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Automobile Industry Offers Key Growth Opportunity for Micron

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SMAC provides diversification avenues for Micron’s growth

As we’ve seen in this series, sluggish growth in the PC (personal computer) market has significantly impacted Micron’s (MU) revenues. But there are other growth avenues that can put Micron’s growth prospects on track.

The SMAC (social, mobile, analytics, and cloud) revolution, increased penetration of the Internet, exponential growth in connected devices, smartphones, and Wi-Fi corridors are key drivers of Internet traffic. These drivers have created an abundance of opportunities as well as pressures to deliver web-based solutions. This has led to the boom in data centers and servers requiring massive storage capabilities.

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Automotive electronics is a huge market that’s currently going through a transition phase. There is increased computing capability in vehicles’ drive trains and dashboards. Dashboard functionality in cars, called infotainment systems, digital clusters, and automatic driver assistance, are being computerized at a fast pace. Micron already supplies memory chips to the automobile industry. As cars embrace more digitization, the demand for memory will only grow.

Huge growth expected in automotive industry

According to Strategy Analytics, the market for advanced driver assistance systems (or ADAS) is expected to be worth about $15 billion by 2016, growing at a CAGR (compound annual growth rate) of 23%. Realizing the importance of this growth avenue, Nvidia (NVDA), Micron’s peer, aims to enhance its presence in the automobile market with advanced chips to power self-driving cars.

To ward off the declining trend in the PC market, Nvidia is strategically focusing on the specialty PC and high computing market. This market involves gaming PCs, workstation PCs, automobiles, and high-performance computing (or HPC).

Apple (AAPL) has launched CarPlay, which is expected to be in 40 car models in 2015. Through CarPlay, Apple’s iOS will be integrated into a car’s dashboard. Since Apple is already Micron’s customer, Micron could leverage this relationship to further its presence in the increasingly digitized automobile space.

If you want to invest in Micron Technology, you can invest in the PowerShares QQQ ETF (QQQ) and the Technology Select Sector SPDR (XLK). QQQ and XLK invests about 0.59% and 0.77%, respectively, in Micron.

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