Auto Embedded Software: Summary EU position in auto embedded software is strong Strong future EU competitiveness has some risks Software standards will bring major advantages Software standards also brings commoditization Indirect economic value and impact of auto embedded software is much higher than direct market value European Commission Project: IPTS-2009-J04-17-NC JRC/IPTS

Auto Embedded Software: Big Picture Auto Industry Overview & Perspectives Software standards: Upheaval impact Implications of Software Standards EU Auto Software Position: Good & Bad News Current Problem: Infotainment Software Future Problems: Commoditization; EV Software? Retaining EU Auto Software Strength: How? New Software Opportunities Infrastructure Connected Auto Software European Commission Project: IPTS-2009-J04-17-NC JRC/IPTS

Worldwide Auto Sales & Production Trends Auto production & sales growing from 60M range in 2009 to 90M+ in 2020 Production is usually slightly higher than sales; except 2009

Regional Auto Sales Shares Developed countries are losing market share in auto sales: EU, USA & Japan China & others developing regions are growing their share EU auto industry must follow regional auto sales growth or stagnate

Autos In-use per Capita Trend Autos in-use per 1000 people Autos in-use per capita shows that USA/WE/Japan are near saturation with little growth USA/WE/Japan auto sales are primarily replacing autos that are scrapped China, A-P and other regions are growing auto sales and autos in-use per-capita

External Trends with Auto ICT Impact Key Information Comments Green Issues Lower emissions Better fuel efficiency Less traffic congestion Most improvements from ICT Emerging ICT shows promise Accident Mitigation Passive system: crash protection Active systems avoid crashes New systems are ICT based New ICT warn/correct driver errors Connected World  Car Drivers want connection Car systems need connection New ICT systems for connection Emerging ICT functions Infotainment Expansion Digital music growth Mobile device growth Digital TV & video emerging Used in auto audio systems Connected to auto audio systems Connected to passenger systems 4 main external trends are increasing usage of auto ICT systems All trends will continue and will grow SW volume & value in autos ICT=Information & Communication Technology ICT=Information, Computer & Telecommunication

Core Auto and Infotainment Systems Domains Function Examples Powertrain Controls the power and its distribution to the auto Engine control Transmission control Chassis Controls the functions that guides the auto’s direction and speed Steering control Brake control Suspension control Safety & ADAS Controls the auto’s safety systems. Many new systems are emerging Air bag control Seat belt control Adaptive cruise control Body & Comfort Controls the driver and passengers’ convenience and comfort systems. Includes dash board & related controls Heater & air conditioning Windows & seat control Window wipers Instrument cluster display Infotainment Controls the entertainment and information systems used by driver and passengers Radio & music systems Navigation systems Telematics & mobile phone Multiple auto ICT segments, but 2 main segments: Core auto control & Infotainment Core auto ICT controls all systems that make the car a transportation system Entertainment & information are growing in importance

Key Auto Trends: Mostly ICT Based Key Information Comments Powertrain Trends Gas & diesel engine will improve EV importance growing EV’s electricity from many sources Long-term EV will become leader Mostly due to electronics advances EV is a when, not if-question Battery, engine-generator, hydrogen Is it in 2025 or 2035? Driver Assist & ADAS Trends Mostly warning systems Mostly for luxury autos Driver error correction emerging Collision mitigation emerging Future integrated systems Lane, blind spot, speed, parking Ultrasound park assist is exception Stability control and others Improves safety systems effect Based on ICT Connected Car Trends Multiple communication links Telematics applications & services Connected navigation systems Connected auto control systems Embedded, driver phone & others eCall, safety & infotainment functions Traffic information & others Remote diagnostics & others Entertainment Trends Digital radio receivers Digital music player interfaces Internet radio emerging Premium audio systems Satellite radio in some regions USB, iPod and streaming Bluetooth High bandwidth communication link Surround sound music systems 4 ICT trends are highlighted due to their large SW growth—current & future Powertrain ICT are mostly impacted by green issues ADAS ICT are due to high auto accident costs Connected car ICT follows the connected world Entertainment ICT is going digital & connected

