Moving from Computers to Transportation

hree events took place in the first quarter of 2016 that will change the dynamics of power electronics:

First, Tesla Motors, Inc. (Palo Alto, CA) announced that it will take online orders for its next generation of electric cars, Model 3, over the Internet with a $1,000 deposit. This car is not yet available in show rooms and its pictures barely appears in the advertisement - but as of this writing about 400,000 people have registered their intent to purchase this car. (Disclaimer: I am one of them). In the history of automobiles, such an event has never before taken place; demand for this car, priced at $35,000, has outstripped all expectations. It seems that the future of automobiles will be electric. And the credit goes to Elon Musk, the founder of Tesla Motors. Mr. Musk, the celebrity CEO of Silicon Valley, is the person with many normal and exotic products and ideas, including SolarCity, Home Battery System, Space X Rocket and the Hyperloop, a high-speed transportation system. Elon Musk is viewed as next "Steve Jobs"; he plans to revolutionize transportation systems with electric cars, space rockets and Hyperloop transportation, the way Steve Jobs revolutionized computers, telephones and consumer electronics. So the next big thing for electronics will be electric cars.

Second, Intel Corporation (Santa Clara, CA), in its first quarter 2016 earnings report mentioned that its Client Computing Group revenue declined by 14% sequentially and up 2% year-over-year. In addition, it was reported that Intel will lay off about 11% of its global workforce - up to 12,000 employees- a painful downsizing aimed at accelerating its shift away from the waning personal computer (PC) market to one more focused on cloud computing and connected devices. In short, the PC market that has propelled switching power supplies into high-volume commodity products and became the mainstay of the industry will be declining significantly in future.

Third, Apple Inc. (Cupertino, CA) released its 2nd quarter fiscal 2016 (1st quarter calendar year 2016) financial statement. It showed a significant decline in its iPhone sales. According to Bloomberg News: "Apple Inc.’s streak of 51 consecutive quarters of uninterrupted sales growth is over -- and its expansion may not resume until late this year..." This was first-ever decline in its thirteen-year history, suggesting high growth for mobile phones may be coming to an end as markets for such products become saturated.

So the ever-growing market of personal computers is declining and the mobile phone market may be slowing down; so what is next? Or in Silicon Valley parlance, what will be the next best thing? It seems electric vehicles (EVs).

The early eighties provided a true revolution for power supplies when personal computers became the driver for high volume products for power supplies. Later, the revolution in communications brought ubiquitous mobile phones and their associated adapters to the market. Now is the time of electric vehicles. With Tesla Motors bringing a $35,000 car to market, it has breached a critical barrier; it has moved from its super expensive Model S, priced at $100,000+ to the Model 3, priced at $35,000. This is still an expensive car for the masses, but it will not be long before an electric car breaks the price barrier to about $25,000 and its driving range extended beyond 300 miles. It is expected that within the next few years, electric cars may become very affordable for "the masses". With additional heavy emphasis on climate change from the governments around the world and the associated social consciousness, electric cars are expected to join the mainstream automobile markets. Declining growth in personal computers, modest growth in mobile phones and high growth of EVs will be a paradigm shift for the overall electronic industry and especially for power electronics.

With high use of electric vehicles, battery chargers are expected to be installed not only in designated charging stations, but in many more locations, such as shopping malls, office buildings, apartment buildings and private homes. Delta Products in Fremont, California has installed 19 charging stations in its parking lot of which 18 are Level 2 AC 7.2kW and the other is a 50kW DC fast charging station. During my visit to Delta last month, I saw a variety of cars including Tesla, Nissan Leaf and others being charged while their owners worked at the facility. My local shopping mall in Santa Rosa has three charging stations. Charging stations are being installed all over the country and will be popping up around the globe in next few years as electric cars become common.

Though Tesla has garnered the most attention in EV due to its advanced high performance product, clever marketing and celebrity CEO, it is not the only company in the EV business. There is Nissan with the Leaf and Chevy with the Volt, to be replaced by the new Bolt by 2017. All major automobile companies including BMW, Daimler (Mercedes Benz), Ford and Toyota are planning to introduce all electric vehicles in the next few years. A Chinese company, Le Holding Ltd. just showed its first driverless all electric car, LeEco, at the Los Angeles Auto Show and Google just announced its partnership with Fiat/Chrysler to develop driverless cars. Replacing the driver requires a significant amount of electronics, including sensors, processors, motors and many other devices. All of these electronics also will need some form of power conversion.

EVs offer the next great opportunities for power electronics, more than personal computers and mobile phones, because the products are not "cheap". The price of a typical personal computer power supply is less than $10 and a mobile phone adapter is priced at less than $2 depending on volume. So despite large market opportunities, PC power supplies and adapters are not offering significant profit potential. On the other hand, EV chargers are higher wattage products, more sophisticated and higher priced, from $600 to $1000 for a Level 2 AC to about $35,000 for a 50kW DC unit. So EVs may not reach the high volume of PCs or mobile phones in units, but the dollar sales associated with power electronics may be higher together with the profit margins.

The next best thing for power electronics will be all electric transportation.

Provided by Mohan Mankikar, President, Micro-Tech Consultants

If you or anyone in your company is interested in getting on the distribution list for future issues of PSMA UPDATE, please send e-mail to: power@psma.com. Be sure to include your name and the name of your company.