Automotive demand to drive technology sector forward
This augurs well for Malaysian firms such as Malaysian Pacific Industries Bhd (MPI) which is ahead of its peers in positioning itself for more automotive-related jobs. AmInvestment Bank
KUCHING: The automotive industry is set to drive demand in the semiconductor sector as with the emergence of electric vehicles (EV) and autonomous driving gaining traction, there will be opportunities for a potential pick-up in demand for automotive semiconductor components.
AmInvestment Bank Bhd (AmInvestment Bank) anticipates for automotive electronics systems to grow 6.4 per cent year on year ( y- o- y) in 2019, topping all other categories including communication.
This growth is premised on the rapid adoption of advance driver-assistance system (ADAS) and active safety features, which increases the need for more automotive electrical systems such as sensor fusion, camera, radar and lidar (light detection and ranging).
“This augurs well for Malaysian firms such as Malaysian Pacific Industries Bhd (MPI) which is ahead of its peers in positioning itself for more automotive-related jobs,” it said in a 2019 Outlook report.
“Infineon Technologies, a prominent player in the automotive semiconductor space, projects that a Level 2 vehicle will likely incur an additional US$150 worth of semiconductor content per car.
“At Level 3, the number increases to US$580 while Level 4 and 5 require an additional US$860 per car. Similar to the transition to autonomous driving, the transition to EV does not need to be instantaneous.
“Vehicles with hybrid powertrains will bridge the gap, and IHS Markit estimates a simple hybrid vehicle to have an increase of US$428 worth of semiconductor content.”
All in, a full EV with full autonomous driving capability should have approximately six times the value of the average semiconductor components in a typical internal combustion engine (ICE) vehicles.
Of similar view was MIDF Amanah Investment Bank Bhd (MIDF Research) who said growth in optoelectronics products will be partially supported by the stable demand of automotive LED.
“In the near the term, demand will be stemming primarily from the exterior automotive lighting,” it added. “For this segment, the high/ low beam headlamps are expected to grow at the fastest pace due to technological improvement.
“On a longer term horizon, we expect the demand for interior automotive lighting will pick up as autonomous driving pick up pace.”
Regionally, MIDF Research saw that China has been one of the main region of growth as it on course to strengthen its position as the world’s largest automotive market. Meanwhile, there is higher barrier to entry due to the stringent product requirements.
“In this respect, automotive LED vendors has to borne higher R&D expenses to account for additional product stress test qualifications for new and existing products in compliance with new industry and/ or automotive customers’ quality standards,” it added.
AmInvestment Bank also saw that cloud computing is gradually emerging as a prominent segment on its own, with data centre and enterprise software recording the highest growth in terms of spending in 2017.
This trend is expected to continue in 2018F and 2019F with the emphasis on enterprise software, as companies are moving towards cloud-based software as a service (SaaS) such as customer relationship management (CRM), supply chain management (SCM) and enterprise resource planning (ERP).
“This has sparked a trend of aggressive acquisitions among SaaS players in 2018 itself, notably SAPQualtrics, Adobe- Marketo and IBM- RedHat,” it added. “Riding on the move towards cloud computing, back-end data centres facilitating cloud-based software will eventually see a need for expansion or upgrades in order to accommodate higher number of users and increasing data size.
“Local players like Dufu Technology Corp and MPI, who are involved in server hardware such as storage drives and power management chips, are poised to benefit.”