Understanding the IoT Trend for MCHP and CY
An MCU (microcontroller) is an entire embedded system on a chip with memory. IoT (Internet of Things) devices depend on MCUs for connectivity and data collection.
IoT is a wide market, ranging from automobile to consumer electronics to industrial IoT to military and aerospace to healthcare. As the IoT market develops, there will be an increasing need to develop MCUs for different IoT applications. MCUs are now divided into three segments—8-bit, 16-bit, and 32-bit—based on the processing capability, degree of interfacing, and power consumption.
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Microcontroller stocks like Texas Instruments (TXN) and STMicroelectronics (STM) reached all-time highs in 2000, and now the advent of IoT has brought increased optimism in MCU stocks. NXP Semiconductor (NXPI), Microchip (MCHP), and STM outperformed the S&P 500 Index (SPY) by a significant margin in 2016 and 2017.
Notably, Cypress acquired Spansion in March 2015, NXP acquired Freescale in December 2015, and Microchip acquired Atmel in April 2016. Qualcomm (QCOM) is currently acquiring NXP to expand in the automotive market.
Analysts are optimistic about MCHP and Cypress and have given “buy” recommendations for both stocks. MCHP stock has already increased 38% since the start of 2017 to $88.3. Analysts have set a consensus price target of $95, which shows that they are bullish on the stock, but analysts are divided over Texas Instruments and have set a price target of $89.5, which represents an 8% growth from its current trading price of $82.5.
Microcontroller market outlook
Acute Market Reports expects the IoT MCU market to grow at a CAGR (compound annual growth rate) of 11.7% between 2016 and 2023, driven by strong growth in the automobile, consumer electronics, and healthcare markets. While the overall MCU market growth is strong, individual stocks performance will likely vary due to company-specific factors.