Electronic Control Unit (ECU) ECU Hardware Overview Key Information Comments Microcomputer (MCU) Many types, often defined by bit-size 32-bit are most powerful MCUs now On-chip memory for many functions On-chip electronic buses, several types 8-bit, 16-bit, 32-bit MCUs 64-bit used in special cases Program & data storage Connect to other chips/devices Memory Extra memory for complex functions Additional memory chips Electronic buses Multiple buses: low to high speed High-speed use separate control chips LIN, CAN, FlexRay, others Due to higher complexity Sensors Measure pressure, temp, speed etc. On-chip or separate chip/device Actuators Control mechanical devices in auto Usually separate chip/device Reliability Auto industry requires extra testing Auto-grade more reliable than PC chips For better reliability Higher cost per chip/device For reference: Definition and overview of the ECU Electronic Control Unit (ECU) ECU is the basic building block for auto ICT systems

Auto Software Overview Core Auto Systems Infotainment Systems System Examples Powertrain Chassis & Body Safety & driver assist Entertainment (Head-unit) Navigation Telematics Application Software Examples ECU control software: Engine management Anti-lock brake system Air bag management Turn-by-turn navigation Digital music player software eCall activation software Operating System Middleware software OS nucleus (kernel) Driver Software Examples Electronic bus control Pressure sensor driver Fuel injection driver DVD or disk control software Speech input or output software Display control software Software Standards AUTOSAR to be dominant GENIVI Alliance QNX, Microsoft Auto & others For reference: Definition and overview of auto software elements: First system examples for 2 ICT categories 3 main Software categories: Applications, OS and Software Drivers SW platform standards are becoming crucial building blocks SW Platform Standard: OS, SW Drivers & Standard Interfaces for Applications

Auto Functionality Is Mostly Software-Defined SW Defined Car Era Changeable operation Graceful degradation The car is the most complex product in volume production! ECU domain clusters Software API standards Remote SW Upgrades Digital Car Era Platform architecture Re-usable software AUTOSAR Remote Diagnostics ECU Growth Analog-Digital Car Era Digital control system growth ECUs Summary: SW is becoming THE component that defines what a car is and can do! Complex SW-based product are eventually linked to a SW management center Cars: not if, but when Analog Car Era Analog control systems 1990 2000 2010 2020

Auto Embedded Software: Big Picture Auto Industry Overview & Perspectives Software standards: Upheaval impact Implications of Software Standards EU Auto Software Position: Good & Bad News Current Problem: Infotainment Software Future Problems: Commoditization; EV Software? Retaining EU Auto Software Strength: How? New Software Opportunities Infrastructure Connected Auto Software European Commission Project: IPTS-2009-J04-17-NC JRC/IPTS

AUTOSAR Implications Category Key Information Other Information Positive Implications EU companies lead standard effort EU companies lead deployment Standards expand market size EU company opportunities Application opportunity last longest Multiple upgrades to come EU luxury brands lead Early EU expertise gained OS, driver & applications Applications need innovation Negative Implications Standards increase competition Standards lead to commodity products Commodity products has low profit Global expertise, not local Post 2015 for OS & driver Favours low-cost regions Current implications are primarily POSITIVE Future implications: Some are NEGATIVE

GENIVI Implications Category Key Information Other Information Positive Implications Infotainment OS/API standard effort Open source advantages Standards expand market size EU company opportunities Application opportunity last longest US, EU & other regions Low cost, no dominant player Many advantages OS, driver & applications Applications need innovation Negative Implications GENIVI not likely to be dominant No head start for EU companies Standards increase competition Standards lead to commoditization Commodity products has low profit QNX & Microsoft competition Unlike in AUTOSAR Global expertise, not local Post 2015 for OS & driver Favors low-cost regions Current implications are primarily POSITIVE Future implications: Some are NEGATIVE

Auto Software Standard Landscape QNX CAR Apps software interface Reference platform Used by most OEMs 2002 deployment Microsoft Auto Apps software interface Software standards Fiat, Ford, Hyundai/Kia 2006 deployment Core Auto Systems Powertrain systems Chassis & Safety ADAS & Driver Assist Body systems Comfort & Convenience Infotainment Systems Audio systems Navigation systems Rear/front-seat entertainment Mobile device connections Telematics systems Others? SW Platform spectrum & 2 Auto ICT Segments AUTOSAR & Core Auto Systems go together Platform SW battle is in the Infotainment ICT segment AUTOSAR Apps software interface Software standards Multiple MCUs 2009-10 deployment GENIVI Apps software interface Software standards BMW, GM, PSA, Renault 2012-13 deployment Android Apps software interface Software standards Conti auto platform 2012-13 deployment

