Last month, Cypress Semiconductor (NASDAQ: CY) announced the availability of a new microcontroller unit (MCU) in its Traveo series for the auto industry. The chip has a 3D graphics engine built in, enabling 3D instrument clusters and head-up displays (HUD). This is just the latest example of how important the auto industry has become to chipmakers.
Tech-centric autos on the rise
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Before autonomous cars render the human driving experience a novelty, automakers are hard at work integrating new technology into their vehicles for drivers and passengers.
For consumers, the result is new features like blind spot detection and lane departure warnings, backup cameras, automatic emergency braking, Bluetooth connectivity and voice control, digital instrument panels, and electric and hybrid powertrains. For technology companies like Cypress and other chipmakers, it means a new outlet for sales.
Distracting gadgets or must-have safety features?
Cypress' new device enables 3D and high-resolution graphics for infotainment systems and instrument clusters. It replaces the need for things like a traditional speedometer tach, as well as the typical push-button controls for music, climate control, etc. A head-up display is also supported, displaying relevant information directly into the driver's line of sight.
Some of these new features aren't merely designed to provide fancy new toys to make the work commute more enjoyable. The idea is to keep the driver's eyes on the road as much as possible, eliminating the tendency to shift focus to the radio or climate dial or look away to a navigation screen for directions. Instead, relevant information can be displayed conveniently right in front of the driver, reducing the risk of an accident.
Buying the trend
Cypress isn't the first to offer 3D and HUD-enabling devices. Rival chipmaker NVIDIA (NASDAQ: NVDA), for example, has had a similar offering on the market for years. Luxury auto brands like General Motors' Cadillac and BMW have been including the tech as an upgrade in its vehicles.
The difference here, though, is that Cypress is trying to get digital displays and HUD into the mass market. The idea behind these new units was to provide an affordable solution that all automakers could start offering in their vehicle lineup, and Cypress management reports that some leading industry manufacturers have begun testing with the new MCU. If all goes as planned, your next car could come equipped with these futuristic gadgets.
That also has implications for investors to consider. Cypress Semiconductor reported record sales during its third quarter 2017 report, driven by strong growth in its connected Internet of Things and MCU business. Automotive has become an important part of that picture, with 30% of revenues during the last quarter coming from that industry alone. The picture is similar for some of Cypress' peers.
The trend could just be getting started. In a recent interview with ON Semiconductor, the company's vice president of corporate strategy and marketing told me about the four megatrends in autos that are driving growth for ON and other chip makers: autonomous driving, electric vehicles, connected vehicles, and mobility services. Those movements will likely take the next couple of decades to play out.
In the meantime, estimates have semiconductor sales to the auto industry growing at about 6% a year through 2020. Electronic equipment's share of total car production costs is expected to hit 35% by 2020 and possibly balloon to 50% by 2030.
What that means is that 3D graphics and a head-up display could be coming to a mass-production vehicle near you. That's exciting news for driving enthusiasts and investors alike.
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Nicholas Rossolillo owns shares of Cypress Semiconductor and ON Semiconductor. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Cypress Semiconductor. The Motley Fool has a disclosure policy.