit Suisse
European automakers Expanding adoption of high-performance IVI systems beyond luxury segment In the European market, the proportion of vehicles factory-equipped with car navigation systems has historically been limited, but PND (personal navigation device) market share has increased for aftermarket car navigation equipment. In the fleet sector, low-cost services tend to be a requirement, which is causing growth in demand for telematics systems that link to mobile devices such as smartphones. Demand for high-performance IVI systems is also growing, but mainly in the luxury vehicle segment—presumably a harbinger of growth in other segments. Starting in 2018, new vehicles sold in Europe will be required to come equipped with the eCall emergency notification system. In combination with similar developments, this should spur the adoption of telematics systems. As demonstrated by the acquisition of HERE, a major mapping company, by Audi, BMW, and Daimler-Benz illustrates, notable developments are occurring in information-related technology development in the area of safety for next-generation autonomous driving vehicles. Volkswagen Group, the largest European automaker by vehicle sales, is working to differentiate its telematics services by brand, such as Volkswagen (VW) and Audi. For VW vehicles, a telematics service called Car-Net is available. By linking a vehicle’s Car-Net system to a smartphone by use of Mirrorlink, Android’s Auto, or Apple’s CarPlay, the car owner can use a variety of apps. Car-Net can also be linked with the Discover Pro car navigation-style IVI system. For Audi vehicles, an embedded IVI system called Audi Connect is installed in all vehicles. This system provides various types of information and makes the vehicle a Wi-Fi hotspot through which up to
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 32 12 September 2016 eight mobile devices can connect to the Internet. BMW previously offered a telematics system called BMW Assist, but this system has since been merged into the BMW ConnectedDrive system. The German automaker also provides the Mini Connected system for Mini vehicles and the BMW I ConnectedDrive system for i-Series vehicles (which include EVs and PHVs). The ConnectedDrive system makes emergency calls and teleservices (through the IVI system) standard features, enabling use of various online information and BMW Apps. Through its IVI systems, Daimler-Benz provides the Mbrace service, primarily in North America. Mbrace has various safety/theft-prevention functions, including automated collision warning (even when parking), emergency call service, and notification of location information when the vehicle has been stolen. It also enables the use of a variety of applications known as Mercedes-Benz In-Vehicle Applications. Aiming to makes technology strengths de facto standards European automakers, particularly German ones, are taking steps aimed at making their informatization technologies de facto standards. One of the most significant recent developments in this field is the acquisition by Audi, BMW, and Daimler-Benz of HERE, a mapping business that had been part of Nokia. We believe this three-company acquisition is intended to turn HERE’s products and services into an open and independent value- creating platform, usable over the long term for mobility services such as cloud-based mapping by all customers in the auto industry and other fields. According to media reports, HERE had been considering the possibility of additional investments from companies such as Amazon and Microsoft as late as 1H CY2016 and is pursuing partnership with local companies in China, an increasingly important market for European automakers. Audi and Daimler-Benz have each teamed up with Baidu, announcing partnerships for developing the technology needed to make the connected car a reality, including map functions for navigation use and location information features. Audi has announced that it will join Huawei Technologies in developing LTE communication modules. In July, VW announced a partnership with LG Electronics involving joint development of connected car technology. BMW has announced partnerships with both Intel and Mobileye related to development of next-generation autonomous driving vehicles. With the aim of making the fully autonomous driving vehicle a reality, the three companies are attempting to develop and test-operate prototype vehicles that leverage technology from BMW’s in conventional cars, Intel in semiconductors, and Mobileye in image recognition. The three companies are evidently considering supplying the developed autonomous driving technology platform to other companies, including companies in the auto sector. Figure 23: Recent informatization-related events among European automakers Date Event
Feb-2015 Volkswagen announces introduction of a cloud service and placement of an order with NTT Data for operation of a business support system (logistics, sales). The NTT Data order is expected to be worth around ¥10bn. May-2015 Audi revealed in a statement that it will collaborate with Chinese internet search major Baidu on development in the Chinese market of a "connected car" equipped with internet access technology. Audi announces joint development of a high-speed LTE module specially for the Chinese market with communication equipment major Huawei Technologies. Daimler and Audi each announce collaboration with Baidu, which is also a map search major, in development of maps for navigation in China and functions including location search and setting destinations. Daimler announces strategic collaboration with Qualcomm Technologies in areas including wireless charging technology for in-vehicle use of internet equipment. Aug-2015 German carmakers Audi, BMW, and Daimler announce acquisition of Nokia map business Here, enabling them to enter the digital mapping field needed to commercialize autonomous vehicles. Mar-2016 Daimler announces investment of €500mn through 2020 in digital businesses at its truck segment. Announces vision of connected logistics networks, in which logistics information is linked to the internet. Aims to expand business to new areas such as services aimed at improving logistics efficiency using Big Data gathered via trucks worldwide. Apr-2016 It is reported that Amazon and Microsoft are in talks to acquire minority stakes in Here, owned by Audi, BMW, and Daimler. Daimler believes it needs a supplier of cloud services to process the large amount of data generated by Here and its customers. Jul-2016 Volkswagen announces an alliance with LG Electronics in joint development of connected cars fitted with communication functions. BMW announces an alliance with Intel and Mobileye in automotive areas. The companies will jointly develop systems that fuse automotive sensors and high-speed data processing technology, boosting reliability. Aug-2016 Audi announces the sale in the US this autumn of vehicles that can alert drivers to the timing of light changes at crossroads, representing the first commercialization of traffic signal information sensing technology. Source: Company data, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 33 12 September 2016 Informatization technology trends Automotive technology for sending and receiving information IVI systems As the name suggests, in-vehicle infotainment (IVI) systems provide a wide range of information and entertainment functions. They are positioned as human-machine interfaces (HMI) that function as transmitters and receivers of internal and external car information including navigation, location data, multimedia (including the Internet), and vehicle diagnosis. Vehicles are increasingly equipped with IVI systems, and we expect further adoption due to diversification of the information handled by vehicles. In this report, we look at two types of IVI systems, embedded IVI systems that have unique communication modules, and tethered ones (mobile phone-related) that communicate via mobile devices. In embedded IVI systems, all functions used by the system such as communication equipment and navigation functions are built into the vehicle. Such systems have all IVI functions, but as communication fees stipulated by automakers are separately incurred, users bear heavy fees. Thus, they have mainly been rolled out so far to large or high-end models. Such systems have mostly been adopted by European and US companies such as GM, Ford, VW, and PSA. In Japan, adoption is lagging slightly behind European and US manufacturers, partly because these systems face a mature market for telematics- compatible factory-installed vehicle navigation systems. However, as automotive information becomes more diverse, we think use of data other than navigation data will increase and lead to increased IVI adoption in Japan as well. We expect the number of vehicles worldwide with embedded IVI systems to increase from 7.4mn units in 2015 to 12.8mn in 2020 and 22.7mn in 2030. All components used in IVI systems such as displays, navigation systems, and automotive communications equipment should benefit from growing demand for IVI systems. Tethered IVI systems usually do not have an internal communication module, instead using external communication equipment such as a mobile phone. In this case, smartphones are used like external modems to obtain information from outside. The embedded IVI systems mentioned above have mainly been rolled out to high-end models, whereas tethered IVI systems have been fitted to mass-market cars due to their relatively low cost. Adoption of tethered IVI systems has increased sharply due to the advent of standards for linking mobile phones and auto operating systems, such as Android Auto and Apple CarPlay. In contrast to embedded systems, tethered IVI systems have had relatively fast development not only among European and US carmakers, but also Japanese companies. A typical example is the global development of Mazda Motor's mobile-linked IVI system Mazda Connect. The number of vehicles fitted with the system has increased rapidly. Toyota, Nissan, and Honda provide tethered IVI systems mostly for the North American market (Entune, Nissan Connect, Hondalink). We expect the number of vehicles worldwide with tethered IVI systems to increase from 6.2mn units in 2015 to 12.4mn in 2020 and 19.0mn in 2030. Vehicle navigation systems Some telematics-compatible vehicle navigation systems are being developed by OEM manufacturers while others are not. Although many factory-installed navigation systems are telematics-compatible, many vehicle owners do not use them to avoid the additional cost. However, we expect real-time updating of navigation data and growth in the range of telematics services to take the market for telematics-compatible systems into an expansion phase. In the long term, however, we expect a declining trend to emerge in both factory-installed and aftermarket navigation systems due to downward pressure from
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 34 12 September 2016
IVI systems. We see no change from the current setup in which navigation system makers sell systems for use as IVI. Rather, these developments will come as an opportunity to boost product added value. Looking at the global market for vehicle navigation systems, we expect the number of equipped vehicles to contract from 6.00mn units in 2015 (13.5mn including those with IVI systems) to 5.33mn in 2020 and 3.60mn in 2030. In their stead, we look for the number of vehicles equipped with navigation systems that include IVI to rise from 18.00mn units in 2020 to over 26.00mn in 2030. Both consumer electronics makers such as Pioneer (6773), Panasonic (6752), Alpine Electronics (6816), and Clarion (6796), and parts suppliers like Aisin AW, Bosch, and Continental handle vehicle navigation systems.
Figure 24: Toyota’s T-Connect navigation system Figure 25: Nissan’s Nissan Navigation System
Source: Toyota Motor Source: Nissan Motor
Other display audio systems Display audio refers to components incorporated as hardware in IVI and car navigation systems. There is also a market for displays that only show auto information without having communication equipment or any original transmission and reception of information from external sources. Due to the development of standards such as Mirrorlink for using smartphones as auto monitors, such systems have been adopted in vehicles in the low- price band as a cheap option that does not require proprietary communication equipment. We think adoption could increase, especially in emerging markets. Similar to car navigation systems, the supply chain (suppliers delivering to IVI and car navigation systems makers) remains in place in display audio, and we expect volume growth to continue due to growth in IVI as well as standalone use of display audio systems.