Software Standard Impact Impact/Changes Comments OEM Control Higher level building blocks OEM retains more control Design details less important Computer platform components System architecture become crucial Tier 1 may provide less value New Suppliers Computer platform focus Contract manufacturers bSquare, Elektrobit, Vector, dSpace Flextronics (Ford Sync) Feature Growth Faster feature upgrades Remote feature upgrade Platform-based design advantage Used by Ford Sync Cost Savings Fewer ECU types Higher ECU volumes Re-usable system software Better development tools Fewer software errors Commoditization post-2015 Standard ECUs tailored by software Lower cost per ECU Lower cost per OS & driver software Higher software design efficiency Lower software development cost From local to global competition Commodity Effect Hardware commoditization Software commoditization Eventually happens with standards New features to grow software value Mostly all is good for the auto OEM: New suppliers, Feature growth, Cost savings Suppliers will see more competition Commodity effect is a future big issue for all parties

Auto Related Software Spectrum Test & Diagnostic Software Auto Embedded Software Core auto software Infotainment software Future applications New core SW New infotainment SW Auto Impact Systems PC software Mobile phone apps Digital content/SW Web content/SW Software Design Tools Software design SW simulation Software testing Summary that shows all the Related segments that impacts auto SW Infotainment SW overlaps with PC, CE, Web & Mobile Communication Transportation system overlap becoming important Infotainment Software Transportation Systems ITS software V2X software ITS & V2X Software

Auto Embedded Software: Big Picture Auto Industry Overview & Perspectives Software standards: Upheaval impact Implications of Software Standards EU Auto Software Position: Good & Bad News Current Problem: Infotainment Software Future Problems: Commoditization; EV Software? Retaining EU Auto Software Strength: How? New Software Opportunities Infrastructure Connected Auto Software European Commission Project: IPTS-2009-J04-17-NC JRC/IPTS

EU Auto ICT Position Category Key Information Other Information Luxury Auto Position Luxury autos always ICT EU has 3 top luxury brands Due to initial high ICT price BMW, Mercedes-Benz & Audi Strong ICT Suppliers ICT innovation for luxury brands Later ICT for volume brands Non-EU ICT business follows Early market entry & leadership Learning curve & tech advances From non-EU auto manufacturers Independent Auto Suppliers All key EU suppliers independent Captive suppliers in USA & Japan More competition & business savvy Delphi/Visteon/Denso captive earlier Key ICT Suppliers Bosch & Continental are leaders Autoliv, Hella, Valeo, others Across most ICT segments Leaders in specific ICT segments Software Companies Many small, strong companies Mostly focused on EU ICT Focused on specific auto mfgs Some global success, more is likely Automotive Semi Infineon & ST Micro are leaders NXP and others are strong Across many ICT segments EU auto industry structure creates numerous advantages: Leading luxury suppliers; Independent auto suppliers Strong ICT suppliers: System, SW & Semi Current Status: Nearly All Good News

EU Technology: Strengths and Weaknesses Key Information Other Information BMW Leading luxury brand worldwide Software innovator Leader in AUTOSAR & Genivi USA, Europe and other regions Crucial to continued EU SW leadership Understands benefits of SW API VW 3rd largest auto producer Leader in EU, China, other regions Top EU electronics customer Gained share in 2009 recession Strong presence in most regions Software, semiconductor & electronics Other EU Auto OEMs M-B is another luxury brand leader M-B: 2nd to BMW in SW innovation Others are average in SW Strong in driver assist and ADAS PSA, Renault & Fiat Tier 1 Companies Bosch & Continental: World-class Many other strong companies EU has strongest Tier 1 companies Multiple segments, Strong in SW Autoliv, Hella, Magneti, Valeo EU position, but also other regions Semi Companies Infineon & ST Micro: World-class NXP strong in infotainment Across multiple auto segments Other good companies in automotive EU Weakness Too focused on combustion engine EV: when-question, not if-question EU can catch-up in EV Infotainment SW is fair to good EU strength, but will fade post 2020 EU has the most to lose Requires public-private effort More infotainment effort needed Key details on EU strengths by key companies Current weaknesses are few, but likely to grow

