Our analysis shows semiconductors are driving 80% of automotive innovation and yet represent
only c.3% of a car’s total cost. We estimate semi vendors generate an average EBIT margin of
c.15.5% in Automotive, i.e., more than triple that of carmakers and more than twice that of car
equipment makers. We believe semis will continue to capture the value add of the auto
ecosystem.
We expect 6% revenue CAGR for automotive semiconductors over 2016–20
Despite bearish unit forecasts from our Automotive team, we see automotive semiconductors
growing by 6% CAGR over 2016–20 as semiconductor content per car accelerates to c.6% vs
2.3% historically. This acceleration is driven by the electrification of the car, which should lead
semiconductor content in each vehicle to rise by c.USD360 (vs USD323 today), and autonomous
cars, which should command incremental semiconductor content of USD500 per car. We expect
half of the sector’s growth to come from the electrification of the car and autonomous cars.
We see STM (Yes! STM) and IFX as the winners among existing leaders
Outperforming the industry will essentially be conditional on exposure to ADAS and the
electrification of the car. Largely non-consensual, our bottom-up model shows that STM should
be a winner of current trends thanks to its strong position in ADAS (N1), its market share gains in
microcontrollers and its entry into the electrification of the car via its SiC technology. We expect
the group’s automotive revenues to grow by 8.7% CAGR over 2015–20. Largely consensual, we
expect IFX to also achieve a 8.8% y/y revenue growth over 2015–20, thanks to its very strong
position on the electrification of the car, which should represent about half of its revenue growth.
Among the established players, we expect Renesas, NXP and TXN to lag.
Mobileye and Nvidia the new rock stars of the sector, CEVA and Intel potential challengers
Due to the demanding processing requirements of autonomous cars, we expect Mobileye and
Nvidia to post 39% and 37% revenues CAGR over 2015-20. Ceva and Intel post-Movidius
acquisition could become credible challengers