Figure 26: MMC’s Display Audio Figure 27: Nissan Moco display audio
Source: Mitsubishi Motors Source: Nissan Motor
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Head-up Display (HUD) Head-up Display (HUD) is a display system that projects all information a driver requires directly in view. The system projects information from instruments and navigation onto the windshield or a dedicated plastic disk mounted in front of the windshield. As HUD shows all the necessary information in front of the eyes, drivers no longer need to turn their view to instruments or a monitor to secure information. We expect demand for HUD to grow as a device that enables drivers to maintain their view and as a means for enhancing safety. In tandem with the increase in amount of information displayed in autos, there is a greater likelihood of the driver switching their view away from the windshield. HUD has gained attention as a means for reducing distracted driving. For example, if we assume a driving speed of 100km per hour and that it takes 1 second for the driver to check the instrument panel and revert to the view in front of the glass, it means the driver has driven roughly 27 meters without looking in front. The elimination of this single second of distracted driving using HUD greatly enhances safety. In order to prevent distracted driving, the NHTSA in the US has issued a guideline setting the amount of time a driver can switch view away from the front and specifying the response time of display instruments, while Europe has included HUD as an evaluation item for Euro NCAP (new car assessment program). Due in part to the boost from regulations and inclusion as assessment criteria for new vehicles, we expect sustained growth in HUD installation. Two types of HUDs are currently available for purchase: windshield HUDs and combiner HUDs. The key feature of the windshield type is that the projected image on the car’s windshield appears as if it floats over the hood and not as a flat, still image on the glass. In contrast, combiner HUDs are more compact and are akin to a mirror mounted in front of the windshield with information displayed on a transparent plastic disk, called a combiner. The adoption of this latter type has gained momentum on auto models with space constraints for mounting components. We expect HUD to evolve to include augmented reality in the future (termed "augmented reality HUD" by Continental). In these systems, projected information appears as a part of the driver’s field of vision. If the driver is navigating using augmented reality, virtual symbols appear as overlays on top of the scenery visible outside of the car. This will also enable visual representation of a detected auto as a target for tailing in auto-cruise mode. While the adoption of combiners is likely to gain momentum on small cars, we expect windshield HUDs that enable ready access to augmented reality HUDs in the future to predominate. Nippon Seiki which was quick to expand its business to include European and US manufacturers, and Continental together have around one-half the share of the global HUD market. (We estimate that in 2015, Nippon Seiki had a 28% share and Continental 28%). Trailing these two companies are Denso, Johnson Controls, Yazaki, and Pioneer. We forecast that the global HUD market will grow from ¥60bn in 2015 to ¥285bn in 2020 and ¥350bn in 2030. Figure 28: Overview of HUD system
Source: Continental Automotive GmbH
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Figure 29: Access to navigation information on the Figure 30: Combiner HUDs windshield
Source: Continental Automotive GmbH Source: Continental Automotive GmbH
Figure 31: HUD market share (2015, estimated) Figure 32: Near-term growth in HUD stemming from introduction of Euro NCAP 400 Billion Yen Thousand Units 14,000 Others Pioneer 350 12,000 Denso 300 10,000 250 8,000 Nippon Seiki Yazaki 200 6,000 150 4,000 100 JCI 50 2,000
0 0 Continental
HUD Market (LHS) HUD Volume (RHS) Source: Credit Suisse estimates Source: Company data, Credit Suisse estimates
Cluster MID Cluster Multi-Information Display (MID) is a color LCD unit that displays vehicle information and infotainment information in the instrument cluster located in front of the driver as well as on the central cluster. In addition to the usual information such as vehicle speed, engine RPM, and outside temperature, more recent cluster MIDs display fuel consumption and other eco-driving information as well as infotainment information. In developed markets, the cluster MIDs are increasingly being adopted for instrument clusters. While all autos contain instruments, more auto models are now being mounted with an instrument cluster MID in conjunction with the increasing diversity of information sought by drivers and specifications seeking to enhance the driver’s view. In the future, cluster MIDs could also leverage LCD units to display all necessary instrument cluster information in place of traditional in-car instruments and devices. There are already auto models such as ones from Audi that display navigation data and the view around the vehicle on the instrument cluster. On the other hand, the use of central cluster MID is gaining traction as a simple display without navigation and IVI functions. Central cluster MIDs display basic information including FM/AM tuner information, fuel consumption, and outside temperature. In Japan, where a large number of autos have factory-installed navigation systems, the adoption of central cluster MID remains modest, but we anticipate their use as a simple display to gain momentum in emerging markets and North America.
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In the US, regulation stemming from the Kids Transportation Safety Act (KT regulation) has made rear cameras mandatory on autos, leading us to expect automakers to leverage cluster MIDs as a monitor for displaying images from the rear camera in order to comply. Both Denso, a supplier of in-car MIDs to Toyota, and Continental, which supplies MIDs mainly to the European automakers, boast a high market share for cluster MIDs. Other makers include Delphi, which is rolling out MIDs for the US automakers, and Visteon. We forecast that the global instrument/central cluster MID market will grow from ¥130bn in 2015 to ¥220bn in 2020 and ¥370bn in 2030.
Figure 33: Toyota instrument cluster MID
Source: Toyota Motor Figure 34: Mitsubishi Pajero central cluster MID Figure 35: Audi’s all-digital instrument cluster MID
Source: Mitsubishi Motors Source: Aisin AW
Figure 36: Cluster MID market share (2015, estimated) Figure 37: Replacement of conventional instrument panels, growth of cluster MIDs 500 Billion Yen Thousand Units 100,000
400 80,000
Others Denso 300 60,000
200 40,000
Continental Visteon 100 20,000
0 0 Delphi
Cluster MID Market (LHS) Cluster MID Volume (RHS) Source: Credit Suisse Source: Company data, Credit Suisse estimates
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Telematics communication devices Telematics (formed by combining the terms "telecommunications" and "informatics") refers to the function and information of in-car mobile communication systems. In a broad sense, all information provided real-time to the auto can be called telematics, but the telematics discussed in this report refers exclusively to wide-area in-car communication modules such as navigation systems and embedded IVI systems linked to a telephone line or a dedicated communication device (DCM). This narrower definition does not include short- range wireless communication or GPS accessible through smartphones. Previously, in-car communication typically meant data transfer using the mobile communication network of navigation systems installed in luxury cars. However, in conjunction with the penetration of smartphones and the resultant development of a connected environment and automotive operating systems that enable data sharing, we now see ongoing efforts toward developing a deeper link with autos. The main uses of a telematics device include automatic update of navigation data, emergency communication in case of an accident, operator assistance on traffic, and transfer of application data used in the automotive operating system. Telematics devices are necessary for leveraging the telematics service provided by individual automakers. We look for the adoption of in-car telematics to pick up in tandem with ever-growing information needs. For example, Toyota has announced that it will step up DCM installations on auto models released in 2017 and subsequent years. Following US models due for launch in 2017, Toyota plans to raise the DCM installation rate globally. We expect this to speed up analysis and use of data collected from DCM-equipped cars and lead to the development of various services.
Figure 38: Toyota telematics device Figure 39: Overview of Toyota’s DCM service
Source: Company data Source: Company data
Short-range communication devices Short-range communication devices, as represented by Bluetooth and Wi-Fi, enable users to link smartphones with the auto. Once the smartphone is connected, users can leverage hands-free communication and various infotainment options. We expect the installation of short-range communications devices on autos to expand in the future, for enhancement of mobile-linked IVI and for leveraging smartphones’ increasingly diverse functions. Specifically, we expect integration of Bluetooth, particularly voice data connectivity, with Wi-Fi and forecast the market for combined communication chips will expand. Alps is ahead of other suppliers and we estimate it has 50% market share in global automotive Bluetooth/Wi-Fi communication devices. Other suppliers include Mitsumi Electric for Wi-Fi communication devices and Parrot for automotive Bluetooth modules. In short-range automotive communication, we look for an integrated automotive Bluetooth module with a Wi-Fi communication device to emerge as the predominant trend. Alps, which accounts for the top share by our estimates, has already developed an automotive Bluetooth module that incorporates a wireless LAN function. We expect Alps to continue its market domination amid stepped-up efforts to integrate Bluetooth modules with Wi-Fi communication devices. We forecast global market for short-range automotive communication devices to expand from ¥84bn in 2015 to ¥159bn in 2020 and ¥270bn in 2030.
