The automotive industry has turned out to be a happy hunting ground for semiconductor companies, thanks to the rising chip content in cars to enable connectivity and autonomous driving functions. According to one estimate, the automotive semiconductor market is expected to hit almost $49 billion in revenue by 2022.

Not surprisingly, Cypress Semiconductor (CY) is trying to make a dent in this space with its product development moves. The chipmaker is targeting the auto industry with its microcontrollers, flash memory, and connectivity chips to enable a variety of functions, including advanced driver assistance systems (ADAS), infotainment, and body electronics functions.

But is Cypress a better automotive play when compared to a bigger company like NVIDIA (NVDA -0.49%), which is trying to change the game by focusing on self-driving cars? Let's find out.

Man faced with making choices.

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The case for Cypress

The automotive business supplied  30%, or $181.3 million, of Cypress Semiconductor's revenue in the last reported quarter. The business has grown 17% in the first three quarters of 2017 as compared to the year-ago period, thanks to Cypress' strong partnerships and fast product introductions.

Cypress recently revealed that it has developed a new family of microcontrollers that will help automotive companies deploy advanced graphics and functionality in instrument clusters and heads-up displays. The chipmaker has equipped these microcontrollers with a 3D graphics engine to help automakers deliver a rich and dynamic experience in their cars.

More importantly, Cypress is providing a simplified solution because the new platform is powered by a single chip, allowing the end users to reduce costs and scale-up functionality as per their needs. Cypress is wise to focus attention on the instrument cluster market as this area is expected to grow at 10.3% a year through 2021.

The chipmaker expects this new product to go on sale from the first quarter of 2018, so it should start contributing to its top-line growth soon enough. Earlier this year, Denso announced that it is using  Cypress' microcontrollers to deliver advanced graphics functionality in the 2017 Toyota Camry.

This was a big win for Cypress as the Camry is one of the most popular cars from Toyota's stable. The model has been the number one selling passenger car in the U.S. for 15 consecutive years. Looking ahead, Cypress could indirectly land more such contracts as it has close ties with other Tier 1 component suppliers such as Continental AG and Bosch as well.

Bosch recently expanded its partnership with Cypress. The automotive component supplier will use the chipmaker's NOR Flash memory products to power advanced driver assistance systems (ADAS), a market that's set to grow at almost  20% a year in the long run.

On the other hand, Continental will be using  Cypress' Traveo microcontrollers to develop its next-generation body electronics platform. This is another fast-growing market that's set to increase at over 10% a year through 2021. Cypress has struck the right partnerships and it is attacking the right areas to make the most of the automotive opportunity.

The case for NVIDIA

Surprisingly NVIDIA pulls in a lower amount of revenue from the automotive industry as compared to Cypress. Last quarter, the graphics processing unit (GPU) specialist reported  $144 million in automotive revenue, an increase of just 13% from the prior-year quarter. In fact, automotive supplies just 5.4% of NVIDIA's total revenue, which is surprising given its partnerships with numerous automakers across the globe.

The reason why NVIDIA hasn't been able to monetize its automotive partnerships so far is that it hasn't deployed its solutions commercially on a large scale. Its DRIVE PX 2 self-driving platform is being used by Tesla across all its models, but the electric vehicle maker isn't a mass-market car seller.

What NVIDIA needs is one of its mass-market auto partners, such as Volkswagen or Toyota, to deploy its solutions in their vehicles on a commercial basis, but this could take some time. Volkswagen Group's luxury car brand Audi, for instance, is working with NVIDIA to bring an artificial intelligence-equipped car to the market in the next three years.

Toyota, on the other hand, is working to deploy  NVIDIA's DRIVE PX2 self-driving car platform in its cars going forward, though there is no definite timeline for a commercial launch. However, the Japanese automaker has indicated that it plans to start testing its driverless cars from  2020, which further indicates that NVIDIA's automotive segment could take time to grow.

In fact, almost all of the big automakers around the globe believe that they won't be offering self-driving cars before  2020. Moreover, we can't expect fully autonomous vehicles anytime soon as the technology is still in its nascent stage, it will need a lot of testing and will have to pass through a lot of regulations before going mainstream.

The verdict

It might take some time for NVIDIA's automotive business to hit critical mass. Meanwhile, Cypress Semiconductor is already reaping the benefits of the growing semiconductor content in the automotive space by supplying components for critical functions and striking partnerships with Tier 1 suppliers.

Cypress' strategy has helped it bring in more revenue from the automotive industry when compared to NVIDIA. Moreover, Cypress might continue holding the upper hand as the verticals it is going after are already picking up the pace, while NVIDIA will have to wait until self-driving car adoption gains critical mass. This makes the former a better automotive bet in the current scenario.