Instant Analysis: NXP Semiconductors N.V. Just Took a Big Step Into Driverless Cars

Image source: NXP Semiconductors.

What happened?
This week, NXP Semiconductors N.V. (NXPI 1.29%) revealed its off-the-shelf autonomous driving system called BlueBox. It's big news from the company because NXPI says the system will allow automakers "design, manufacture, and sell" Level 4 self-driving cars by 2020.

Right now, most semi-autonomous systems only reach Level 2 or Level 3 automation, while Level 4 automation is effectively complete autonomy where the vehicle maintains controls at all time with no expectation of the driver being available for control.

BlueBox includes NXPs semiconductors for processing power, along with radar, lidar, and on-board vehicle-to-everything (V2X) communication sensors. The system is also open-sourced, so automakers can make adjustments to it as they see fit. 

Does this matter for shareholders?
This is a very important move both for the company and the driverless car industry. After its purchase of Freescale Semiconductor last year, NXP is now the No. 1 semiconductor manufacturer and is already a leader in advanced driver assistance systems (ADAS). The release of BlueBlox means NXP will be able to leverage its position in the automotive market to better compete with other companies that are building autonomous driving platforms, namely NVIDIA (NVDA 3.71%). 

Eighty automakers and Tier 1 suppliers are already using NVIDIA's Drive PX and Drive PX 2 driverless car platforms, and the company is already a leading provider of GPUs for in-car infotainment systems. NXP said in a press release that four out of the five largest automakers have already been testing BlueBox since September 2015, and the company's dominant position in the automotive semiconductor segment means it should have a smooth transition into getting BlueBox into more carmakers' hands. 

The driverless car technology market is expected to grow to $42 billion by 2025, according to Boston Consulting Group. NXP is in a perfect position to benefit from this growth with its current automotive semiconductors, and especially now with the unveiling of BlueBox.