Chipmakers look to autos for demand, deals and disruption

BERLIN: Faltering demand in computer and phone markets, once semiconductor industry mainstays, have fueled a year-long merger wave as firms look to formerly unloved areas like auto electronics for sales growth. Big consumer chipmakers who once considered automotive electronics too small to merit attention are taking notice as Tesla, Google and Apple have jump-started a drive to turn cars into connected Internet devices.

That promises accelerating growth rates for incumbent electronics suppliers that are the envy of those looking to break into the business. On Monday, NXP is set to close its $11.8 billion deal to buy Freescale, displacing Renesas as the world’s top auto chipmaker and putting pressure on rivals to respond. Already, Infineon has reportedly begun talks to take a stake in Japan’s Renesas. The scope for other major deals in the auto sector appears to have narrowed, but automotive electronics makers who lack the capacity to invest in next-generation products still could come into play, analysts said.

That’s the game-plan for Anglo-German chipmaker Dialog, which has a profitable business supplying iPhone power management chips, but wants to diversify into auto and industrial markets by agreeing to buy US chipmaker Atmel. In Europe, other targets could include Melexis, Micronas MASN.S and Elmos or AMS, which has a small automotive business. The automotive chip market is expected to hit $40 billion by 2019, a compound annual growth rate of 6 percent, Gartner predicts, while the overall global chip market, looks set to shrink 0.8 percent to $337.8 billion this year, it says. “A decade ago, autos was not sexy. Now it is,” Reinhard Ploss, chief executive of Infineon, the leader in vehicle power management chips, told investors recently.

Infineon is shooting for 8 percent growth per annum over the next several years in vehicle related work. Europe’s three biggest chipmakers — Germany’s Infineon, Dutch NXP and Franco-Italian STMicroelectronics plus Japan’s Renesas are all broad-based suppliers which also increasingly specialize on key segments of the car. The four account for nearly 50 percent of automotive chip revenue globally.

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