Market Overview

Automotive software can be categorized briefly into 1) controller software and 2) automotive IT software. Controller software consists of ECU units that control automobile electronically, and the number of controllers per vehicle is increasing in tandem with ADAS sophistication. Automotive IT software is cloud-based software with design aligned to CASE (Connected, Autonomous, Shared & Service, Electric), which is the platform for various vehicle-related applications including entertainment.

The market size of automotive software developed by automakers and auto parts suppliers (Tier 1 etc.), based on the price of such software as well as R&D expenses and capital expenditure at these companies, was 582,400 million yen in 2021, 86.6% of which was occupied by controller software and the rest (13.4%) by automotive IT software. The same market size has grown to 628,600 million yen in 2023 (101.1% of the previous year), with the composition ratio of automotive IT software rising year by year (controller software 77.2％, automotive IT software 22.8％).
The market is projected to reach 644,000 million yen in 2024 (102.4% YoY), with composition ratio of controller software at 71.5% and automotive IT software at 28.5%. Against the background of a rapid increase of OEM R&D expenses, especially for vehicle OS and HAL*2, some of the expenses are outsourcing fee paid to contractor vendors (software developers). Controllers are on a declining trend from 2022 due in part to the integration of conventional ECUs, which on the other hand increases the ratio of automotive IT systems to controller software.

*1 ECU: ECUs (Electronic Control Units) electronically control lane keeping systems, distance control systems, etc. The number of ECUs installed per vehicle has been on the rise in the last few years. The increase of volume and cost of ECUs has become an issue for automakers.
*2 HAL: The hardware abstraction layer (HAL) provides a software interface between hardware and software, effectively bridging the gap between the two. It is responsible for managing the differences among various hardware components.

*Reference: For the market size of automotive software based on the price quoted by software developers (business partners), please refer to “Automotive Software (Software Vendor) Market in Japan: Key Research Findings 2023”.
https://www.yanoresearch.com/en/press-release/show/press_id/3454

Noteworthy Topics

Shift of Automotive Electronics Architecture from Domain-type to Zone-Type

In the early 2020s, automotive manufacturers (OEMs) actively engaged in the development of automotive IT software, especially vehicle operating systems (OS). However, trying to implement a vehicle OS while still using traditional control software for specific areas like powertrains and chassis turned out to be quite complicated. Many projects faced major difficulties during the integration phase, resulting in a number of failures.

In light of these challenges, OEMs are now exploring the development of zone-type control systems. This approach involves rethinking traditional control systems, which are usually organized by specific areas, to redesigning the control software. This means breaking down existing electronic control units (ECUs) grouped by domain, like powertrain and chassis, and then reorganizing them into new categories based on their operational needs, such as "those that need critical movements" versus "those that can tolerate some delays (even though the amount of info may be vast)".

While OEMs have yet to define their product categorization clearly, they frequently adopt the ASIL (Automotive Safety Integrity Level) framework based on ISO 26262. This framework typically allows for classification into three to four groups. For instance, products that require critical operations are classified as ASIL-D, while those that can accommodate delays fall under ASIL-B. The electronic control units (ECUs) are connected to and managed by a high-performance computer (HPC) through a gateway. The HPC's upper layer functions as the application layer, where necessary functionalities are implemented according to application requirements.

For example, if the HPC system consists of three HPCs, it will necessitate three separate operating systems. The traditional method of relying on a single operating system has not yielded success. By breaking down the control software into multiple components, it becomes feasible to implement them incrementally, starting with the functionalities that are simpler to develop.

Future Outlook

In the development of in-vehicle software, there is much to be done through trial and error. In fact, major Japanese OEMs and others are currently developing vehicle OS and peripheral systems at a rapid pace, and we expect to see the fruits of their efforts around 2027. In addition, coupled with the convergence toward integrated ECUs, we expect the composition ratio of control systems and IT systems in the automotive software market (automakers and auto parts suppliers) to be roughly fifty-fifty by 2027. However, controller software will also shift from domain-type to zone-type. The investment is expected to continue, although not on the scale of automotive IT systems.

Given that the actual installation of the next-generation automotive software will be around 2030, the total market size of automotive software market (controller software and automotive IT systems) developed by automakers and auto parts suppliers is expected to reach close to 1 trillion yen by 2030 (981 billion yen).

Research Outline