After the earthquake in Japan, the semiconductor market was at a standstill, thanks to supply shortages from facilities that were directly affected. A slowdown in the growth rate of chip markets worldwide was something that perhaps everyone expected.
In June, Gartner confirmed those worries in a report in which it lowered its chip-market growth forecast for 2011 to 5.1%. The market-research firm, though, appeared quite bullish with its views on niche areas such as automotive chips.
Slowdown, but with a bright side
Gartner blamed the slowdown on the tsunami that shook Japan and the havoc it wreaked on the global chip-supply chain for goods ranging for tires to chips. In its forecast, however, the firm noted that niche markets should still experience strong growth through 2015, particularly those for chips with automotive applications. The market for chips in the automotive industry is indeed a niche segment and is also highly dependent on the movement of the automotive sector as a whole. But research firm Markets and Markets forecasts the automotive-chip market to grow by 12% by 2014.
Chipmakers in the business of cars
There are a few big companies to cling to as investors here. Chipmakers such as Intel
Another chipmaker with big stakes in the automotive market is STMicroelectronics
In the field of memory solutions with automotive applications, Micron
These companies are already the biggies in the business with semiconductor solutions for industrial sectors other than automotive. But the opportunity is also rife for relatively newer players in the market.
The chip, called the MagniV, will help reduce production costs by lessening the number of chips required and increasing performance at the same time. If this product catches on in the market, there are plenty of opportunities for widespread application and for investors to take advantage.
Foolish bottom line
As car sales pick up, so, too, should the demand for "smarter" cars that are easier on consumer pocketbooks. The market is rapidly adopting automotive applications for semiconductors, as more and more carmakers use chips in their designs to increase efficiency and performance. Foolish investors should take note.
Fool contributor Arunava De owns no shares of the companies mentioned in this article. The Motley Fool owns shares of Texas Instruments and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.