The proliferation of semiconductors in electric vehicles is creating a big market opportunity for numerous suppliers, a Wall Street analyst said Thursday.
[ibd-display-video id=2970198 width=50 float=left autostart=true] The report by Nomura analyst Romit Shah says the average semiconductor content per electric vehicle is about $924, more than triple what is in standard internal combustion gas-powered automobiles, based on data from STMicroelectronics ( STM ).
Shah projects the category of alternative electric vehicles will grow to 53 million units by 2030, up from 3.4 million units in 2017, implying a compound annual growth rate of 23%.
"This is significantly higher than the overall automotive compound annual growth rate, which our Nomura colleagues estimate to be 2.2% over the same time frame," Shah wrote. "We believe that there are a number of major shifts in transportation technology that will expand the demand for automotive semiconductors by orders of magnitude."
Some of the companies set to benefit from the growth in auto electronics include NXP Semiconductors ( NXPI ) and Texas Instruments ( TXN ), as well as STMMicroelectronics and Analog Devices ( ADI ).
Among recent events about these companies, NXP on Friday announced new chip products for radar applications in automated driving . Analog Devices received at least six price-target increases to its stock after delivering a beat-and-raise quarterly report on Nov. 22.
In addition, Texas Instruments is currently trading near a record high, while STMicroelectronics is forming a base with a 24.90 buy point as it gets set to report quarterly earnings on Jan. 24.
Shah said he spent his summer at electric-car company Tesla ( TSLA ), where he also spent significant time analyzing the supply chain for alternative energy vehicles. The category includes hybrid vehicles, plug-in hybrid electric vehicles and battery electric vehicles, such as Tesla, which is in the process of rolling out its mass-market Model 3 .
He expects advanced driver assistance systems, autonomous driving, and powertrain electrification to be the biggest driver of chip content. His report focused on the electrification of the powertrain, which is the primary piece of an electric vehicle, housing the batteries and other technologies that provides the power for vehicle performance.
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The market for semiconductor components related to the electrification of automobiles is projected by STMicroelectronics to grow at an 19% compound annual growth rate from 2016 to 2021, "significantly faster than the greater automotive semiconductor and overall semiconductor markets," Shah wrote.
Internal combustion vehicles comprise the large majority of vehicles on the road today, making up 97% of the overall automotive market in 2016. That's expected to fall to about 58% of the overall automotive market by 2030, as alternative electric vehicles drive ahead, Shaw wrote.
Shares of Tesla added 0.9% to close at 337.95 on the stock market today . Texas Instruments added 0.9% to 110.67, just below the record high of 110.98 it reached on Tuesday. Analog Devices gained 1.2% to 91.19, while STMicroelectronics climbed 2.3% to 24.02.
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