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Figure 40: Automotive Bluetooth/Wi-Fi module
Source: Alps Electric Figure 41: In-car Wi-Fi module market share (2015, Figure 42: In-car Bluetooth market share (2015, estimated) estimated)
Chip on Board Others Lesswire
WNC Alps Electric Murata Manufacturing Mitsumi Electric Alps Electric
LG Innotec Parrot Murata Manufacturing
Source: Credit Suisse estimates Source: Credit Suisse estimates
Figure 43: Wi-Fi module demand growing from greater diversity, data transmitted 500 Billion Yen Thousand Units 140,000 120,000 400 100,000
300 80,000
200 60,000 40,000 100 20,000
0 0
Vehicle Bluetooth Module Market (LHS) Vehicle WiFi Module Market (LHS) Vehicle WiFi Module Volume (RHS) Vehicle Bluetooth Module Volume (RHS) Source: Company data, Credit Suisse estimates
In-car V2X devices V2X broadly refers to a system aimed at achieving better traffic system efficiency, accident prevention, and autonomous driving through direct vehicle to vehicle communication (V2V), vehicle to infrastructure (road signs, traffic lights etc.) communication (V2I), and vehicle to pedestrian communication (V2P). As V2X mainly uses narrow-band communication without the cloud infrastructure, V2X devices must be mounted on vehicles in order to
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 40 12 September 2016 enable two-way communication. In V2V, information on vehicle location and speed is transmitted to other vehicles in the vicinity. These nearby vehicles analyze the transmitted information and depending on the situation, also display alerts or information about the vehicle transmitting the data. In V2I, signals located at traffic intersections send signals to vehicles. Road-side traffic signals transmit information on signal change time to vehicles, which then analyze the need for raising or lowering speed when passing the signal; this helps the vehicles attain higher fuel efficiency. Moreover, as both V2V and V2I enable detection of other cars located in the driver’s blind spot, we expect future autonomous driving technology to leverage these two forms of communication to improve vehicle location accuracy based on the nearby traffic situation. The narrow-band communication technology used in V2X is based on the IEEE 802.11p standard. In the US and Europe, V2X uses a dedicated wireless frequency of 5.9GHz assigned to Intelligent Transport Systems (ITS). Meanwhile, in Japan, the 760MHz frequency is assigned exclusively for ITS use. At present, there are no moves to unify the assigned frequencies, but we understand the 5.9GHz band (based on the 11p standard) is favored to emerge as the eventual unified spectrum. On the other hand, leading cellular- technology companies Qualcomm and Huawei have proposed LTE V2X as a new standard. LTE V2X benefits from the use of the existing LTE cellular network infrastructure, but many observers have also taken a cautious view as its adoption is more complicated than the narrow-band communication standard that is already reasonably well advanced. Given that V2X devices have not been in the market for long, their market size is currently negligible, but as stated earlier, we see enormous potential for their use and expect their installation on cars to expand in the future. Main suppliers of in-car V2V devices include Denso, which launched the product for Toyota; Delphi, which supplies them to European and US automakers; and u-blox. Other makers include Bosch, Continental, Aisin Seiki, Oki Electric, and Japan Radio (6751). The main suppliers of in-car V2I (launched ahead of V2V) include Japan Radio, Denso, Mitsubishi Electric, and Panasonic. We forecast global V2X market to expand from ¥3.5bn in 2015 to ¥110bn in 2020 and ¥875bn in 2030. Figure 44: V2X overview Figure 45: Denso’s in-car V2X device
Source: Continental Automotive GmbH Source: Denso
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Figure 46: V2X market to grow rapidly over mid/long term 1,000 Billion Yen Thousand Units 160,000
800 120,000
600 80,000 400
40,000 200
0 0
V2X Transmitter Market (LHS) V2X Transmitter Volume (RHS) Source: Company data, Credit Suisse estimates In-car GPS device Linked with car navigation and other devices, in-car GPS is used for determining a vehicle’s location based on data received from GPS satellites. We expect the installation of in-car GPS to expand in order to improve car navigation accuracy and for use in tandem with the 3D maps and sensors required for semi-autonomous driving in the future. The use of GPS for car navigation began in 1990. Initially designed for the military, GPS was approved for civilian use after its accuracy was lowered. As a result, cars mounted with navigation systems combined gyro sensors and acceleration sensors with GPS (accuracy within 100m or so) to augment accuracy. After selective availability of GPS for military use was lifted in 2000, the accuracy of civilian-use GPS improved dramatically (to within 10m) and is expected to improve even further (within several centimeters) with the use of other augmenting technologies. While this is obviously insufficient for the location accuracy required in autonomous driving, we expect the use of GPS to grow in the future as a key device for determining location. We expect the use of 3D map data, V2X, and sensors to boost the installation of GPS units. Chips for automotive GPS are supplied by u-blox, CSR, Japan Radio, and Furuno Electric. However, market share for automotive GPS is fragmented as there are many car navigation system makers that procure the chips from these four companies and assemble their own modules. Moreover, other companies pursuing autonomous driving technology such as ZMP also make GPS modules. As in-car GPS unit installation was previously packaged with factory-installed navigation systems, shipment volumes were tied to sales of such systems. With the expansion of IVI and installation of GPS units on display audio to improve location accuracy, future automotive GPS market growth is unlikely to be tied to installation on factory-installed navigation systems alone. Taking into account the autonomous driving needs discussed above, we anticipate significant growth in in-car GPS over the long term.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 42 12 September 2016
Figure 47: In-car GPS overview
Source: Aisin AW Figure 48: Furuno Electric’s GPS chip and module Figure 49: Furuno Electric’s GPS antenna
Source: Furuno Electric Source: Furuno Electric Infrastructure for sending/receiving information Short-range communication/Bluetooth, Wi-Fi Bluetooth and Wi-Fi are both used in short-range communication (up to a distance of roughly 100m) for connecting to mobile phones, smartphones, and portable media players (PMPs). While Bluetooth is used for data transfer with these three types of devices. In addition to tethering via smartphones, Wi-Fi is also used for mirroring (syncing images between smartphone and in-car display), Miracast, Internet connectivity, connection to home networks, vehicle inspection, and over-the-air (OTA) software updates. We expect future display audio to speed up the mirroring function with smartphones, and look for mirroring to drive demand for Wi-Fi. Mirroring is also on course to support display audio in rear passenger seats. According to Techno Systems Research (TSR), the overall Bluetooth installation rate on all on infotainment devices was around 50% in 2015, with an 80% rate on car navigation systems (where it is virtually standard) but limited to 40% on car audio. Wi-Fi installations started around 2013 and reached around 10–15% overall for infotainment devices in 2015, but over 30% for display-equipped devices (AVN, display audio). The Wi-Fi installation rate is likely to pick up momentum from 2017 and reach nearly 40% for infotainment devices and 70% for display-equipped devices by 2020. In conjunction with the higher uptake of Wi-Fi, Bluetooth Audio is likely to be switched out in favor of Wi-Fi for transmission. In addition, Wi-Fi is likely to move from single band to dual band and MIMO. Bluetooth installation is already shifting from module units to chip-on-board. However, modules still account for a large portion of Wi-Fi (Panasonic and Continental have limited chip-on-board supplies, which account for just around 10%). Alps Electric boasts top market share for Wi-Fi modules (other Japanese makers include Murata Mfg, Mitsumi
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Electric, and Panasonic). Overseas suppliers of Wi-Fi modules include LG Inotech, WNC, Lesswire, u-Blox, Continental, and Parrot. As for Bluetooth chipsets, CSR (acquired by Qualcomm) leads other makers in terms of market share, but we also note market share gains for Mediatek in the aftermarket space. In Wi-Fi/Bluetooth combo chips, Qualcomm-CSR boasts top market share followed by Toshiba (6502), Mediatek, Marvell, Intel, and Broadcom. Wide-area communication Wide-area communication refers to communication distances from 100 meters to a few kilometers. In automotive applications, wide-area communication is used for connecting to the mobile IT network. Cellular network is also used in Fleet Management (operational control of commercial and cargo vehicles). We anticipate the rollout of LTE-V for V2X communication from around 2018 and 5G-based V2X communication between 2022–25. The cellular module market is broadly divisible into the OEM Telematics and Aftermarket Telematics/Fleet Management markets. According to TSR, the OEM Telematics market at 14mn units in 2015 and an estimated 15.8mn units in 2016. We look for the market to expand in 2017 and subsequent years driven by emergency communication-related regulatory impact. There are even plans for making eCall, an emergency communication system, mandatory on new autos in Europe from April 2018. Also, ERA-GLONASS, a similar emergency communication system, will become mandatory for all new cars sold from January 2017 in Russia. Elsewhere, CONTRAN245 is expected to be deployed in Brazil. We understand that emergency communication systems are also currently under consideration in the UAE. TSR estimates cellular communication-equipped passenger cars to reach 60% (59.3mn units) in 2020 driven by the adoption of telematics and eCall systems. On the other hand, according to TSR, the cellular module market for Aftermarket Telematics/Fleet Management at 38.5mn units in 2020 (versus 24.3mn units in 2015, and an estimated 28.1mn units in 2016) with outlook for steady growth. We expect a shift from 3G to LTE and LTE-Advanced for telematics and V2X applications, but note that eCall and other systems remain GSM based. The cellular module market is dominated by overseas names including Huawei, Gemalt, LG Inotech, Sierra Wireless, and Telit. Among Japanese makers, Kyocera (6971) supplies cellular modules to Toyota (Denso) and Honda. We understand that other Japanese makers such as Alps Electric and Murata Mfg. are also eyeing the cellular module market. Narrow-band communication Narrow-band communication involves distances from around 10 to 100 meters. In automotive applications, vehicle-to-vehicle together with road-to-vehicle and other V2X communications represent common uses of narrow-band communication. In particular, we expect the 5.8–5.9GHz band, ISO-certified as Dedicated Short Range Communications (DSRC) in ISO 15628, to become the dominant narrow-band frequency for road-to-vehicle communication. The frequency is already in use for ETC toll payments in Japan. On the other hand, Japan is moving toward 760MHz (ITC frequency band) in anticipation of growth in V2V functions. We think the main chipset suppliers are Qualcomm and NXP. Among Japanese manufacturers, Alps Electric (6770) and Murata Mfg. (6981) are handling Wi-Fi modules for DSRC.
