In April of 2004, I wrote a story for Automotive News about the Yanfeng Visteon joint venture in Shanghai. Its subsidiary company Yanfeng Visteon Automotive Trim Systems accounted for almost one-third of the JV’s sales. It was the number one automotive trim supplier in China at the time.
A month later I wrote about how multinational Tier One suppliers including Delphi, Valeo, and AVL were building r&d centers in China to serve the China market. That was back in the days when internal combustion engines in foreign-brand vehicles dominated the China passenger car market.
Fast forward to the present. S&P Global Mobility expects New Energy Vehicles – including battery electric, plug-in hybrid electric and hydrogen fuel cell vehicles – to account for 46% of the passenger vehicle market in China in 2024.
I wonder what kind of interiors Yanfeng Visteon is producing now and what kind of work those r&d centers are doing? Delphi saw the future when in 2017 it spun off its mobility business under the name of Aptiv, shunting its powertrain and aftermarket businesses into Delphi Technologies.
Delphi Technologies’ business slumped, and it was sold to Borg Warner in 2020 then spun off. Aptiv, meanwhile, had sales of $20 billion in fiscal year 2023. But, I fear that Aptiv will face hardship in China because its customers are primarily the traditional automakers, who are losing market share in China.
The main problem for the traditional automakers is their inability to compete in NEV sector. That is partly because they didn’t jump on the user experience train fast enough. Chinese EV makers are famous for their fancy connected car interiors. Okay, BYD, the best-selling NEV maker in China, has interiors that are less than stellar. But for the price, they’re awesome.
Take the Atto 3, which debuted in Europe this year. Wired highlights the ”striking interior full of fun design and feels well-made.” But BYD makes most of its stuff in-house and the point of this blog is to highlight the changing nature of the supply chain in China and how multi-national Tier One suppliers that invested millions in r&d centers in China may be facing challenges.
The new supply chain will be dominated by companies like Appotronics, a Shenzhen-based supplier of laser light technology, first to the cinema industry but now, increasingly, to automakers.
Rather than try to explain what laser lights are, let me just tell you what LASER is short for: “Light Amplification by Stimulated Emission of Radiation.” Of course, I don’t understand the technology, but it is using lasers to amplify light.
I spoke with Appotronics vice president Yu Xin about how the rise of NEVs is changing the automotive supply chain and his company’s opportunities in the automotive sector. I see the company as a microcosm of the changing nature of China’s automotive supply chain.
Appotronics, Chinese name Guangfeng Technology, was the first company to be listed on the Shanghai Star exchange, Yu told me. The Star is China’s version of NASDAQ. The laser light maker was founded in 2006 and initially used its laser technology in the cinema projection sector.
But its founders were sharp. They saw the changes happening in the automotive industry – the switch to EVs and the emphasis on user experience – and three years ago began working on automotive applications that, among other things, enhanced the in-car user experience. “The new competitive basis is the user experience,” Yu said.
They adapted Appotronics’ display technology to automotive uses. That includes making the headlamps brighter, being able to project movies from your car onto exterior surfaces (create your own drive-in movie!) and, most importantly, project on to surfaces in the car itself.
They were on to something. Auto revenue is already one quarter to one-third of Appotronics’ revenue. Models China are currently using Appotronics’ technology include the Seres Aito M9, and the Smart #5 SUV produced by Geely and Mercedes-Benz.
I talked (via Zoom) with Yu when he was in Los Angeles for the Laser Illuminated Projector Association (LIPA) annual meeting, where he was a speaker. ”LIPA is an organization where we can get the leading edge of what is happening in this industry,” Yu said. “This organization makes standards for laser projectors.”
But the automotive sector is where Appotronics sees the chance for lots of growth, and not just in China. The supply chain for traditional internal combustion engines is very mature, Yu explained, and the auto manufacturers have established suppliers. As EVs and “smart” cars have become the trend, he said, the supply chain has changed significantly. And not just for the powertrain, but also for the headlamps and the interiors. Appotronics developed three lines for the automotive sector for when people are sitting in the car, when they are approaching the car, and when they are outside the car, Yu said.
Appotronics is already developing business outside of China, Yu said, “but the pace will be slower than in China. The famous OEMs outside of China, their development model takes several years. The iteration in China is much faster.”
Indeed. Which brings me back to those r&d and r&e centers the multinational Tier One suppliers opened in China. I wonder what products they are developing now and if those products are being developed at China speed. I’d love to visit and find out.