EU Embedded Software SWOT: Current Strengths Luxury car leader: most SW is introduced AUTOSAR: Standards leadership AUTOSAR: SW competency & deployment Diesel & gasoline engine software Chassis control software (ABS, ESC) Safety and driver assist software Software and software tool companies V2X R&D programs (CVIS & others) Opportunities EV software advances may make EU leaders at EV system level Auto apps store leadership ADAS software, systems & apps eCall regulation as way to catch-up in telematics & connected car apps V2X software & systems (regulation needed) Autonomous driving (post-2020) Weaknesses Current EV deployment Current EV development Infotainment software OS & API standards Infotainment application software Telematics software and deployment Threats AUTOSAR commodity software (post-2015) Infotainment commodity software (post-2015) EV growth negates powertrain SW market leadership (post-2020) Summary of current EU SWOT status

EU Auto Embedded Software Problems Comments Current Problem Infotainment OS GENIVI: EU Infotainment OS? Infotainment applications Mostly led by US companies To counter QNX & Microsoft Few EU software leaders Future Problem EV software Engine management Time enough to react Importance to decline Software commoditization AUTOSAR software Software standard impact Worldwide supplier base Current SW problem: Infotainment Future SW problems: Commodity SW Future SW Problem: EV SW Could be an opportunity

Auto Embedded Software: Big Picture Auto Industry Overview & Perspectives Software standards: Upheaval impact Implications of Software Standards EU Auto Software Position: Good & Bad News Current Problem: Infotainment Software Future Problems: Commoditization; EV Software? Retaining EU Auto Software Strength: How? New Software Opportunities Infrastructure Connected Auto Software European Commission Project: IPTS-2009-J04-17-NC JRC/IPTS

Retaining EU Software Leadership Strategy Why or How Minimize commodity software impact Continue moving to advanced software Target new promising opportunities High-value opportunities Strengthen infotainment software EU can get better position Invest in EV battery system software Possible EV catch-up technology Connect software to infrastructure Local presence advantages Improve software skills Quality and quantity Train software project managers asap Highest software manpower need Strategy: Counter problems by moving to new, innovative SW opportunities Tie new software to infrastructure-based systems Improve SW skills across the board

New Software Overview Applications Comments Core Auto Software Petrol & diesel engine control EV battery system software ADAS applications Remote ECU software upgrades Fuel efficiency improvement Not established yet ACC, LDW, BSD Error fix; functional update Connected Car Software Telematics software & service Connected navigation Connected entertainment Remote control eCall; Remote diagnostics Destination download Internet radio Door unlock, lights on/off Infrastructure Connected Software V2V applications V2I applications ITS applications Collision avoidance Intersection applications Traffic applications Autonomous Driving Platoon driving Highway autonomous driving Post 2020 application Multiple new SW opportunities emerging: Advanced old apps & new apps Examples of applications are shown Link SW in 2 ways: Connected application & Infrastructure connected apps

Future Embedded Software Opportunities Category Key Information Other Information Connected Car Application Software Many applications emerging EU is behind USA in telematics eCall: basis for telematics apps Multiple com links emerging For car, driver & passengers Link to ECUs become important eCall is EU chance to catch up ECU, driver & infotainment links ADAS Software Software intensive systems Builds on driver assist apps EU: ADAS & sensor expertise Sensor-based systems Major life and cost saver Warns or corrects driver errors Leverage into SW leadership V2V & V2I Software Many applications possible EU’s CVIS R&D project is key More EU development needed Early deployment create expertise Safety, traffic & fuel-savings Public & private cooperation To complete system architecture Systems & software experience Autonomous Driving Software Builds on ADAS & V2X systems More autonomous functions Compute, sensor & SW intensive Deployment likely after 2020 Complex ECUs and software Large software opportunities More details on the new opportunities: 4 key segments

Auto Embedded Software: Conclusions EU software industry is currently well positioned EU has lead the development of auto software standards There are current weaknesses and future issues Software standards bring many advantages to EU auto industry Re-usable software and more reliable applications Future software development cost savings and other advantages Software standards are also bringing future risk to EU auto software labor force size Shifting of software development & design to low-cost regions Due to software commoditization and lack of skilled software personnel This is the main threat to EU embedded auto software industry Future software opportunities can lower the commoditization threat Application innovation is key to retain lead in high-value auto software EU Commission need to understand that auto embedded software have a multiplier effect well above its direct economic value Auto functionality and features are mostly software-defined Software is a major and growing factor in EU auto OEM competitiveness Take away Info: Auto SW is many times more important than is direct economic value “The tail that wags the dog”