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Figure 50: V2X spec Europe US Japan Wireless protocol IEEE 802.11p IEEE 802.11p IEEE 802.11p ETSI protocol WAVE protocol DSRC protocol ARIB T109 ETSI EN 302 663 IEEE 1609.x Frequency 5.855‒5.925GHz 5.850‒5.925GHz 760MHz 10MHz Frequency band 10MHz 10MHz (Option 20MHz) 3-27Mbps Throughput 3-27Mbps 3-18Mbps (6-54Mbps) US govt. has commenced Considering adding V2X to Situation deliberations aiming to make Service due to start in 2015 Euro-NCAP (*1) V2X obligatory *1：European New Car Assessment Program： European car safety performance assessment program Source: Alps Electric However, Qualcomm and Huawei are promoting cellular network-based LTE-V for V2X. LTE-V Release 12 is built on standardized LTE-D. It is expected to be standardized in Release 14, which is due to start in 2016. We think demand might start to take off in earnest, especially in China, from around 2018. Device-to-Device communication is possible in LTE-D, which comprises two functions: direct communication and device discovery. We expect LTE-D to operate in two situations: communicating independently outside areas covered by base stations and communicating using D2D based on assistance information from base stations outside base station coverage. In LTE-D, devices a kilometer apart can communicate with each other, while within a 500m range, the technology can detect several thousand devices. We think that from a latency viewpoint, V2X control which intermediates between base stations, will be introduced in or after 5G. The group that has driven development of DSRC-based V2X rather than LTE-V says DSRC has already passed field tests, while LTE-V is lagging substantially behind. However, in China there are concerns about interference in the 5.8GHz waveband used in DSRC, and a group centered on the China Communications Standards Association (CCSA), the China ITS Industry Alliance (C-ITS) and Huawei is working to standardize TD- LTE-based V2X. With regard to CATT, at the 14th Asia-Pacific Forum held in April 2015 in Nanjing and the GSC-19 in Geneva in July 2015, a group including Tsinghua University and Changan Automobile jointly demoed LTE-V using TD-LTE. DSRC is still in the lead as a V2X technology. However, we cannot afford to ignore LTE-V given that it is being aggressively promoted in China, which is the world's largest auto market (Tongji University and NXP Semiconductor have announced a large-scale trial in China using 802.11p as part of the Shanghai Intelligent and Connected Vehicle Demonstration Program). The group promoting LTE-V point to the following as problems with DSRC-based V2X: (1) 802.11p is an ad hoc system, and performance is not guaranteed (802.11p is a CSMA/CA-based standard, so waiting times arise in communication). (2) Allocated spectrum is limited to 30MHz in Europe and 10MHz in the US. (3) Roll-out of the road-side units (RSU) needed to achieve coverage will be extremely costly. (4) The business model for monetizing the service is unclear. (5) Security, the regular and long-term maintenance burden and other problems contrast with the benefits of using cellular networks, specifically, (1) deployment will carry no costs as the system would use communication companies' existing infrastructure, (2) integration in chipsets is low cost, and (3) the technology is proven and superior in terms of extendability and coverage. It can also benefit from evolution of cellular networks such as 5G. In addition to LTE-V, there has been a string of announcements of tie-ups between automakers, communication companies, and communication equipment makers in 5G
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 45 12 September 2016 development. In Japan, NTT DoCoMo (9437) and Denso have agreed to work together on R&D into automobile control systems using 5G and LTE. In November 2015, Deutsche Telekom, together with Continental, Fraunhofer-Gesellschaft, and Nokia Networks conducted tests of real-time communication between vehicles using an LTE cellular network. In July 2016, Deutsche Telekom announced an LTE-V trial focused on 5G at Ingolstadt autobahn with Huawei and automakers such as Audi and Toyota Motor.
Information sent/received by users Map information Among the types of information discussed in this report, map information is one of the most important from the standpoint of users seeking a connected car. It is possible to use navigation maps in various automotive communication systems; there are also systems that project external map data to in-car devices through smartphone link-up. Furthermore, we anticipate increased leveraging of 3D map data for autonomous driving and look for demand growth in this area to mirror the larger trend in informatization. Navigation map data sources have progressed from CD-R to high-volume HDDs, but SSDs and external memory such as SD cards are now being leveraged due to the benefits they offer in data transfer speed and durability. As mentioned earlier, use of systems for projecting external map data to in-car devices through smartphone connections is also on the rise. Looking ahead, we expect wider diffusion of connected cars to fuel growth in the installation of map data, a core application for users. We also anticipate higher demand for precision 3D map data for augmenting legacy 2D maps and GPS information. The ability to match 3D images of actual buildings and road signs with real-time sensor data and pinpoint the location of the car with minimal errors can be leveraged for autonomous driving. The release of 3D maps is still awaited, but companies involved in 2D maps such as HERE, Google, and TomTom are stepping up development of 3D maps. Moreover, measurement services and systems providers including Aisan Technologies, Zenrin, and Pasco (9232) have also taken up development of precision 3D maps. Future uses of precision 3D maps include development of dynamic maps. These are currently under development in Japan and Europe. Dynamic maps are essentially a database of accurate spatial maps (precision 3D maps) consisting of static information such as buildings and road lanes overlaid with real-time dynamic information. In other words, dynamic maps systems perform real-time updates of information on the vehicle’s surroundings, obtained through probe data and various sensors mounted on the vehicle (millimeter-wave radar, cameras) and communication devices (V2X, GPS), and then overlay the updated information on cloud-based precision 3D maps. We believe that next- level autonomous driving will hinge on autos on the roads sharing the same dynamic map information. However, we estimate that there are already over 600 items of static information attributes in the currently available precision map data, and believe it will not be easy to overlay constantly changing dynamic attributes on top of the existing data. Vehicles using dynamic map data not only require V2X, GPS and other sensors, but also powerful CPUs to process massive amounts of data. At present, there are no clear standards on the type of data that can be extracted from specific vehicle-mounted sensors for use on dynamic maps, and activities are currently underway in various countries toward establishing a standard. In Japan, observers view the implementation of the SIP-adus initiative on automated driving, a part of the Cabinet Office’s Strategic Innovation Promotion program (SIP), as a key task. Toward establishing a standard, Mitsubishi Electric, Zenrin, Aisan Technologies, Increment P, and Toyota Mapmaster joined up with automakers to establish Dynamic Map Planning in June 2016. The company will look into standardization of the dynamic map data specification and development process, verification of maintenance procedures, coordination with related public institutions, formation of international alliances, and other measures for shaping
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 46 12 September 2016 autonomous driving and driving safety support systems. Similar activities are also underway outside Japan, with Local Dynamic Map (LDM) in Europe taking initiatives for standardization. Activities among system suppliers include the development of the eHorizon concept by Continental. The concept takes the name eHorizon as it will provide a predictive view of areas at the car's visible horizon, i.e., considerably beyond the driver's normal range of vision. Permanent connectivity between the car and network servers enables eHorizon to combine vehicle sensor information (real-time dynamic information; handled separately in the past) with navigation map data (legacy static information). The use of combined real- time traffic information should improve overall traffic efficiency. Continental, IBM, and HERE are jointly developing the eHorizon system. Continental’s automotive sensors, IBM’s cloud service, and HERE’s precision 3D maps are critical pieces in the development of the eHorizon system aimed at realizing advanced, next-generation autonomous driving. Bosch and TomTom, rivals of Continental and HERE respectively, also have an alliance for the development of high-precision maps. The two companies are cooperating in the development of a connected-car service that will collect real-time information from vehicles and link these to maps for use and analysis. Clear visibility is lacking on the launch timing of dynamic maps developed in various countries. However, we do not regard these as imperative at stage three of autonomous driving in 2020 and expect companies to pursue development of the function with the view to attaining an even more advanced level of automation. Figure 51: Information included in dynamic maps
Source: Cabinet Office
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Figure 52: Continental’s eHorizon concept
Source: Auto Prove
Figure 53: Continental’s eHorizon concept
Source: Continental Automotive GmbH
Infotainment Amid the ongoing transformation of cars into mobile information units, there is a growing demand by users to access infotainment apps they previously used on smartphones. The term "infotainment" derives from information and entertainment, in-car infotainment naturally includes all applications related to the two spheres. We anticipate greater uptake for in-car services such as music downloads through in-car telematics or smartphones, search for nearby stores and receipt of coupons, tourist information, weather information, news, and e-commerce (discussed below). Operating systems installed on autos tend to
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 48 12 September 2016 have a significant impact on application vendors. In most cases, users connect their smartphones with in-car telematics using standards such as Apple’s CarPlay, Google’s Android Auto, and the Car Connectivity Consortium’s (CCC) MirrorLink. Telematics auto insurance Auto driving information (a form of Big Data), obtained through telematics, is also utilized for auto insurance. Telematics auto insurance is a type of auto insurance that leverages driving information sent/received via telematics and analyzes it for calculating insurance premiums. In these services, insurance companies obtain driving information including distances traveled, driving speed, and the number of times sudden braking was applied through telematics devices and then determine insurance premiums for drivers after analyzing the frequency of use and accident risks for each driver. Users derive benefits including discounts on insurance premium and the insurance companies benefit from lower risk exposure. Also, automakers stand to benefit indirectly from the collection of large amounts of driving data once more vehicles use in-car communication systems for subscribing to telematics-based auto insurance. Since this also has the added benefit of fewer accidents due to safer driving, Japan's Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has set telematics insurance as a future priority and is encouraging drivers to subscribe to telematics insurance. As a proportion of overall auto insurance, telematics insurance is quite small at present. Even in Europe and the US, where the adoption rates are relatively higher, the proportion of telematics insurance is only around 10%, but we expect this is to rise to roughly 30% by 2020. Insurance premium calculations can be broadly divided into Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD) models. In PAYD, the insurance premium mainly varies according to distance traveled and deterioration in auto’s condition based on frequency of use. In PHYD, insurance companies determine drivers’ propensity for safe or dangerous driving based on specific driving attributes (sudden braking, rapid acceleration) for calculating the insurance premium. Systems in Europe and the US typically consist of special-purpose devices mounted on automotive communication devices, but we note an increase in the use of smartphones in recent years. In Japan, insurance companies, in collaboration with specific automakers, mostly use factory-installed navigation devices. This is because in most cases factory-installed navigation devices are already linked to vehicle diagnosis information. Trucks leverage widely-used digital tachometers for sending and receiving information. The PAYD model was introduced in Japan in 2004 by Aioi Sompo (now Aioi Nissay Dowa Insurance), which launched a service using data from G-Book, a telematics system mounted on Toyota’s factory-installed navigation devices. In 2013, Sompo Japan Nipponkoa Insurance introduced its PAYD model, Dra-Log telematics insurance, for the Nissan Leaf. The service leverages driving information accumulated in the Hitachi-built telematics unit installed in the car. For management of Dra-Log, Sompo Japan Nipponkoa adopted Hitachi's data processing and distribution service for Telematics, which analyzes information such as distance traveled and offers the data through its cloud infrastructure. Japan still lags other nations in the introduction of PAYD and PHYD plans. In February 2015, Sony Assurance launched the Gentle Driving Cash-Back Plan, the nation’s first PHYD insurance, which involved a dedicated Drive Counter equipped on policyholders’ vehicles for measuring driving behavior. The system monitors rapid accelerations or sudden braking and awards bonus points for safe driving, allowing policyholders to earn cash back on their insurance premiums. In January 2016, Axa General Insurance announced plans to step up telematics-based insurance policies in Japan within the next two years. Axa will collect data on driving behavior and distance traveled through its tie-up with Smart Drive. The company aims to develop a PHYD type telematics insurance that is not restricted to a specific auto model or automaker. Compared to the entire auto insurance market, Telematics auto insurance has limited adoption at present, but insurance companies are stepping up collaboration with complete- vehicles manufacturers and working on product development. Toyota and Aioi Nissay
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 49 12 September 2016
Dowa Insurance are stepping up collaboration in anticipation of demand growth in telematics auto insurance. Aioi Nissay Dowa Insurance developed a highly versatile, PAYD type Tsunagaru Automobile Insurance product leveraging T-connect, Toyota’s next- generation telematics service launched in 2014. The service calculates distance traveled using the in-car communication module or the user’s smartphone and enables the company to offer policyholders a discount on their insurance premiums. In conjunction with the growth in in-car telematics, the company has revised its PAYD type auto insurance (previously limited to luxury cars) and is now offering insurance products compatible with a variety of auto models as long as their users have a factory-installed navigation system and own a smartphone. In 2015, Aioi Nissay Dowa Insurance acquired Box Innovation Group, a UK telematics insurance provider, and rolled out telematics auto insurance for the Toyota Aygo model in Europe. Through a joint investment with Toyota in April 2016, Aioi Nissay Dowa Insurance established Toyota Insurance Management Solutions (TIMS), a new telematics insurance service company in the US. The insurer is apparently aiming to step-up telematics insurance sales overseas.
