Have you had enough of oil stocks? Here's another energy play-invest in companies that will participate in the reinvention of the gasoline automobile around hybrid engines.
At first glance, hybrid car economics just don't make sense. A conventional engine costs about $70 per horsepower-or, in electrical units, about $50 per kilowatt. Now add the extra cost of going hybrid: The power electronics required to convert horsepower to kilowatts run $6 a kilowatt, battery packs add another $25, and then you need electric motors, at $15 a kilowatt, to turn electricity back into shaft power to drive the wheels. For an SUV these and related electrical parts are going to run something like $5,000. Why pay for all that extra hardware when it ends right back where it began, in the mechanical power of a spinning shaft?
Cut to the chase: You'll buy it, and like it. By 2015 almost every new car and truck will be built around a hybrid drive. Detroit hasn't witnessed a comparable revolution in automotive technology since the days of Henry Ford. Companies that catch the wave are going to prosper.
To invest in the hybrid future, don't pick General Motors or Ford. Look instead to manufacturers of power silicon-Fairchild, International Rectifier, ON Semiconductor, Siliconix (80% owned by Vishay), Diodes and Ixys. "The automotive platform is one of our main engines for growth," says Ixys Chief Executive Nathan Zommer. But also keep an eye on their foreign competitors-Eupec (an Infineon subsidiary), the omnipresent Toshiba and Mitsubishi (which is also in Powerex, a joint venture with General Electric). Also worth watching: the main U.S. suppliers of drivetrain assemblies and the entire array of automotive peripherals, like Delphi, Visteon, Lear, Dana, Eaton, ArvinMeritor and TRW Automotive. Auto parts firms have deep troubles these days, to be sure, but those troubles are already reflected in the prices of their shares. By betting on these old-guard companies, you are betting on their ability to reinvent themselves as they reinvent their product lines around power silicon.
Power under the hybrid hood has to be converted and transformed again and again. Driven by the engine-or by the wheels during "regenerative" braking-the alternator delivers messy, highly variable AC power that requires a lot of cleanup before it can be dispatched to do anything useful. The battery pack draws and delivers clean, low-voltage DC power. The electric motors that drive the wheels run on 42, 300 and even 500 volts. And power has to be reconfigured once more to run 14- or 42-volt electric steering, brakes, fans, cooling pumps, ignition, transmission, active suspension and dozens of other peripherals.
Electric power-massaging equipment already is, astoundingly, a $50 billion global industry. Embedded in everything from desktop computers to mining trucks, power supplies and related gear are becoming ubiquitous. But until recently the products were just too expensive, bulky and unreliable to be scattered across an automotive platform. Now, however, advanced power supplies are built around high-speed, high-power semiconductor switches-silicon doing for power what it already does for logic. Every couple of years power-chip manufacturers double the power that their chips can handle. Individual power chips now switch tens of kilowatts, and a handful are enough to handle the entire output of a truck engine.
"Twenty years ago no engineers imagined they'd have power transistors at the price, efficiency and capabilities we have now," says Zommer. "Our engineers have been able to ride the coattails of the fantastic improvements in tools, quality of silicon and manufacturing [of the computer chip business]." In the coming decade look to companies like Cree and Infineon-and likely the Japanese-to deliver transistors built on diamondlike silicon carbide, propelling another ten-fold improvement in both power density and price.
Shrink and speed up the switches, and you can make all the surrounding capacitors, inductors and transformers in the power supply much smaller, too. Since 1994 power supplies have shrunk three-fold, and prices have dropped more than fivefold. It is the dramatic though little noted advance in power semiconductors, together with parallel improvements in sensors and microprocessors, that have made the silicon drivetrain compact and affordable enough for cars.
With size and cost covered, hybrids win not just because they're cleaner and more efficient but because they improve on every aspect of performance of conventional engines. The new Lexus luxury SUV (coming to showrooms this month) delivers 268 pavement-rippling horsepower, 30 horsepower more than the gas-only model but with 72% more miles per gallon in the city. Electric drives convey far more power in much smaller, lighter conduits and do so much more precisely and reliably than any mechanical drive- train. Electricity moves at close to the speed of light; all thermal and mechanical systems move at the speed of sound, or slower. And at high voltages, electric wires can deliver the same power through far less metal than a driveshaft.
All this means wide-open opportunities for companies that make the components of the silicon car. "Even when we get to only 5% or 10% of vehicles as hybrids-a niche for the auto industry-it's still a huge deal for the power semiconductor business," observes Stephen Ahrens, Fairchild's director of discrete automotive-power products. And the silicon gets there before the hybrid drives in any event. Fairchild Semi is the leading supplier of high-power insulated-gate bipolar transistors (IGBTs) for automotive ignitions. The company also sells metal oxide transistors (Mosfets) for fuel injection, power steering, high-intensity discharge headlamps and the new integrated starter-alternators.
Three Mosfets and two analog control chips are the heart of Fairchild's Smart Power Switch package, which powers heaters and transmissions. ON Semi makes a high-power 400-volt transistor to fire spark plugs. Ixys' IGBTs and Mosfets are in prototype hybrid designs with both Chinese and Korean automakers. International Rectifier's H-Bridge Controller combines logic and four Mosfets in a single package to run pumps, throttles and compressors, and its Mosfet-based regulator, which converts AC power to DC, is used in both GM's Silverado hybrid and the DaimlerChrysler megaluxury Maybach.
High-power semiconductors and electric modules built around them are rapidly cannibalizing the mechanical innards of yesterday's cars. Pumps, fans, steering, brakes and other peripherals are going electric first; the entire drivetrain will soon follow. Toyota, which designs and fabricates its own IGBTs for its hybrid drives, estimates that electrical systems account for about 15% of the base cost of conventional cars and 47% of the cost of its hybrids.
Japan took the plunge first, but the race has just begun. GM's Silverado pick-up and Ford's Escape SUV are already in showrooms; Toyota's Highlander SUV is coming in June, and GM's Tahoe hits showrooms in 2007. Dodge is reportedly planning to release its hybrid Durango in 2008. Full-size hybrid cars are available from Honda (Accord) and are said to be coming from Mercedes and Porsche. At least a dozen different hybrids will be in showrooms in 2006. GM is targeting buses and full-size trucks, too-"where our [hybrid] technology can have the greatest impact," Tom G. Stephens, a Group vice president in the GM power-train unit, told Automobile Engineering International.
Hybrids have, in fact, already taken over completely under the hoods of vehicles too big to fit in your garage. GE's 6,000hp locomotive is powered by an enormous diesel-fueled, engine-driven generator; everything beyond is electric. Ixys supplies high-power silicon transistor modules for the locomotives built by Siemens/ABB. Komatsu's 930E 300-ton mining truck is electric-propelled, feeding off a 2-megawatt generator powered by a diesel engine. The surface ships now on the Navy's drawing boards are all-electric, from the propellers to the guns.
Hybrid economics make a lot of sense, after all. In cars the combustion engine gets cheaper because you can make do with a lot less engine; the batteries can provide the extra kick needed for acceleration. In cars, as in trucks and ships, steady operation also lets the engine run much more efficiently, and it can be designed to run on lower-grade fuel. What the hybrid does, really, is to wrap the century-old steel of the internal combustion engine in a cocoon of semiconductors, motors and batteries that end up making everything smaller, faster, cleaner and more efficient.
The internal combustion engine will endure, but the mechanical drivetrain is history. To invest in the future of transportation, invest in suppliers of power silicon, power supplies, sensors and advanced electric motors.
Original Source: http://www.forbes.com/business/free_forbes/2005/0411/076.html