By David Forman
Aug. 20, 2003 — This month’s appeals court decision scuttling a U.S. rule on tire monitors leaves sensor makers in an awkward position. They know they will be dealing with a regulated market, but they don’t know what the rules will be.
Analysts say sensor and component suppliers are left wondering whether they’ll soon face more demand, or a market similar to the one they had anticipated. So they must plan for the different scenarios.
The Aug. 6 ruling said tire monitors must be able to detect if more than one tire is simultaneously underinflated, which MEMS-based “direct” monitors can do but “indirect” monitors based on a car’s antilock brake system currently cannot.
The appeals court threw out the rule that allowed both systems and a three-year gradual phase-in period. The issue now goes back to the National Highway Traffic Safety Administration (NHTSA), which must issue a new rule or file an appeal.
“The most disruptive outcome,” according to Simon Schofield, a senior analyst in the automotive practice of research firm Strategy Analytics, would be “a requirement for all direct TPMS (tire pressure monitoring systems) ramping up on the current NHTSA schedule.” He said such a switch would create an additional sensor demand of more than 2 million units in 2004.
“If a sudden switchover were forced,” he said, “demand could swamp supply and cause major supply chain headaches for the vehicle manufacturers.”
Marlene Bourne, senior MEMS analyst at In-Stat/MDR, said the current crop of pressure sensor suppliers would be up to the task. “There are companies who can probably fairly easily now ratchet up production for demand,” she said. While she said that it would have been difficult as recently as a year ago, “now there’s a solid base in place that can meet this demand.”
In the past year, two leading sensor makers were bought by industrial giants: NovaSensor by GE Industrial Systems and SensoNor ASA by Infineon Technologies. Texas Instruments Inc. and Delphi Corp. also supply the market. Motorola Inc. entered it in May with a new sensor.
John McGowan, senior director of marketing for Infineon Technologies North America Corp., agreed with Bourne on the ability of suppliers to meet increased demand. He cited the inherent scalability of the semiconductor-like processes used to create the sensors. “Adding additional capacity on a semiconductor basis isn’t so difficult,” he said.
But Schofield said the issue isn’t so much about whether suppliers can meet demand but whether the auto industry can qualify new production lines in time to meet regulatory timetables. “The automotive industry takes great pains to qualify suppliers’ individual silicon fabrication lines and assembly plants in order to achieve a fine product consistency,” he said.
Such industry challenges suggest that the NHTSA, in writing a new rule, might extend the timetable for automakers to adopt the technology. “A lot of the companies’ product plans have already proceeded based on the initial NHTSA rule saying that you could use the indirect technology,” said Eron Shosteck a spokesman for the Alliance of Automobile Manufacturers.
Shosteck said 2004 models are already on sales lots and 2005 production schedules have been set. “This industry has huge lead times,” he said.
Allison Zieve, the Public Citizen lawyer who represented the petitioners challenging NHTSA’s rule, said her best-case scenario is if NHTSA issued a new rule this year and maintained the phase-in schedule for 2005 and 2006 model years. However, she acknowledged, the NHTSA could very well “say we need to start the phase-in again.”
The agency could also take time to solicit comments from the auto industry and other parties before issuing a new final rule, she said. By the time that’s done, said Infineon’s McGowan, the volume opportunity for sensor makers could be roughly the same as it was before this month’s court decision.