Micron: Best Chip Stock As Automobile Space Transitions To EV (NASDAQ: MU) – Seeking Alpha

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Global light vehicle unit sales are transitioning from ICE (internal combustion engine) to EV (electric vehicles). Chart 1 shows that the QoQ change in the past three quarters of 2021 of BEV (battery EV) shipments was significantly greater than overall automobile shipments.

Chart 1 (The Information Network)

Chart 2 shows that BEV + PHEV (plug-in hybrid vehicle) total light vehicle sales recovering by only 4.6% from the crisis year of 2020, the 108% growth of EVs means doubling their market share.

(Chart 2) EV Volumes

Not only are vehicle shipments and revenue recovering, but more semiconductors are being used each year, as shown in Chart 3, according to The Information Network’s report entitled “Hot ICs: A Market Analysis of Artificial Intelligence (“AI”), 5G, Automotive, and Memory Chips.” The automotive semiconductor market will be one of the leading drivers to the overall global semiconductor market.

Chart 3 (The Information Network)

During this 2015-2025 period, the greatest growth in content per will be exhibited by ADAS (Advanced Driver Assistance System), growing at a CAGR (Compound Annual Growth Rate) of 26% compared to the total semiconductor market growth of 10%. I discussed ADAS in a December 13, 2021 Seeking Alpha article entitled “Intel’s Mobileye: Strong Headwinds From Competitor SoCs, Particularly In China.”
Table 1 lists five of the leading semiconductor companies based on automotive revenues for 2021.

Company Reports

Infineon is the largest automotive semiconductor company, with 44% of its corporate revenues generated from the automotive sector. Power semiconductors comprised 50% of revenues in 2021, down from 55% in 2019. But Infineon leads the power semiconductor market with a 25% share, and the company’s increasing emphasis on adopting Silicon Carbide will be a strong driver in the EV market, according to The Information Network’s report entitled “Power Semiconductors: Markets, Materials and Technologies.”
Table 2 shows that Infineon’s revenues increased 27.5% in 2021 and net income increased 213.8% YoY.

Company Reports

STMicroelectronics makes a range of chips that are widely used in mobile phones, cars, 5G equipment and other electronic devices. The company, whose customers include Apple and Tesla, increased its investment again for 2021 to $2.1 billion, from $1.28 billion in 2020, and plans to increase capex to $3.4 billion and $3.6 billion in capital spending in 2022.
Table 3 shows that STM’s revenues increased 25.0% in 2021 and net income increased 80.8% YoY.

Company Reports

To boost semiconductor content in the average car over time and thus increase sales, NXPI is concurrently positioning in the three major trends: (1) ADAS, (2) EVs, and (3) connected infotainment.
Table 4 shows that NXPI’s revenues increased 28.5% in 2021 and net income increased 3,498.1% YoY.

Company Reports

ON Semi makes power and discrete products used in applications such as sensors, imaging and electric motors. In image sensors, the company has a 40% market share of the ADAS market. ON’s earnings crushed the street consensus badly. One of the drivers for this is ON’s move to silicon carbide (“SiC”) for its IGBT power semiconductors for autos.
I discussed SiC chips extensively in a March 17, 2022 Seeking Alpha entitled “II-VI: Eyes On Carbide Automotive Chip Market As Semiconductor Shortage Ends.”
Table 5 shows that On Semis’ revenues increased 28.3% in 2021 and net income increased 331.1% YoY.

Company Reports

DRAM has a variety of uses in modern vehicles, including the graphic functions of instrument cluster and infotainment systems. Cameras and sensors in ADAS and self-driving vehicles need the bandwidth and capacity of DRAM to process the incoming data. All of this data must in turn be processed, wired, and routed through the car through various electronic control units (ECUs). The more data that is generated in car, the greater the compute/bandwidth requirements will be. Micron holds nearly 50% of the global automotive memory market, and has a wide range of DRAM and NAND.
Connected cars generate up to 25GB of data an hour. Depending on the architecture of the vehicle, ADAS, and autonomous vehicle (“AV”) sensors can generate between 4TB and 20TB each day. This data must be processed in real time so that compute-centric, artificial intelligence (“AI”)-powered systems can react instantaneously, making modern vehicles the ultimate intelligent edge devices. The amount of memory and storage required to fuel these data-intensive systems has led to making the automotive memory industry one of the fastest-growing segments of the semiconductor market.
Table 6 shows that Micron’s revenues increased 29.3% in 2021 and net income increased 59.8% YoY.

Company Reports

Chart 4 shows the Seeking Alpha Quant Rankings of these five companies. ON Semi has the best sector rank of 8th out of 588 in the Information Technology and 4th out of 62 in the Semiconductor Industry. Micron was a close second ranking 16/588 and 6/62.

Chart 4 (Seeking Alpha)

In Quant Rankings, Micron ranked highest, particularly Profitability, as shown in Chart 5. On Semi was next, but with a C+ in valuation, affecting its overall ranking.

Chart 5 (Seeking Alpha)

Chart 6 shows Rankings of the six companies. Micron was rated a Strong buy in Quant Rating and Wall Street Analyst Rating. Again, ON Sem was second.

Chart 6 (Seeking Alpha)

Profit margin for the six companies is shown in Chart 7. Micron’s PM at 28.95% was twice that of ON Semi (14.98%) and the other companies.

Chart 7 (YCharts)

On the negative side according to an article In Ford Authority:
New car affordability has plunged to new depths over the past year, thanks to a variety of factors. The semiconductor chip shortage and various supply chain issues caused by the pandemic are mostly to blame, as those problems have resulted in low inventory levels and record-high prices, both in the new and used vehicle market, as well as virtually non-existent new vehicle incentives.
Chart 8 shows that new vehicle affordability dropped once again in December, 2022 as the number of median weeks of income needed to purchase the average new vehicle rose to 43.2 weeks compared to 42.1 weeks in November. This decline in affordability was aided by a new record average price paid for a new vehicle of $47,077, along with the worst month for incentives in 20 years.

Chart 8 (Ford Authority)

These data are through December 2021. Inflation has increased to 8.5% in the U.S. This will prove a setback for the auto industry as consumers debate the purchase of a high-ticket item when food and gasoline prices are rising at extraordinary levels.
This free article presents my analysis of this semiconductor sector. A more detailed analysis is available on my Marketplace newsletter site Semiconductor Deep Dive. You can learn more about it here and start a risk free 2 week trial now.
This article was written by
Dr. Robert N. Castellano, is president of The Information Network www.theinformationnet.com. Most of the data, as well as tables and charts I use in my articles, come from my market research reports. If you need additional information about any article, please go to my website.
I will soon be initiating an investor newsletter. Information to register will be online on my website.
I received a Ph.D. degree in chemistry from Oxford University (England) under Dr. John Goodenough, inventor of the lithium ion battery and 2019 Nobel Prize winner in Chemistry. I’ve had ten years experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University.
I have been Editor-in-Chief of the peer-reviewed Journal of Active and Passive Electronic Devices since 2000. I authored the book “Technology Trends in VLSI Manufacturing” (Gordon and Breach), “Solar Panel Processing” (Old City Publishing), “Alternative Energy Technology” (Old City Publishing). Also in the solar area, I am CEO of SolarPA, which uses a proprietary nanomaterial to coat solar cells, increasing the efficiency by up to 10%. I recently published a fictional novel Blessed, available on Amazon and other sites.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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