Figure 54: Telematics insurance from various insurers Insurance company Service Target Outline Toyota T-Connect, Lexus PAYD insurance Tsunagaru auto G-Link navi fitted vehicles Analyzes driving data and provides monthly "safe driving insurance Aioi Nissay Dowa (excluding corporate contracts) advice" Insurance PAYD insurance Thai domestic TBD Approved by Thai insurance authorities in March 2016 telematics insurance *Thai domestic market cars Due to go on sale within the year
Shanghai Sumitomo PHYD insurance Suma Navi Fleet contract customers Mitsui Banking Corp. Maximum 6% discount
Introduction of fleet equipped with drive recorders with Smiling Road Fleet contract customers communication function gives 5% discount Sompo Japan Nipponkoa Holdings PAYD insurance Drive Log Nissan Leaf users Premiums decided via use of driving data collected through specialised telematics units with communication functions PHYD insurance Easy driving Sony nonlife insurance Individual contracts Special drive counter fitted to vehicle, cashback depending on cashback driving record
Tokio Marine & Nichido In collaboration with Pioneer (6773), 5% insurance discount Drive Agent Fleet contract customers Fire Insurance applied to vehicles fitted with Pioneer terminals
Source: Company data, Credit Suisse
Figure 55: An overview of PAYD and PHYD telematics auto insurance models
Source: Toyota Motor, Credit Suisse
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 50 12 September 2016
Digital e-commerce With in-car connectivity becoming available on-demand, we also expect growth in the digital e-commerce market accessed from cars. There are ample opportunities for users to engage in commercial activities online while driving or riding as a passenger, so that commute time could be used effectively. We thus look for expansion in digital e-commerce, particularly as an automotive telematics application. Driver/passengers can now access the Internet while in-car and buy products using the built-in HMI. Under the existing setup, shops where drivers buy products pay a portion of the transaction amount as a fee to the digital e-commerce vendor. BMW has turned to Alibaba as its China e-commerce platform vendor recently, but the scale of operations on the platform are somewhat limited given that the service is still quite new. With GM’s entry into in-car commerce in North America in 2015, we see prospects further growth fueled by other companies entering the fray. GM offers an e-commerce platform known as AtYourService to subscribers of its OnStar telematics system. Dunkin Donuts, Exxon Mobil, Groupon and others are participating on this platform, which is also used for sending/receiving coupons from stores located along the route taken by the car. Emergency communication and vehicle tracking GPS-based vehicle information is also used for emergency calls and tracking stolen vehicles. A primary example is eCall, which enables communication with rescue agencies during emergencies, accidents, problems, or medical emergencies. eCall transmits emergency communications through a GPS module and via GPS satellites to the relevant call center. The system, which automatically identifies vehicle location based on GPS data, enables rapid response from rescue teams as users no longer need to relay this information manually. Considering the fact that the EU Council has made eCall mandatory on autos in Europe, we expect system installations to increase. User uptake is picking up for ERA Glonass, an indigenous standard developed in Russia, but efforts are underway to unify its standards with the eCall module. Although not mandatory, comparable systems such as emergency call services based on HelpNet in Japan and GM’s OnStar in the US and Ford’s 911Assist, also in the US, are also available. Growth in embedded IVI in communication modules should also fuel adoption of such emergency communication systems in other countries. Semiconductor makers including ON Semiconductor, Qualcomm, NXP and system developers such as Bosch and LG Electronics are involved in the development of eCall. The bCall service ("breakdown call"), like eCall, is another system that leverages GPS. While not for emergencies, the system efficiently connects to road assistance services through GPS when a breakdown occurs. Other GPS-based solutions include stolen vehicle tracking systems. The system’s uptake has risen in recent years as tools used in vehicle theft have become advanced enough to neutralize vehicle immobilizers. We look for the system, which is also gradually heading toward becoming mandatory in the future, to see greater levels of adoption. In case of theft, the system relays the vehicle's location and condition to the owner or a call center using GPS or telematics. There are already examples of the system being combined with telematics auto insurance and we look for adoption to increase in tandem with the number of telematics auto insurance policyholders. Automotive radio broadcast We also note rapid advances in in-car installations of broadcast services including Internet radio and satellite broadcast. Although it is called radio, Internet radio does not use radio frequencies and is instead broadcast over the Internet and can be received through the in- car platform or smartphone. Demand for Internet radio is on the rise as it enables users to seamlessly enjoy a variety of content, particularly during long-distance driving in the US, which typically spans several media broadcast areas. Internet radio could become mandatory in many member states of the EU, which is looking to shift traffic information service from FM to digital broadcast. Given the EU’s diverse media valuation, we anticipate strong growth in Internet radio in the region. Currently, Internet radio service providers are mostly concentrated in North America, which also has the highest listener population. The Internet radio market is driven by Pandora, which accounts for a substantial portion of this market. The company provides services to US automakers as well as Toyota, Audi, and others.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 51 12 September 2016 Informatization supply chain Denso (6902, NEUTRAL, TP ¥4,000) Information/safety-related sales to rise to ¥1tn in FY3/21 As a part of its longer-term strategy, Denso is developing an advanced next generation autonomous driving platform leveraging remote sensing, communication, and HMI and is probably one of the sector companies poised to derive maximum benefit from growth in the informatization market. We expect information/safety-related sales to rise from ¥689.3bn in FY3/16 to around ¥1,000bn in FY3/21. In particular, we look for information/communication sales to increase to around ¥300bn in FY3/21. It is involved in diverse information-related technology and in addition to an IVI-based cockpit system, it is also developing HUD, instrument cluster MID, driver status monitor (DSM), in-car V2X devices, data communication modules (DCMs), and ADAS locators. We note a contraction in in both value and value of Denso’s car navigation systems sales, which are mainly supplied to Toyota. Nevertheless, we expect the company’s business portfolio to transition in keeping with the switch from car navigation system to IVI systems in tandem with the advancement of related technologies. At the Automotive Engineering Exposition 2016, the company showcased its Harmonious Communication Cockpit, a concept of the next-generation cockpit system which includes an IVI system. The exhibit, equipped with a large HUD, electric mirrors, and DSM, signalled the direction of Denso’s technology development. Items currently commercially produced by Denso include standalone products such as HUD, instruments cluster MID, and DSM. In particular, Denso’s global market share for HUD, which it started supplying to Lexus in 2000, has increased to around 15–20%. In the area of HMI technology, Denso, as the largest supplier of vehicle instruments and meters, was the first global maker to mass produce high-resolution TFT display-based graphic meters in 2008. We estimate Denso’s current global market share for instrument cluster MIDs (multi-information displays) at more than 20%. Also, in the area of information and communication, Denso supplies V2X devices for Toyota’s ITS Connect service rolled out in 2015. In addition to compact casing, Denso’s products also have built-in functions for wireless communication, vehicle location detection, and situation assessment that can be installed in different vehicles. We see substantial longer-term growth potential for Denso due to the indispensable nature of road-to-vehicle and vehicle-to-vehicle communication technologies in the advanced next-generation assisted driving. Moreover, the company also has a proven record in DCM, being the first maker worldwide to have mass produced DCM for the G-Book in 2002. Toyota has indicated that it will raise DCM installation in its models from 2017, so we look for significant growth in Denso’s supply volume. Cooperation with partner companies in developing informatization technology Denso, which has announced a set of unexpected alliances with non-auto sector names including those in IT, is also pursuing cooperation with partner companies in developing informatization technology. The company signed an agreement with NTT DoCoMo in February 2016 for vehicle control system R&D using LTE and 5G, the next-generation communication standard, for realizing advanced driving assist and autonomous driving technologies. By combining its road-to-vehicle and vehicle-to-vehicle communication technologies with NTT DoCoMo’s communication technology based on the LTE and 5G standards, the company aims to develop a high-quality and high-speed vehicle communication platform. Also, Denso decided to acquire a stake in NTT Data MSE, a software developer for the automotive platform, with a view toward bolstering software development for its in-car instrument cluster and display. In August 2016, Denso hired Takeo Kanade, a professor at Carnegie Mellon University who is well-known for his work in AI, computer vision, and robotics engineering, as a technology advisor with view to stepping up technology development in the areas of image recognition and machine
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 52 12 September 2016 learning. In addition to such company-specific moves, Denso has also joined the global standards organization associated with informatization technology. It also participates in other organizations such as GENIVI, an open alliance for infotainment platform development for IVI; the Car Connectivity Consortium (CCC), an organization pursuing standardization of specs for connectivity between smartphones and other mobile devices and automotive IVI systems; and Automotive Grade Linux (AGL), an organization promoting the use of open-source Linux for an automotive OS.
