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 Faltering demand in computer and phone markets, once the mainstays
of the semiconductor industry, has prompted firms to look to
formerly unappealing areas such as auto electronics for sales
growth.
Competitors are now lining up to prove their worth in advanced
driving assistance systems (ADAS), a field that covers technology
used to boost driver safety, from in-car cameras and
collision-warning systems to self-driving cars.
Ceva already licenses its designs to chipmakers such as Intel and
Samsung, who embed its digital signal processors (DSP) within their
chip sets, reducing the time and cost it takes them to bring
products to market.
One of Ceva's DSPs, the XM4, supports vision technologies and this
is a particular area it wants to develop.
"The market for this is much bigger than what we cover in the
cellphone market," Ceva Chief Executive Gideon Wertheizer told
Reuters. This could range from drones to virtual reality headsets
and the Internet of Things, he said.
"We have significantly increased our customers for visual technology
in 2015, the same technology that will be used in cars for ADAS
purposes," he said.
Research firm IHS forecasts ADAS chip and sensor revenue will reach
$4 billion by 2020, up from $1.6 billion in 2014.
Wunderlich Securities analyst Matthew Robison, who rates Ceva a
"buy" with a $28 price target, said it was in a strong position to
compete with Israel's Mobileye and NXP's Freescale operation in the
car safety field.
HIGHER ROYALTIES
Mobileye is a pioneer and market leader for driving assistance
systems using vision chips and software. NXP is a more recent
entrant and other chip makers are expected to enter the fray as the
market expands.
Licensing Ceva's vision technology could help new competitors reduce
the time and costs they need to develop their own platforms for this
market and take on the market leaders, analysts say.
Robison said Mobileye appears to be focused on automakers such as
Tesla that are developing autonomous cars while NXP is focused on
suppliers to the car industry for safety systems.
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"Self-driving cars may be far in the future, but the building blocks
that start with active safety involve a significant amount of
content," Robison said.
"Expect systems involving large numbers of sensors, eventually
scaling to 8-10 cameras per car," he said.
Ceva's platform, a combination of DSPs, vision-based software and
algorithms, has secured the critical ISO 26262 safety standard
required to enter the automotive market.
The company has landed its first client, a top maker of components
that enable ADAS capabilities in cars.
Ceva did not name the customer but Robison said it could be a
company such as Bosch, Delphi or Toshiba. Wertheizer also said a few
more customers were in the pipeline.
Wertheizer said he would not rule out Mobileye and NXP eventually
becoming clients too, using Ceva's microprocessors to help them cut
costs and time when developing products.
Royalties for ADAS chips will be significantly higher than for
smartphones but Wertheizer said it would take time for it to build
up a significant business.
Ceva, whose shares rose 29 percent in 2015, has a market value of
$465 million compared with Mobileye's $8.7 billion.
"When the market is big and mainstream that is when you will see us.
Usually we do not pioneer technology, we come in after with more
advanced technologies," Wertheizer said.
(Editing by David Clarke)
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