Zonal architecture advancements are disrupting the supply chain

The development of high-end battery electric vehicles has led to the transformation of vehicles' computing processes - using centralized or zonal architectures that reduce the number of electronic control units (ECUs) ­and wiring in the vehicle.

The use of zonal controllers in future centralized vehicle architecture is expected to reduce cost, complexity, and assembly time. The new architecture will present opportunities for suppliers of MCUs, System-on-Chip (SoC), and Domain controllers- but pose a long-term threat to traditional infotainment suppliers. It also means significant software hurdles for OEMs offering a wide array of available features and functions.

Domain controllers are essentially more powerful ECUs that take care of local domains such as the infotainment, powertrain, chassis, and driver-assist controls. By using domain-agnostic hardware that manages local functions, the shift to zonal architecture can potentially reduce wiring by up to 50%. Such implementation has been seen in the Tesla Model 3, which has a claimed assembly time of just 10 hours. With zonal designs, car manufacturers can develop more efficient electric vehicles with lower weight and extended range capabilities.

The trend towards zonal architecture comes from the need for high-performance computers in the car to be able to communicate at high speed (Ethernet) with the rest of the existing low-speed network. To this end, 38% of all vehicles produced by 2034 are expected to have zonal architecture, up from 2% in 2022.

This acceleration is also driven by the increasing electrification of vehicles, particularly from new EV manufacturers such as Tesla and Nio, who are not hamstrung by legacy architectures. Currently, Tesla holds a five-year head-start on their competitors, but Chinese companies are aggressively pursuing this hardware design as well. Many other car brands are in the process of implementing zonal architecture in the next few years.

One of the traditional challenges facing carmakers is the high cost of hardware, which can be offset by reducing wiring and system complexity. In the first instance, body electronics, powertrain domains, and vehicle dynamics will benefit from ECU integration and improved wiring reduction using advanced zonal architecture. ADAS and cockpit data management will remain in the realm of domain controllers, which shift toward more centralized designs with the introduction of central computers that could consolidate these two domains. Of course, this consolidation implies revenue loss for certain parts of the supply chain.

What's more, such implementation may be more complicated than it appears. Automakers will face challenges transitioning to a centralized hardware architecture using fewer, more powerful blocks and will progress at different rates. Volkswagen, for example, faces software complexity in managing all the functionality and features for its massive portfolio of vehicles across mainstream and luxury brands. As a result, the company's single software platform model has been delayed; the new center computer architecture with zone design will only emerge with the very delayed Software Scalable Platform (SSP) program beyond 2030.

Meanwhile, Japanese and Korean OEMs are not initially developing zonal controls, committing instead to developing software-defined vehicles and introducing a centralized gateway - or body domain controller - which also consolidates the existing vehicle architecture. That said, as the degree of center computing evolves, some type of local or zone ECU design is inevitable.

The evolution of architecture in China tends to happen quicker, with companies like Nio already having a roadmap for zone architecture by 2024. Meanwhile, as the individual domain controllers coalesce into center computers, the shift benefits suppliers of various domain controllers such as Aptiv, Denso, Bosch, and Veoneer while also creating opportunities for suppliers such as NVIDIA, Mobileye, and Qualcomm, companies that will provide high-performance SoCs to power these computers.

Nearly all OEMs are considering the advantages of zonal architecture for their coming vehicle designs. They can save costs by using fewer but more powerful hardware units across different segmentations and markets and scale up by updating vehicle features through their software. To do so, OEMs must align their portfolios with the roadmap of big semiconductor suppliers - such as Qualcomm and Nvidia - to ensure they have the necessary processing power for their vehicles.

Suppliers that can adapt to this new architecture - and synchronize hardware, software, and vehicle platform cadences - will be well-positioned to succeed, while those who fail to adapt will find themselves at a disadvantage.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.