Intel Still Has A Long Way To Go To Make A Mark In The Automotive Industry

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Having missed out on the mobile revolution, leading PC chipmaker, Intel (NASDAQ:INTC) seems determined to be an early entrant in the Internet-of-Things (IoT) market, which is considered to be the next big wave in computing. Last year, Intel changed its reporting structure and made IoT a stand-alone segment, underlining its growing focus on the segment. The company currently derives less than 10% of its valuation and approximately 5% of its revenue from the IoT segment. We believe that accelerating its entry in IoT augurs well for Intel’s long term growth potential, and estimate the segment to account for approximately 10% of Intel’s total revenue by the end of our forecast period.

Intel witnessed an 18% increase in its IoT revenue in 2014. In addition to wearables, increasing demand for Intel’s in-vehicle infotainment systems was an important factor driving the company’s growth in IoT. Automotive electronics is a large market and it is going through a transition  as cars have increased computing capability in both the drive train and the dashboard. Increasingly, dashboard functionality within cars (infotainment systems, digital cluster and automatic driver assistance) are being computerized.

Intel has been present in the automotive market for many years, working with auto manufacturers to develop capabilities and technology. In this article, we discuss the growth potential in the automotive market and Intel’s position therein.

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Our price estimate of $34 for Intel is approximately 10% below the current market price.

See our complete analysis for Intel


Connected Cars Are One Of The Fastest Growing Technological Devices

The global market research and consulting company MarketsandMarkets estimates the global In-Car Infotainment (ICI) market will reach $14.4 billion by 2016, with a CAGR of 12.1%. Strategy Analytics expects the market for Advanced Driver Assistance Systems will generate around $15 billion by 2016, with a CAGR of 23%. [1] By 2016, research firm Gartner predicts that most vehicle buyers in mature automotive markets will make connected-vehicle features a key buying criterion in their product selection. ((Intel Connected-Vehicle Solutions Boost Its Automotive Commitment, Gartner, May 30, 2014)) Gartner believes that during the current decade, the democratization of connected infotainment and advanced driver assistance features will lead to the arrival of self-aware and self-driving vehicles.

The auto industry is now the third-largest group of technology patent filers. According to Intel, connected cars are the third-fastest-growing technological device after phones and tablets, with automakers spending much more of their budgets on infotainment and in-car technology.

Where Does Intel Stand In The Market ?

Last year, Intel launched a range of compute models and announced its plans for the connected car, bringing a slew of new hardware and software products, known as Intel In-Vehicle Solutions, to the market. Intel’s In-Vehicle Solutions offers a group of software and hardware products that consists of multiple computing modules, integrated operating systems, middleware stacks and development kits. In addition to launching new products, the company is making investments and conducting research to make the connected car of the future a reality.

In 2012, Intel initiated a $100 million Capital Connected Car Fund to help develop technologies in the segment. Since then, Intel has made investments in a number of companies, including:  1)  ZMP, which develops a autonomous driving platform, and vehicles connected with sensors, radars and cameras; 2) CloudMade, a provider of data aggregation and cloud connectivity necessary for future IVI solutions; 3) Mocana, which delivers security to the IVI platform with a mobile app-shielding solution; and, 4) Tobii Technology, which applies perceptual computing technology to advanced driver assistance applications. [2]

Intel seeks to expand its business in the automotive industry beyond infotainment. The company aims to become a solution partner for multiple functional areas of the connected vehicle, including telematics, advanced driver assistance systems and mobility innovations. [3] Hyndai, BMW, Infinit and Kia are some of the companies that use Intel’s technology to power the in-vehicle infotainment system and advanced driver assistance capabilities.

Despite its various initiatives, Intel does not feature in the top ten suppliers of the application-specific standard product (ASSP) semiconductors for the automotive infotainment market. Though Nvidia (NASDAQ:NVDA) too does not feature in the top ten suppliers, it is ahead of Intel, having successfully imported its experience in multimedia and graphics processing from the consumer segment into automotives.

Source: https://technology.ihs.com/435721/

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Notes:
  1. as cited in Nvidia’s CEO Discusses F4Q2014 Results – Earnings Call Transcript, Seeking Alpha, February 12, 2014 []
  2. Intel Makes Its Move Into the Connected Car, The Street, May 29, 2014 []
  3. Intel Connected-Vehicle Solutions Boost Its Automotive Commitment, Gartner, May 30, 2014 []