Do you remember the first time you held a smartphone? They were large, expensive and alien to most people. Fast-forward less than a decade and it was unusual not to own one. With all good technologies comes a tipping point when buying the alternative no longer makes sense. That creates the classic “S-curve” of new-technology adoption: modest growth among enthusiasts and insiders to begin with, followed by a burst of mass-adoption and the levelling-off of market saturation. In addition, that “S” tends to get squeezed over time as innovation speeds up: telephones took 35 years to reach mass adoption while smartphones grew their penetration in the U.S. from 5% to 40% in only four years.
It’s looking like the next decade will be when battery electric vehicles (EVs) shift into gear to climb their own, steep S-curve in the consumer world.
In January Tesla turned up the heat on rivals with global price cuts of up to 20% in a move that saw a number of models become eligible for tax subsidies in key markets worldwide. Competitors like BYD, VW, BMW and others soon followed. Could this be the first shot in an impending EV price war?
EV prices should continue to fall due to growing competitive forces in the automotive industry, increasing scale across the EV supply chain, and efficiency improvements in vehicle manufacturing processes. Moreover, important subsidies exist in key geographies like the U.S., which are making EV prices even more affordable to the end consumer.
EVs accounted for ~10% of new cars sold globally in 2022.1 That’s an important threshold for technology adoption, and often a sign that mass adoption is around the corner. Analysts forecast around 20% EV penetration by 2025, suggesting that we may be entering the rapid-growth phase of the S-curve.
TE Connectivity: Growing semiconductor demand means growing connector demand
Switzerland-headquartered TE Connectivity, a leader in the design and manufacturing of connectors and sensors for several industries, is particularly well placed to benefit from increased EV adoption, as it provides components for both internal combustion engine (ICE) and electric vehicles. But it’s electrification that is proving to be TE Connectivity’s main growth driver in the automobiles sector, given the company supplies twice as many connectors and sensors for EV platforms than for ICE vehicles.
The driver of this requirement for greater connectivity is the migration of functionality from hardware to software, a trend that is accelerating in a world in which EVs proliferate. By 2030, electronics are expected to account for 50% of the value of a passenger vehicle, up from just 10% in 1980.2 Many functions required in any modern vehicle, let alone an electric vehicle, are simply not possible with hardware alone—but moving from mechanical pistons and cylinders to electric motors results in an even more rapid increase in the share of electronic content.
That’s why semiconductors are an essential component in the electrification of vehicles— the average modern EV has 3,000 of them.3 They enable myriad systems within a car, from safety and security to the powertrain, electrical systems, comfort, infotainment, connectivity and more. As these systems become more complex and automated, the high-speed connectivity with one another as well as other functions of the car will need to keep pace. This is delivered via automotive connectors, which allow for essential functions like optimizing battery performance.
TE Connectivity is the largest supplier of connectors to the automotive industry globally, with approximately 40% market share. As cars become more connected, automated and electrified, the performance demands of automotive connectors are increasing considerably. They are becoming smaller, lighter, more rugged and easier to install. Given TE Connectivity’s expertise in electronic engineering, the company has been leading the way in the innovation of automotive connectors. Continued EV adoption is resulting in strong demand growth for connectors. Amidst the ongoing EV price war, TE Connectivity stands to benefit no matter which manufacturer wins the EV battle.
