As competition increases, most automakers are expanding their collaborative efforts by teaming up with semiconductor and software suppliers in Silicon Valley. Leveraging the talent in Northern California forms a critical link for design teams striving to meet fuel and emissions regulations while also bringing many new features and functions to vehicles.

Automakers are looking at a range of strategies that will help them gain an edge by being first to offer novel features and functions. They’re currently focusing on Silicon Valley, which has a reputation for coming up with major innovations that disrupt evolutionary paths.

“There will be collaborations for building things that in most cases haven’t been built before,” said Rob Csongor, Vice President & General Manager, Automotive at NVIDIA. “This is a market that over the next few years will be in a revolutionary mode.”

Revolutionary changes are a mainstay in the semiconductor industry. Many companies follow strategies that call for constantly wiping out existing technologies, including their own product offerings.

“In Silicon Valley, if something exists, everyone tries to destroy it,” said Takeshi Mitamura, General Manager of Nissan Motor. “People are always trying to disrupt technology.”

Figuring out how to make those revolutionary steps while still meeting auto industry quality and safety requirements was the topic of an SAE 2014 World Congress panel, "Building Bridges between the Motor City and Silicon Valley." Meshing the profit goals of both sides while shortening development cycles are important aspects of these alliances.

“Companies have to find a win-win situation,” said Dirk Hoheisel, Member of the Board of Management, Robert Bosch. “They also need to find a way to get technology into the car quickly.”

Partners must also determine who owns the intellectual property developed by joint teams. Both sides will claim ownership, so managers have to set rules at the outset of each project. Panelists note that no two projects are alike.

“Companies have to be creative, there is no one-size-fits-all approach,” said John Suh, Director of Hyundai Ventures.

The need for flexibility extends to working relationships. Most semiconductor teams are used to working on short deadlines with customers that can respond quickly. Some panelists noted that some automakers aren’t viewed as nimble or adaptable. But that varies widely.

“We often collaborate with Tier 1s and OEMs,” Csongor said. “We often meet with one group that’s very flexible while other groups in the same company are very rigid.”

Teaming up with Bay Area companies also lets automakers leverage the heavy investment in the electronics industry.

“Silicon Valley got 41% of the venture capital investment in the U.S. in 2013,” said Naoki Sugimoto, Senior Program Director, Honda Silicon Valley Lab. “There are more big gaps between Motor City and Silicon Valley. In Motor City, the smartphone is an accessory. In Silicon Valley, the car is an accessory.”

These venture capital funds aren’t readily available to the auto industry, panelists noted.

“In Silicon Valley, the trend is capital efficiency, not investing a lot yet having good potential for returns,” Suh said. “Investors won’t invest in companies involved in the automotive industry because there are long design cycles and a lot of risks.”