Demand For Automotive Chips Will Continue To Grow As The Outlook For The Electric Vehicle Market Looks Solid
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Growing sales of electric vehicles — which typically use more semiconductors than their gas-powered counterparts — coupled with greater automation of all vehicles have kept car chip makers busy.
Car chip boom
Chip executives say the increase in the number of chips going into cars is staggering. As of 2021, the average car had about 1,200 chips, twice as many as in 2010, and that number is only likely to increase.
Companies including Dutch automotive chip company NXP Semiconductors, German Infineon Technologies AG , Japanese Renesas Electronics Corp., an American company Analog Devices Inc. and Texas Instruments Inc. recently reported growing sales in its automotive divisions and made good forecasts for this year.
NXP's automotive chip sales grew 25% last year, and the company expects about 15% growth in the first quarter of this year. Renesas' automotive business grew nearly 40% last year, and analysts expect more growth this quarter. Analog Devices, which accounts for nearly a quarter of its sales in the automotive industry, posted 29% growth in this segment last year.
It's not just the cars themselves that are using more and more chips; as will vehicle manufacturing as manufacturers introduce more automation to deal with labor shortages and try to cut costs, semiconductor executives said.
Car chip resilience comes despite a historic drop in car sales last year, which was the lowest in more than a decade in the US. Sales have been hampered by supply chain issues, including a lack of chips necessary for a new generation of cars with a range of digitally enhanced features, from driver assistance technology to automatic windshield wiper control. The increased digitization of cars means that even lower vehicle sales do not reduce the demand for car chips.
Prospects of EV market
Long-term EV market outlook looks solid, Tesla Inc. hinted last week as chief executive Elon Musk detailed plans for his car company to increase sales to 20 million vehicles a year by 2030, up from around 1.3 million in 2022.
Electric vehicle sales surpassed a global milestone last year, reaching around 10% market share for the first time. While EVs still represent a fraction of U.S. car sales, their share of the overall market is becoming significant in Europe and China.
Tesla is still the dominant manufacturer of electric cars in the world, but conventional carmakers are reducing their lead with new electric models.
European carmakers have focused their production and sales of electric vehicles on domestic markets in an effort to meet EU emissions regulations. They also began a more aggressive expansion of their electric vehicle business in other major markets last year, especially China and the US.
Declines in other sectors of chipmakers
The boom in automotive chips contrasts with sharp declines in other sectors of chipmakers whose products end up in electronics closely tied to consumer appetites.
Intel Corp. , the largest U.S. chip maker by revenue, reported a loss in the fourth quarter and expects another loss this quarter, hit by a weakening demand for personal computers that house its chips. Rival Advanced Micro Devices Inc. is also battling a volatile PC market where industry-wide shipments are expected to fall by 12.5% this year, according to recent Morgan Stanley estimates.
Qualcomm Inc., known for its mobile phone chips, illustrates how some chip vendors feel both sides of market dynamics. The company saw an 18% drop in mobile phone revenue in the last fiscal quarter.
NXP Semiconductors N.V. share prices
NXP shares have been up since Feb 24. from 176.86 to 182.96.
By comparison, Renesas shares also rose to 6.72, a record high in more than 10 years. Infineon Technologies shares also rose to 36.63 after falling to 35.43.
Source: wsj.com, finance.yahoo.com
