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 Chip-makers or tech giants such as Infineon and Google are among a
variety of companies involved in the rapid development and testing
of intelligent cars from those that drive themselves to those
allowing a driver to use mobile phone apps through the dashboard.
A number of carmakers are embracing the trend, with Nissan Motor Co,
Volkswagen AG's Audi and Toyota Motor Corp working with outside tech
firms to test self-driving car technology.
However, it is the tech and telecom firms - from U.S. bellwethers to
small European companies - that are seen benefiting the most, fund
managers and analysts said.
"It's a whole new market emerging," said Christian Jimenez, fund
manager and president of Diamant Bleu Gestion.
"The best way to play it for investors in the long term is to buy
names such as Microsoft or chip makers such as Infineon, not
(automakers) Peugeot and Renault".
If the new market grows to $50 billion as forecast by French bank
Exane BNP Paribas that would be roughly half the size of German
carmaker BMW's revenues last year.
Internet giant Google Inc is leading the charge among tech
companies, trying to break into the century-old industry as it works
on its own prototypes of fully autonomous vehicles.
It may be a few years before driverless cars hit the road but Google
is already shaking things up in the sector, saying last week that
the first cars running its Android Auto - a voice-enabled software
allowing drivers to navigate maps and send messages while behind the
wheel - will hit showrooms later this year.
Apple is also in the race, with its new CarPlay - which integrates
iPhone functionality - allowing drivers to use applications directly
via the dashboard to view maps, make calls, listen to music and send
and receive text messages.
Only about 10 percent of vehicles have built-in connectivity today,
but the number is expected to rise to more than 90 percent by 2020,
according to the British consulting firm Machina Research.
"This is not a distant dream, but a five-year race where there is
money to be made, or lost," Exane BNP analyst Stuart Pearson said in
a note to clients, predicting that the market for connected car
services would grow by an estimated 30 percent a year through to
2020.
EUROPEAN PRESENCE
Investors are also keen to pick smaller, specialized companies at
the heart of changes in the car driving.
AKKA technologies, a French engineering firm which has been
developing a prototype of electrical driverless car, has seen its
stock soared by nearly six-fold since 2009.
"The autonomous car is not science fiction, it's real and it's
happening now. The technology is ready, it's just a question of
regulation at this point," said Philippe Obry, head of research and
development at AKKA.
"The idea is not to upgrade existing cars with new technologies,
it's to rethink the whole sector and the way people will use cars in
the future...We're not a car maker, so it's been easier for us to
think outside the box."
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Shares in French electric car battery maker Blue Solutions have
jumped 130 percent since their initial public offering last October,
which was more than 15 times oversubscribed.
Among big European tech stocks, Nokia and TomTom are seen facing
their make-or-break moment with the connected car, Exane's Pearson
said.
"The two map-makers hold a duopoly in maps for embedded solutions of
original equipment manufacturers and auto part suppliers. If these
embedded solutions dominate in the long run, our TomTom fair value
could rise by 32 percent, 13 percent at Nokia."
CHIP MAKERS PROFIT
Analysts and fund managers also see chip makers such as Germany's
Infineon and Texas Instruments profiting from the push into
driverless cars, while telecom operators will also win from the
increased data revenue, with larger, cross-border operators set to
dominate.
Last April, Infineon - whose chips activate airbags, enable cruise
control and cut vehicle emissions - raised its profit outlook for
the year and said it would lift its dividend after posting
forecast-beating quarterly results, buoyed by robust demand from the
automotive sector.
Qualcomm and Intel are already competing to supply chips that
connect cars to the Internet and processors for increasingly
sophisticated navigation and entertainment systems.
Whether made with 3G chips from Qualcomm or Bluetooth and Wifi chips
from Broadcom, every wirelessly connected car needs components to
handle power amplification, switching and filtering, made by
companies such RF Micro Devices Inc and Skyworks Solutions. This
year, those two companies have seen their stocks surge 91 percent
and 68 percent respectively.
"Whether it's connectivity from a phone or a car or a Nest
thermostat or a home security system, the only thing ubiquitous
across the Internet of Things is they have to connect wirelessly,"
said Ascendiant Capital analyst Cody Acree, who recommends Skyworks
as a play on connected cars.
Bosch, STMicro and San Jose, California-based InvenSense are
supplying growing numbers of sophisticated sensor chips for braking,
driver assist and other safety functions that are bringing cars
nearer to becoming autonomous.
(Additional reporting by Noel Randewich in San Francisco; Editing by
Lionel Laurent and Anna Willard)
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