Denso also develops smartphone-linked applications Since 2011, Denso has been offering ARPEGGiO, a smartphone application compatible with Toyota’s initial G-Book telematics service. ARPEGGiO allows users to operate smartphone applications such as facilities search and music playback through in-car navigation display. In 2013, Denso linked ARPEGGiO with Yahoo! Japan’s Voice Assist, a voice search application for the Android platform, to enable the display of voice search results related to travel destination, news, and weather. In 2015, it then announced the development of Spin n’Click, an application assisting smartphone use in different situations, including those encountered while driving. The application uses KKP, a Bluetooth-compatible control device that allows users to easily operate smartphones. Meanwhile, Denso is also involved in developing an automotive version of an information system similar to plug-and-play, which enables users to automatically download applications that make use of existing or newly connected devices on the in-car network. This not only allows easy update of new functions in the car, but is also likely to be useful in handling autonomous driving and other transitional technology.
Figure 56: Denso’s informatization technology linked to advanced driving assist
Source: Denso
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 53 12 September 2016
Figure 57: Denso’s Harmonious Communication Cockpit
Source: Denso
Aisin Seiki (7259, OUTPERFORM, TP ¥5,400) Focus on developing informatization technology centered on car navigation business Aisin Seiki is involved in developing a wide range of informatization technology. Most of the development is centered around the car navigation business of Aisin AW, a consolidated subsidiary. Development spans a variety of areas including the interplay between car navigation systems and smartphones, driving-assist systems linking the car navigation system’s functions with other in-vehicle devices, and remote operation of certain vehicle functions via smartphones. FY3/16 sales at Aisin Seiki’s car navigation business totaled ¥108.4bn, or just 3.3% of the company’s consolidated sales (Aisin AW’s accounting for around 8.5% of consolidated sales), but we note an uptrend in the shipment value of the company’s car navigation systems in recent years, due partly to changes in a Toyota procurement policy that has increased supply volume from Aisin and to software sales including smartphone apps. Moreover, incorporating a car navigation system in joint operation of various standalone products is helping lift overall value-added. Bolstering link between mechatronics components and car navigation system The car navigation system’s use in jointly operating other devices goes back to NAVI- MATIC, the first such system mass produced in 1998. The system, which automatically controlled automatic transmission (AT) shifting based on road information input from car navigation, was regarded as a major breakthrough and played a crucial role in lifting the fuel-efficiency of the Aisin Seiki's AT systems. The company further developed its navigation-coordinated shift control and introduced a navigation-linked braking assist system in 2008. The system senses the auto’s deceleration point and provides a heads-up
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 54 12 September 2016 for the driver to come to a safe halt at the intersection stop line, even adjusting the braking force as needed. Aisin’s system improves the accuracy of coordinated control based on input from map information embedded in car navigation and compares this information with image data from camera sensors that recognize white lines and signs painted on the road. Coordinated control using a car navigation system constitutes a major element of autonomous driving technology that leverages map data; we expect this technology to become critical. Rolling out high-function navigation software as a standalone application; looking to expand car navigation system sales channel Aisin’s sales of in-car units to automakers have increased as car navigation systems have become multifunctional, but the company is also eyeing growth opportunities arising from potential sales of navigation software as a smartphone app. NAVI elite is highly popular as it offers functions almost on par with factory-installed Toyota navigation systems. Even though free navigation apps are available, we note an increase in the contract renewal rate of NAVI elite (priced at ¥3,800 per year or ¥400 per month, as of April 2015) boosted by user acclaim for its high-level functions. Aisin is also putting effort into introducing new functions to its navigation software. It has tied-up with akippa, a share service for available parking space, for providing a parking lot reservation function on NAVI elite. Furthermore, it added information from the Tomereta parking space sharing service to the app in July 2016. In addition to traditional paid parking lots, Tomereta also enables users to let out or rent home or storefront parking space. Taken as a whole, these moves suggest that Aisin may be looking to widen the scale of its navigation business by raising the level of convenience offered by its navigation software. Aisin also developing smartphone-linked apps Aisin is also developing a smartphone-controlled remote parking system. It showcased this technology for the first time in October 2015 at the ITS World Congress 2015 and then demonstrated it in Japan in February 2016. The system sends signals from the smartphone to the car via Wi-Fi and enables users to park their car remotely at the designated place. Once camera sensors mounted on the car detect an available parking space, the smartphone automatically moves the car toward the parking spot when the user presses an icon. The system currently uses cameras to detect the white lines and is usable only in parking spaces delineated by white lines, but Aisin is now working on a technology that will allow users to remotely park their vehicles in parking spaces without white lines. The system is compatible with the next-generation autonomous driving function and Aisin Seiki plans to speed up development of informatization technology.
Figure 58: Overview of navigation coordinated braking Figure 59: Informatization technology showcased at ITS assist system World Congress 2015
Source: Aisin AW Source: Aisin Seiki
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 55 12 September 2016
Mitsubishi Electric (6503, NEUTRAL, TP ¥1,340) Informatization offers business opportunities in three areas; victory will depend on overall ability to provide solutions Auto parts should generate 17% of companywide sales, 22% of OP (FY3/17 guidance). We estimate automotive multimedia (such as car navigation systems) business accounts for around 30% of sales. The company mainly supplies brand-name car navigation systems to domestic and European manufacturers. The company is focusing on growing business in three new areas: EV/HEV, advanced driver assistance systems (ADAS), and next-generation information terminals. We think the company has an edge in terms of its ability to provide solutions as it has a wide range of technologies including high-precision Quasi-Zenith Satellite System (QZSS), communication, and security technologies. It is therefore involved in all three categories we define as informatization. The first is human-machine interface (HMI) in hardware and software. The second type of infrastructure for sending/receiving information is V2X modules for automobiles and multi- beam multiplexing technology for 5G base stations. The third, which is information itself, is establishing new companies to monetize precision maps. In May 2016, the company set up a consortium with itself as the main investor (18% stake, Zenrin, geospatial information major Pasco 17% each) that established Dynamic Map Planning aimed at monetizing precision map business for autonomous driving. The company has not disclosed specific sales targets for the three new areas. However, we expect results from informatization business to grow in tandem with market expansion. Alps Electric (6770, OUTPERFORM, TP ¥2,900) Maximizing benefits of market growth in in-vehicle electronics Alps is the largest manufacturer of in-vehicle Bluetooth modules and Wi-Fi modules. Alps has superior development capabilities for both hardware and software in the in-vehicle connectivity market. In the Japanese car OEM segment, we think Alps is already shipping connectivity products for vehicle-to-everything (V2X) ITS Connect technology. Overseas, the company is developing dedicated short-range communications (DSRC) V2X (802.11p) modules and is also involved in cellular modules. We estimate in-vehicle communication module sales of nearly ¥25bn in FY3/17. In 2015, Alps started supplying head-up displays (HUDs) for use as an option in prestige vehicles in Europe and we expect sales growth in 2017 and beyond for use in Japanese and European cars. Alps is also involved in cockpit modules and appears well positioned to maximize the benefits of market growth in in- vehicle electronics. Murata Manufacturing (6981, OUTPERFORM, TP ¥16,500) Expect growth in in-vehicle Wi-Fi modules from 2H FY3/17 and 802.11p modules from around 2018 We expect sales of Murata’s in-vehicle Bluetooth modules to reach around ¥10bn in FY3/17. We expect Murata to begin delivering in-vehicle Wi-Fi modules for European cars from 2H FY3/17 and to start V2X 802.11p module operations from 2018. In the in-vehicle Wi-Fi module segment, Murata announced in September 2013 that it would develop technologies for high-speed Wi-Fi authentication/connection and high-speed activation of automotive systems in collaboration with Renesas Electronics and Ubiquitous (3858). The company has also established Miracast Solution for mirroring. Using Renesas’ R-Car SoC, Murata’s Wi-Fi modules, and Ubiquitous’ driver software, it is now possible to use Wi-Fi to display smartphone screens on the vehicle navigation system and to mirror this on displays mounted for the rear passenger seats. For passive components, we expect growing demand for CMF, coils, and MLCC with the move to in-vehicle infotainment (IVI) and instrument cluster displays.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 56 12 September 2016
