The semiconductor industry is facing a challenging time in 2022, as a slump in demand for smartphones and personal computers led to a sharp decline in the sales of some major chipmakers.

The likes of Nvidia and Micron Technology, which were once flying high thanks to the healthy demand for graphics cards and memory chips, are now in bad shape. On the other hand, reports that Apple has been forced to pull back the production of the iPhone 14 line-up on account of tepid demand have weighed on the company's chip suppliers.

However, there's one industry where chip demand continues to remain robust: automotive. Several automakers have pointed out of late that the chip crunch in the industry is here to stay. Volkswagen, for instance, estimates that the auto industry could continue witnessing a chip crunch into 2023 and beyond. Stellantis also holds a similar view, while General Motors CEO Mary Barra also pointed out that the automotive industry could continue grappling with a chip shortage beyond next year.

The shortage of chips in the auto industry isn't surprising, as the semiconductor content per vehicle increased remarkably thanks to the adoption of connected cars, autonomous driving, electrification, etc. By 2026, the semiconductor content per vehicle is expected to exceed $1,000, which would be double 2020 levels. Not surprisingly, the automotive semiconductor market is expected to clock annual growth of 16% through 2027.

Investors can take advantage of this lucrative opportunity with the help of NXP Semiconductors (NXPI -2.40%), a Dutch company that has solid exposure to the auto market.

The automotive market is driving tremendous growth at NXP Semiconductors

NXP Semiconductors gets half of its revenue from selling chips used in automotive applications. In the second quarter of 2022, the company's automotive revenue shot up 36% year-over-year to $1.7 billion. For comparison, NXP's total revenue was up 28% year-over-year during the quarter to $3.3 billion.

NXP's President and CEO Kurt Sievers said on the company's July earnings conference call that he doesn't "see any substantial weakening within the auto and industrial customer base." What's more, the demand for NXP's chips should remain healthy going into 2023, as the current level of non-cancelable, non-returnable orders that the company had at the end of the previous quarter was "greater than our ability to service."

It wouldn't be surprising to see NXP management singing a similar tune when the company releases its third-quarter results later this month. That's because automakers will be scrambling to place more orders for chips in a bid to boost production. McKinsey estimates that automakers are expected to place chip orders for 120 million cars in 2022, even though the auto industry's sales are likely to come in at 83 million.

So NXP should continue to witness solid demand from its largest end market. The automotive market should be a long-term growth driver for NXP, and help the company sustain its impressive growth. Let's see why.

A look at the bigger picture

We have already discussed that the semiconductor content in each vehicle is set to increase rapidly in the long run. This explains why NXP sees its automotive revenue clock a compound annual growth rate (CAGR) between 9% and 14% over three years ending in 2024. That would be a nice bump from the 7% CAGR NXP's automotive revenue posted in the past three years.

But don't be surprised to see the automotive business record stronger growth thanks to the presence of fast-growing niches such as automotive radar and electrification systems. NXP estimates that the new growth drivers could deliver $6 billion in total revenue by 2024, compared to $3 billion in 2021, in addition to the company's legacy business, which is expected to generate another $9 billion. In total, NXP sees its top line jumping to $15 billion in 2024, compared to $11 billion last year.

Multiplying the company's 2024 revenue forecast by its five-year average price-to-sales ratio of 4.3 would translate into a market cap of $64.5 billion. That implies an upside of 53% from current levels. Even better, the chipmaker is trading at 16 times trailing earnings and 10 times forward earnings, which means investors can buy this stock at a nice discount to the Nasdaq-100's earnings multiple of 23.

That's why investors looking to make the most of the automotive chip shortage and looking to add a semiconductor stock to their portfolios should consider going long NXP Semiconductors, as it can deliver robust long-term upside and is valued attractively right now.