2023-12-21 10:20:02 ET
Summary
- The European semiconductor sector aims to mobilize €43 billion in investments to achieve a 20% global market share by 2030.
- NXP Semiconductors is identified as the top automotive chip company among European manufacturers.
- The SiC market is expected to grow at a CAGR of 53.2% between 2021 and 2026, making it a key differentiator for NXP.
The European Chips Act seeks to mobilize more than €43 billion in combined public and private investments within the semiconductor sector. The overarching objective is to achieve a production capacity that accounts for 20% of the global market by the year 2030.
Leading semiconductor manufacturers in Europe, such as NXP Semiconductors N.V. (NXPI), STMicroelectronics NV (STM), and Infineon Technologies AG (IFNNY) stand to experience substantial benefits from augmented investments.
Each of these three chip companies have a large exposure to the automotive industry, providing a variety of different semiconductor types for various applications. In this article, I analyze the three companies, and pick NXP as my top automotive chip company.
Competitive Markets
Table 1 shows market shares for Infineon, NXP, and STMicro for various sectors they overlap. For Automotive Semiconductors, Infineon and NXP have nearly the same market shares, with STM a distant third.
In Microcontrollers and Security IC sectors, market shares are relatively comparable.
Below in this article, I discuss the Automotive Semiconductor sector and the SiC (Silicon Carbide) sector.
Automotive Market
Infineon has been the largest supplier of semiconductors in the auto industry since 2020 -- with fellow European chipmakers NXP Semiconductors, and STMicroelectronics dialing in at No. 2 and 3. NXP had led the market in 2019 but was negatively impacted by Covid in 2020, as shown in Table 2.
ST Microelectronics held only a 5.9% share, but notice that only 32% of its revenues are generated from the automotive sector, compared to ~50% for its peers.
Demand for Automotive Chips
Automotive semiconductors play a crucial role in modern vehicles, enabling a wide range of applications that enhance safety, efficiency, and overall vehicle performance. Here are some key applications for automotive semiconductors:
- High-Performance Computing ("HPC") in automotive semiconductors drives Advanced Driver Assistance Systems (ADAS) for real-time sensor data processing, and are a fast-growing segment. It is essential for autonomous driving algorithms, enabling mapping, localization, and control.
- In-Vehicle Infotainment (IVI) systems benefit from HPC for multimedia, navigation, and connectivity.
- Electronic Control Units (ECUs) and Powertrain Control Modules optimize electric motor control. HPC supports fast and reliable Vehicle-to-Everything (V2X) communication, enhancing safety. It plays a role in cybersecurity for threat detection in connected vehicles. HPC contributes to simulation, over-the-air updates, and energy management in electric vehicles.
Currently, NXP is the only company of the three to offer ECU products. The company announced a partnership with Hailo, the edge AI chipmaker in late 2021 to launch a number of joint AI solutions for automotive ECUs. The joint solutions will combine NXP's automotive processors (S32G and Layerscape) along with the high-performance Hailo-8™ AI processor. NXP's automotive-grade microcontrollers and processors are commonly used in these ECUs.
Chart 1 shows my analysis of the size of the automotive semiconductor market, combining the above applications, according to The Information Network's report Hot ICs: A Market Analysis of Artificial Intelligence ("AI"), 5G, Automotive, and Memory Chips .
Chart 1
Silicon Carbide ("SiC")
The market potential for SiC as well as another wideband gap material Gallium Nitride ("GaN") are shown in Chart 2. GaN will exhibit a CAGR (compound annual growth rate) of 53.2% between 2021 and 2026, ahead of SiC with a CAGR of 42.5%, according to The Information Network's report entitled Global and China EV Batteries and Materials: Technology, Trends and Market Forecasts.
Chart 2
Chart 3 shows the significance of the EV market on SiC device market, making up 63% of MOSFET's in 2025, according to The Information Network's report Power Semiconductors: Markets, Materials and Technologies .
Chart 3
Investor Takeaway
My analysis shows that from Table 2, while Infineon led the overall automotive semiconductor market, it did so by less than a 1% share over NXP. Also, STMicro, which had a share of only 50% that of Infineon, dominated the Microcontroller market, and these are used in automotive applications among others.
Without a dominant automotive semiconductor manufacturer, a choice of top player based on these metrics is more or less a toss-up. But in my opinion:
- The Silicon Carbide market is a key differentiator. As noted above, the SiC market is expected to grow at a CAGR of 53.2% between 2021 and 2026.
- In contrast, the overall automotive market, illustrated in Chart 1 above, will exhibit a CAGR of just 14.1%.
In addition, Based on NXP's lead in the SiC market, combined with its strong share in other sectors, and on its technology lead in ECUs and High Performance Computing for the automotive industry, it is my opinion that this company is the top automotive semiconductor manufacturer now and in the future.
I rate NXP a Buy, and my top semiconductor automotive semiconductor manufacturer pick.
For further details see:
NXP: My Top Automotive Semiconductor Manufacturer Pick