Mitsumi Electric (6767, NEUTRAL, TP ¥525) Involved in in-vehicle Bluetooth, Wi-Fi modules, and antennas Mitsumi is involved in in-vehicle Bluetooth and Wi-Fi modules, but we think the company lags somewhat behind Alps and Murata. Mitsumi is also involved in antennas; we expect increasing connectivity functionality in cars to drive up antenna added value. Rohm (6963, OUTPERFORM, TP ¥7,300) Benefiting from growth in on-board displays Rohm produces backlight LED drivers, LCD drivers, controllers, PMIC, and timing controllers for use in in-vehicle displays. At the results briefing in May 2016, the company commented that its chipsets had been selected by the four largest panel makers, its panel PMIC was being proposed to or had been selected by 20 Tier 1 companies and panel makers, and that its panel T-CON (timing controller) was being proposed to or had been selected by ten companies. Rohm is also collaborating with Renesas, developing power PMIC for Renesas’ R-Car systems for instrument cluster and infotainment applications and almost all key Tier 1 companies around the world have decided to use Rohm products. Panasonic (6752, NEUTRAL, TP ¥1,100) Expecting OEM navigation system sales growth from FY3/18 while upfront investment period comes first FY3/16 automotive segment sales were ¥1.3tn (approx. 17% of its total sales). Breaking this down, about ¥570bn of sales were from comfort products, led by infotainment systems, about ¥360bn were from safety products, which includes sensors and automotive cameras, and about ¥350bn were from Panasonic’s environmental category, mainly batteries. In addition to its product lineup of sensing parts, which includes sensors and millimeter- wave radars, and automotive cameras, part of Panasonic’s strength lies in its ability to offer integrated solutions that also encompass semiconductors and onboard communications technologies. OEM navigation system orders are currently in a fallow period, but orders for delivery from FY3/18 and beyond are showing growth in cockpit systems that integrate infotainment, center display, and head-up display components. The shift from traditional navigation systems to in-vehicle infotainment systems (IVIs) continues. In sensing components and automotive cameras, Panasonic aims to expand its integrated system lineup through tie- ups that extend into areas such as emergency braking, automatic parking, and driver monitoring. It has already announced integrated communications modules with antennas, tuners, and servers, as well as V2V wireless units. Pioneer (6773, NEUTRAL, TP ¥240) OEM order growth from 4Q FY3/18 although preceding quiet intervening period; map data promising for medium term Pioneer focuses mainly on car navigation and car audio systems, and also owns Increment P, a map-data developer. Pioneer derives much of its earnings from aftermarket audio equipment sales and has large market shares in emerging nations. OEM navigation system orders are currently in a fallow period, but we expect sales contributions starting in 4Q FY3/18 from new orders. Some 38% of car electronics sales are aftermarket, and conditions are challenging, especially in emerging markets. For the medium term, we envisage risks from stiffer competition and sales decline. Management is focusing on strengthening interoperability with smartphones to take advantage of the connected car trend.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 57 12 September 2016
Among its self-driving systems products, we believe there is medium-term growth potential in the company’s 3D LiDAR sensors, advanced map-related systems, and high- precision map data. In 3D LiDAR, Pioneer is partnering with HERE and plans to begin testing live map systems, but full-fledged earnings contributions are only expected from 2022. It plans to begin selling high resolution maps in 2018, but this is to remain within its existing business frameworks at first (navigation, smartphone apps, etc.). We expect a gradual rise in earnings growth (we estimate Increment P’s OP contribution was about ¥1.5bn in FY3/16). Alpine Electronics (6816, NEUTRAL, TP ¥1,350) Strong in luxury cars, expecting sales recovery from 2H FY3/17 Alpine specializes in car infotainment systems and is mainly engaged in producing OEM navigation and audio systems for overseas markets. It is a consolidated subsidiary of Alps Electric, which hold a stake of 40%. Alpine’s business centers on OEM car navigation systems for luxury sedans, and it is positioned to benefit from the shift toward in-vehicle infotainment systems (IVIs). In cooperation with parent Alps Electric, it is developing integrated cockpit systems integrating instrument clusters, head-up displays (HUDs), and other elements. In security and vehicle position sensing systems, it can make use of the software development resources of Chinese company Neusoft. Overall, its use of opportunities to collaborate with other group companies is a strength. We expect cockpit systems to take off in earnest around 2019–20. Meanwhile, the company plans for existing OEM navigation system business to start benefitting from new orders around 2H FY3/17. Although orders are likely to remain sluggish through 2Q FY3/17, in terms of fundamentals, we expect trends to bottom out before long. Clarion (6796, NEUTRAL, TP ¥320) Expecting automotive camera systems to pick up again from FY3/18 Clarion is OEM focused. Besides car navigation and car audio systems, it produces automotive cameras (discrete units and systems) and telematics control units (TCUs). It is a consolidated subsidiary of Hitach (6501), which hold a stake of roughly 64%. Major customers include Nissan. Although the pace of sales growth has slowed for the moment due to a fading impact from a round of new orders, with its OEM-centered business model, we think Clarion is likely to do well in the shift toward in-vehicle infotainment systems (IVIs). In automotive camera systems, its specialty is surround view monitors that help confirm the position of the vehicle during parking. With demand for driving-support functionality growing, we expect the adoption of Clarion systems to grow as automatic parking options spread to more vehicle models from 2H FY3/18. We also expect TCU demand to grow along with connected car functionality. Clarion has the advantage of being able to collaborate with Hitachi Automotive, a member of the Hitachi group, and parent Hitach to develop self- driving systems, on which the partners within Hitach group are already conducting joint tests. JVC Kenwood (6632, NEUTRAL, TP ¥260) Dealer option channels growing, but risk of contraction in aftermarket channels JVC Kenwood’s car electronics business includes navigation, audio, CD/DVD mechanisms, and speakers. Its navigation and audio systems are currently mainly aftermarket, but it has been expanding its dealer option lineup in recent years. As a share of its FY3/16 totals, car electronics contributed 47% of sales and 7% of OP. The company’s main businesses besides car electronics include commercial wireless products. It is developing digital cockpit systems that include electronic mirrors, electronic meters, head-up displays (HUDs), and infotainment systems. It has announced it will use a
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 58 12 September 2016
McLaren as the display car at the Consumer Electronics Show. JVC Kenwood’s technologies include image sensors and image processors, enabling it to assemble system solutions using in-house resources. It has commercialized aftermarket HUD systems that use high-resolution, high-brightness LCOS projectors. These use reflective liquid crystal on a silicon substrate and feature sharp image resolution and high brightness. While we understand that JVC Kenwood has received digital cockpit orders from some automakers, sales and earnings contributions are likely to be small. Over the medium term, growing sales in the aftermarket and car CD/DVD mechanism businesses, will likely require winning additional orders in both dealer option and OEM channels. Zenrin (9474, Not Rated) Uptake of navigation apps increasing; working now on system supporting autonomous driving Zenrin is Japan's leading provider of map information. In addition to supplying residential maps, it also provides map databases and content including in-car navigation and various other apps and services. Zenrin’s car navigation software is highly accurate and up-to- date; once the destination is reached, for example, it often provides information on how to enter the building. As well as providing map information to manufacturers of car navigation systems, Zenrin also offers proposals for comprehensive services combining map databases and applications, which are starting to be adopted by automakers. As a contribution to autonomous driving, Zenrin currently is building a “high-precision spatial database" containing precise location data that will help ensure safe driving, and a “spatio-temporal system” that consolidates information on geographic features into a database, which will then be updated regularly to reflect differences (changes) observed in real time by vehicles mounted with sensing equipment. Zenrin will pull this all together to create a high-precision map solution it has dubbed ZGM Auto (ZENRIN Geospatial data Model for Automotive). The company is participating in a public-private partnership to develop high-precision 3D (dynamic) maps supporting autonomous driving, and it expects ZGM Auto to make a contribution. Aisan Technology (4667, Not Rated) Focus on dynamic map development in anticipation of autonomous driving Aisan Technology is a measurement system design/sales company based in Nagoya, Aichi Prefecture. The company focuses on a 3D spatial measurement solution known as the mobility mapping system (MMS) for developing high-accuracy 3D maps for autonomous driving. Aerial measurement using laser and camera sensor-equipped drones is another key strength of Aisan. Zenrin and Pasco are Aisan’s rivals in the measurement business, but the company has a cooperative relationship with the two companies for dynamic map infrastructure development geared toward autonomous driving. Aisan established Dynamic Map Planning in June 2016 in partnership with Mitsubishi Electric, Zenrin, Aisan Technologies, Increment P, Toyota Mapmaster, and complete vehicle automakers. The newly established company will look into standardization of dynamic map data specification and development process, verification of maintenance procedures, coordination with related public institutions, international alliances, and other measures for shaping autonomous driving and driving safety support systems. Aisan has a cooperative relationship with its rivals for standardization of data specs, but once this goal is attained it aims to differentiate itself by leveraging its strength in measurement technology. The company is also a member of Urban Drive, a working group of the Internet Intelligent Transport Systems (ITS). Other members of ITS working group, which is working toward commercialization of autonomous driving technology, include Intel, Increment P, ZMP and Nagoya University. In addition to highlighting technical issues including those related to autonomous driving platform technology, high-accuracy mapping technology, and the incorporation of sensors, the group is also working on on-road autonomous driving tests.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 59 12 September 2016
