'Physical AI' fuels billion-dollar race between automakers and chip giants

LAS VEGAS — Tech giants are pivoting to "Physical AI," a new marketing term describing autonomous systems that interact with the physical world, ranging from factory-floor humanoid robots to self-driving cars.

Leading the charge at the CES technology trade show, chipmakers Nvidia and ARM are positioning themselves at the center of a rapidly growing sector. The automotive chip market is projected to reach $123 billion by 2032, an 85% increase from 2023 levels.

Nvidia has introduced a new suite of AI models designed for autonomous systems and announced partnerships with automakers including China’s Geely and Mercedes-Benz. CEO Jensen Huang characterized the self-driving sector as a "massive business" for the company.

Traditional automakers are also ramping up their autonomous goals. Ford expects to begin selling vehicles equipped with "eyes-off" driving systems by 2028.

In the robotics sector, Hyundai is partnering with Google DeepMind and Boston Dynamics to deploy humanoid robots on production lines. Additionally, the Sony and Honda joint venture is developing the Afeela, an electric vehicle centered on self-driving capabilities.

The emergence of "Physical AI" is less a technological breakthrough and more a sophisticated exercise in market positioning, orchestrated primarily by the semiconductor giants. By rebranding autonomous driving and industrial robotics under this new umbrella, Nvidia and ARM are effectively redefining the automobile. It is no longer a mere vehicle, but a mobile high-performance computing (HPC) platform—a pivot designed to manufacture sustained demand for increasingly powerful silicon.

Data from AlixPartners underscores the scale of this transition, projecting that the "central brain" of the modern vehicle will grow 100-fold in capacity. For a semiconductor industry seeking growth drivers beyond personal computers and data centers, the automotive sector represents the next gold mine. This shift is forcing a fundamental convergence: legacy carmakers must now operate like technology firms to remain competitive, while tech companies are aggressively colonizing the automotive supply chain.

For a manufacturing powerhouse like Vietnam, this trend presents a complex policy challenge. The rapid automation of assembly lines by major partners, such as Hyundai, will exert significant long-term pressure on the low-skilled labor market. Yet, the disruption also offers an opening for a more specialized workforce in robotics engineering, maintenance, and programming.

In the long run, Hanoi’s industrial policy must move beyond traditional assembly. If Vietnam is to maintain its regional competitiveness, policymakers must ensure domestic supply chains are capable of integrating into the smart vehicle ecosystem. Without a strategic pivot toward high-tech manufacturing and skill development, the country risks being sidelined in the global race for automotive innovation.