At the end of last year, the global software-defined vehicle (SDV) market size was valued at $49.3 billion. With a compound annual growth rate exceeding 25%, the industry is set to skyrocket over the next decade. But this anticipated growth hinges on automakers addressing fundamental architectural and organizational barriers. To me, 2025 will be a pivotal year for SDVs, provided the industry focuses on overcoming these challenges rather than chasing incremental enhancements.
Moving beyond the in-cabin experience
In recent years, innovations in the realm of SDVs have primarily focused on enhancing passenger experience with infotainment systems, high-resolution touchscreens, voice-controlled car assistance, and personalization features ranging from seat positions to climate control, and even customizable options based on individual profiles.
While enhancements of these sorts have elevated the in-cabin experience to essentially replicate that of a smartphone, the next frontier in the automotive revolution lies in reimagining the very architecture of vehicles.
To truly advance the future of SDVs, I believe OEMs must partner with technology companies to architect configurable systems that enable SDV features to be unlocked on demand, unified infrastructures that optimize efficiency, and the integration of software and hardware teams at organizations. Together, these changes signal a fundamental redefinition of what it means to build and operate a vehicle in the era of software-driven mobility.
1. Cost of sluggish software updates
The entire transition to SDVs was built on the premise that OEMs could continuously improve their products, deploy new features, and offer better user experience throughout the vehicle’s lifecycle, all without having to upgrade the hardware. This has created a new business model of automakers depending on software as a service to drive revenue streams. Companies like Apple have shelved plans to build a car, instead opting to control digital content within vehicles with Apple CarPlay. As automakers rely on users purchasing software to generate revenue, the frequency of software updates has risen. However, these updates introduce a new set of challenges to both vehicles and their drivers.
When over-the-air updates are slow or poorly executed, it can cause delayed functionality in other areas of the vehicle by rendering certain features unavailable until the software update is complete. Lacking specific features can have significant implications for a user’s convenience but also surfaces safety concerns. In other instances, drivers could experience downtime where the vehicle is unusable while updates are installed, as the process may require the car to remain parked and powered off.
Rapid reconfiguration of SDV software
Modern users will soon ditch their car manufacturers who continue to deliver slow over-the-air updates that impair the use of their car, as seamless and convenient functionality remains a priority. To stay competitive, OEMs need to upgrade their vehicle architectures with configurable platforms to grant users access to features on the fly without friction.
Advanced semiconductor solutions will play a critical role in this transformation, by facilitating the seamless integration of sophisticated electronic systems like advanced driver-assistance systems (ADAS) and in-vehicle entertainment platforms. These technological advancements are essential for delivering enhanced functionality and connected experiences that define next-generation SDVs.
To support this shift, cutting-edge semiconductor technologies such as fully-depleted silicon-on-insulator (FD-SOI) and Fin field-effect transistor (FinFET) with magnetoresistive random access memory (MRAM) are emerging as key enablers. These innovations enable the rapid reconfiguration of SDVs, significantly reducing update times and minimizing disruption for drivers. High-speed, low-power non-volatile memory (NVM) further accelerates this progress, facilitating feature updates in a fraction of the time required by traditional flash memory. Cars that evolve as fast as smartphones, giving users access to new features instantly and painlessly, will enhance customer loyalty and open up new revenue streams for automakers, Figure 1.
Figure 1 Cars that evolve as fast as smartphones using key semiconductor technologies such as FD-SOI, FinFET, and MRAM will give users access to new features instantly and painlessly. Source: Getty Images
2. Inefficiencies of distinct automotive domains
The present design of automotive architecture also lends itself to challenges, as today’s vehicles are built around a central architecture that is split into distinct domains: motion control, ADAS, and entertainment. These domains function independently, each with their own control unit.
This current domain-based system has led to inefficiencies across the board. With domains housed in separate infrastructures, there are increased costs, weight, and energy consumption associated with computing. Especially as OEMs increasingly integrate new software and AI into the systems of SDVs, the domain architecture of cars presents the following challenges:
- Different software modules must run on the same hardware without interference.
- Software portability across different hardware in automotive systems is often limited.
- AI is the least hardware-agnostic component in automotive applications, complicating integration without close collaboration between hardware and software systems.
The inefficiencies of domain-based systems will continue to be amplified as SDVs become more sophisticated, with an increasing reliance on AI, connectivity, and real-time data processing, highlighting the need for upgrades to the architecture.
Optimizing a centralized architecture
OEMs are already trending toward a more unified hardware structure by moving from distinct silos to an optimized central architecture under a single house, and I anticipate a stronger shift toward this trend in the coming years. By sharing infrastructure like cooling systems, power supplies, and communication networks, this shift is accompanied by greater efficiency, both lowering costs and improving performance.
As we look to the future, the next logical step in automotive innovation will be to merge domains into a single system-on-chip (SoC) to easily port software between engines, reducing R&D costs and driving further innovation. In addition, chiplet technology ensures the functional safety of automotive systems by maintaining freedom of interference, while also enabling the integration of various AI engines into SDVs, paving the way for more agile innovation without overhauling entire vehicles (Figure 2).
Figure 2 Merge multiple domains into a singular, central SoC is key to realizing SDVs. This architectural shift inherently relies upon chiplet technology to ensure the functional safety of automotive systems. Source: Getty Images
3. The reorganization companies must face
Many of these software and hardware architectural challenges stem from the current organization of companies in the industry. Historically, automotive companies have operated in silos, with hardware and software development functioning as distinct, and often disconnected entities. This legacy approach is increasingly incompatible with the demands of SDVs.
Bringing software to the forefront
Moving forward, automakers must shift their focus from being hardware-centric manufacturers to becoming software-first innovators. Similar to technology companies, automakers must adopt new business models that allow for continuous improvement and rapid iteration. This involves restructuring organizations to promote cross-functional collaboration, bringing traditionally isolated departments together to ensure seamless integration between hardware and software components.
While restructuring any business requires significant effort, this transformation will also reap meaningful benefits. By prioritizing software first, automakers will be able to deliver vehicles with scalable, future-proofed architectures while also keeping customers satisfied as seamless over-the-air updates remain a defining factor of the SDV experience.
Semiconductors: The future of SDV architecture
The SDV revolution stands at a crossroads; while the in-cabin experience has made leaps in advancements, the architecture of vehicles must evolve to meet future consumer demands. Semiconductors will play an essential role in the future of SDV architecture, enabling seamless software updates without disruption, centralizing domains to maximize efficiency, and driving synergy between software and hardware teams.
Vice President of Automotive Business Unit, GlobalFoundries
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