Companies Mentioned (Price as of 09-Sep-2016) AT&T (T.N, $39.71) AXA General Insurance (Unlisted) Agoop (Unlisted) Aioi Nissay Dowa (8761.T^C10, ¥482) Aisan Technology (4667.T, ¥4,620) Aisin AW (Unlisted) Aisin Seiki (7259.T, ¥4,795) Alibaba Group Holding Limited (BABA.N, $99.62) Alpine (6816.T, ¥1,318) Alps Electric (6770.T, ¥2,227) Amazon com Inc. (AMZN.OQ, $760.14) Apple Inc (AAPL.OQ, $103.13) Audi AG (Unlisted) BMW (BMWG_p.DE, €66.26) BMW Motorrad (Unlisted) Baidu Inc (BIDU.OQ, $182.1) Bosch Ltd. (BOSH.BO, Rs24204.55) Box Innovation Group (Unlisted) Broadcom Ltd (AVGO.OQ, $160.78) CSR (CSR.AX, A$3.47) Cadillac (CDC.V, C$0.035) ChangAn (200625.SZ, HK$12.75) Clarion (6796.T, ¥318) Continental (CTCN.BO, Rs20.75) Cruize Automation (Unlisted) Daimler (DAIGn.DE, €63.46) Delphi Financial Group (Unlisted) Denso (6902.T, ¥4,330) Deutsche Telekom (DTEGn.F, €14.78) Dunkin' Brands Group (DNKN.OQ, $47.86) Dynamic Map Planning (Unlisted) ExxonMobil Corporation (XOM.N, $86.84) Facebook Inc. (FB.OQ, $127.1) Fiat Chrysler Automobile (FCHA.MI, €6.025) Ford Motor Company (F.N, $12.38) Fuji Heavy Industries (7270.T, ¥4,066) Fujitsu (6702.T, ¥533) Furuno Electric (6814.T, ¥540) Gemalt (Unlisted) General Motors Corp. (GM.N, $30.48) Google (GOOAV.OQ, $568.67) Groupon Inc. (GRPN.OQ, $5.28) HERE (Unlisted) Hino Motors (7205.T, ¥1,135) Hitachi (6501.T, ¥490) Hitachi Automotive Systems (Unlisted) Honda Motor (7267.T, ¥3,136) Huawei Technologies (Unlisted) Hyundai Motor (005385.KS, W98,000) IBM (IBM.BA, $241.0) Increment P (Unlisted) Innotech Corp (9880.T, ¥496) Intel Corp. (INTC.OQ, $35.44) Isuzu Motors (7202.T, ¥1,291) JVC Kenwood (6632.T, ¥254) Jaguar Land Rover Automotive (Unlisted) Japan Radio (6751.T, ¥271) Johnson Controls Inc (JCI.N, $45.7) KDDI (9433.T, ¥3,097) Kanematsu (8020.T, ¥156) Kia Motors (000270.KS, W44,550) Kyocera (6971.T, ¥5,036) LG Electronics Inc (066570.KS, W51,500) LG Innotek (Unlisted) Lesswire (Unlisted) Livio (Unlisted) Lyft (Unlisted) Marvell Technology Group Ltd. (MRVL.OQ, $12.31) Mazda Motor (7261.T, ¥1,670) McLaren Technology Group (Unlisted) MediaTek Inc. (2454.TW, NT$245.0) Microsoft (MSFT.BA, $175.0) Mitsubishi Electric (6503.T, ¥1,305) Mitsubishi Motors (7211.T, ¥497) Mitsui Sumitomo Insurance (Unlisted) Mitsumi Electric (6767.T, ¥618) Mobileye NV (MBLY.N, $47.47) Murata Manufacturing (6981.T, ¥13,190) NTT Data (9613.T, ¥5,350) NTT Data MSE (Unlisted) NTT DoCoMo (9437.T, ¥2,601) NXP Semiconductors N.V. (NXPI.OQ, $81.4)
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 60 12 September 2016
Neusoft Corporation (600718.SS, Rmb17.48) Nihon Enterprise (4829.T, ¥271) Nippon Seiki (7287.T, ¥1,975) Nissan Motor (7201.T, ¥1,049) Nokia (NOKIA.HE, €5.1) ON Semiconductor Corp. (ON.OQ, $10.26) Oki Elec (6703.T, ¥140) On-Star Telematics (Unlisted) PARK24 (4666.T, ¥3,005) Panasonic (6752.T, ¥1,047) Pandora Media (P.N, $13.62) Parrot (PARRO.PA, €16.45) Pioneer (6773.T, ¥242) Preferred Networks (Unlisted) QUALCOMM Inc. (QCOM.OQ, $60.52) ROHM (6963.T, ¥4,980) Renault (RENA.F, €74.167) Renesas Electronics (Unlisted) SAIC Motor Corp Ltd (600104.SS, Rmb21.64) Sierra Wireless (Unlisted) SmartDrive (Unlisted) SoftBank Group Corp. (9984.T, ¥6,899) Sompo Japan Nipponkoa Insurance (Unlisted) Sony (6758.T, ¥3,389) Sony Assurance (Unlisted) Techno Systems Research (Unlisted) Telit (TELT.L, 229.75p) Tokio Marine & Nichido Fire Insurance (Unlisted) TomTom (TMOAY.PK, $3.95) Toshiba (6502.T, ¥336) Toyota Financial Service (Unlisted) Toyota Motor (7203.T, ¥6,171) Toyota Research Institute (Unlisted) Twitter, Inc. (Unlisted) U-Blox Holding (UBXN.S, SFr216.7) UIEvolution (Unlisted) Uber (Unlisted) Ubiquitous (3858.T, ¥1,462) Visa Inc. (V.N, $81.33) Visteon (VC.N, $70.41) Volkswagen (VOWG_p.DE, €124.85) Volvo (VOLVY.PK, $11.685) Wistron NeWeb Corporation (Unlisted) Yahoo Japan (4689.T, ¥414) Yamaha Motor (7272.T, ¥2,082) Yazaki Corporation (Unlisted) ZMP Inc. (Unlisted) Zenrin (9474.T, ¥1,758) akippa (Unlisted) preffered networks (Unlisted) psa peugeot citroen (Unlisted) toyota connected (Unlisted)
Disclosure Appendix
Important Global Disclosures Masahiro Akita, Koji Takahashi, Hideyuki Maekawa, Akinori Kanemoto, Mika Nishimura and Takuma Tsuji each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 61 12 September 2016 ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, wh ich was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple se ctors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 54% (55% banking clients) Neutral/Hold* 29% (21% banking clients) Underperform/Sell* 17% (47% banking clients) Restricted 0% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and- analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names The subject company (T.N, BABA.N, AMZN.OQ, AAPL.OQ, BOSH.BO, AVGO.OQ, CSR.AX, DTEGn.F, 6702.T, 7205.T, 7267.T, INTC.OQ, JCI.N, 000270.KS, 066570.KS, MRVL.OQ, 7261.T, NOKIA.HE, 6752.T, 6773.T, QCOM.OQ, 6963.T, 600104.SS, 6758.T, 6502.T, 7203.T, 4689.T, FB.OQ, BIDU.OQ, 9613.T, UBXN.S, NXPI.OQ, XOM.N, GRPN.OQ, ON.OQ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (T.N, BABA.N, AAPL.OQ, AVGO.OQ, DTEGn.F, INTC.OQ, JCI.N, 000270.KS, 066570.KS, MRVL.OQ, 600104.SS, FB.OQ, 9613.T, NXPI.OQ, XOM.N, GRPN.OQ) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (INTC.OQ, XOM.N) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (AAPL.OQ, DTEGn.F, XOM.N) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (T.N, BABA.N, AAPL.OQ, AVGO.OQ, DTEGn.F, INTC.OQ, JCI.N, 000270.KS, 066570.KS, MRVL.OQ, 600104.SS, FB.OQ, 9613.T, NXPI.OQ, XOM.N, GRPN.OQ) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (T.N, BABA.N, AMZN.OQ, AAPL.OQ, BOSH.BO, AVGO.OQ, CSR.AX, 6796.T, DTEGn.F, 6702.T, 7205.T, 7267.T, 6501.T, INTC.OQ, JCI.N, 000270.KS, 066570.KS,
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 62 12 September 2016
MRVL.OQ, 7261.T, 2454.TW, 7211.T, 6503.T, MBLY.N, 7201.T, NOKIA.HE, 6752.T, QCOM.OQ, 6963.T, 600104.SS, 6758.T, 6502.T, 7203.T, V.N, 4689.T, FB.OQ, BIDU.OQ, 9613.T, UBXN.S, 6971.T, NXPI.OQ, DNKN.OQ, XOM.N, GRPN.OQ, ON.OQ, P.N) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (INTC.OQ, XOM.N) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (T.N, AMZN.OQ, AAPL.OQ, 6702.T, 7267.T, INTC.OQ, JCI.N, 7201.T, 6752.T, QCOM.OQ, 6758.T, 6502.T, 7203.T, V.N, FB.OQ, 6971.T, DNKN.OQ, XOM.N, GRPN.OQ, ON.OQ, P.N). Please visit https://credit-suisse.com/in/researchdisclosure for additional disclosures mandated vide Securities And Exchange Board of India (Research Analysts) Regulations, 2014 Credit Suisse may have interest in (CTCN.BO, BOSH.BO) As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (CSR.AX, 2454.TW, UBXN.S). Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (000270.KS, 066570.KS). Credit Suisse has a material conflict of interest with the subject company (DTEGn.F) . Detusche Telekom AG - Wulf Bernotat, a Senior Advisor of Credit Suisse, is a supervisory board member of Deutsche Telekom AG (DTE) Credit Suisse has a material conflict of interest with the subject company (INTC.OQ) . Credit Suisse Securities (USA) LLC is acting as financial advisor to Intel Corp (INTL) on its announced proposed acquisition of LSI’s Axxia Networking Business from Avago Technologies Limited (AVGO). Credit Suisse has a material conflict of interest with the subject company (FB.OQ) . Credit Suisse has been named as a defendant in various putative shareholder class-action lawsuits relating to Facebook, Inc.’s May 2012 initial public offering. Credit Suisse’s practice is not to comment in research reports on pending litigations to which it is a party. Nothing in this report should be construed as an opinion on the merits or potential outcome of the lawsuits. Credit Suisse has a material conflict of interest with the subject company (NXPI.OQ) . Credit Suisse is Sell-Side Advisor to NXP on the sale of its Standard Products Business. Credit Suisse has a material conflict of interest with the subject company (XOM.N) . Kofi Adjepong-Boateng, a Senior Advisor of Credit Suisse, is a Senior Advisor to Exxon Mobile (XOM).
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683. For a history of recommendations for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to https://rave.credit-suisse.com/disclosures/view/report?i=247346&v=-1pzotpqmg7zlw553ega5ya9y6 . Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit- suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. The following disclosed European company/ies have estimates that comply with IFRS: (DTEGn.F, 7201.T, NOKIA.HE, XOM.N). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (T.N, BABA.N, AAPL.OQ, DTEGn.F, 7267.T, JCI.N, FB.OQ, UBXN.S, NXPI.OQ, XOM.N) within the past 3 years. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse Securities (Japan) LimitedMasahiro Akita ; Koji Takahashi ; Hideyuki Maekawa ; Akinori Kanemoto ; Mika Nishimura ; Yoshiyasu Takemura ; Takuma Tsuji To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 63 12 September 2016
Credit Suisse Securities (Japan) LimitedMasahiro Akita ; Koji Takahashi ; Hideyuki Maekawa ; Akinori Kanemoto ; Mika Nishimura ; Yoshiyasu Takemura ; Takuma Tsuji
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683.
Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors 64 12 September 2016
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Connections Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sectors Series_Informatization_09121665 _E.doc