Most Apple (AAPL, Financial) suppliers have been struggling following Apple’s bleak quarterly earnings. However, NXP Semiconductor (NXPI, Financial) has performed nicely in the meantime. Although NXP Semiconductors still relies on Apple for a considerable portion of its revenue, the company’s diversification efforts should help it perform nicely in the long run. Investors should add it to their portfolios.
BlueBox
NXP Semiconductors holds a robust position in the automotive industry because of its advanced driver assistance system processors. Recently, the company played its cards well by introducing its new BlueBox system into the driverless technology. BlueBox contains the software, processors, sensors and other modules for extremely automated driverless cars basically permitting auto manufacturers to produce a driverless car according to a standardized format.
The company also detailed that BlueBox will help automakers introduce driverless cars by 2020. The time duration is perilous to auto manufacturers as autonomous and semiautonomous cars are rapidly progressing. However, the actual benefit for the company is that it is formerly the prominent supplier of silicon to automotive firms.
The only thing to worry about is that the company and its opponents could be troubled by U.S. regulation. The company's objective of helping automakers to introduce driverless cars in just four years may be a bit single-minded.
A tough competitor for NVIDIA
NVIDIA (NVDA, Financial) launched Drive PX2 previous year, and it is used by approximately 80 auto manufacturers and automotive suppliers. Apart from this, the company recently released a cloud-based supercomputer titled DGX-1, that can be used as a server for processing real time autonomous car data in alliance with the Drive PX included system.
NVIDIA is already leading in the automotive industry, but NXP Semiconductors has some huge advantages. The company sold 30 million processors to automakers for their advanced driver assistance systems, and eight of the 10 major auto manufacturers use its ADAS processors. The company has gained a lot of experience in this particular segment; therefore, it probably knows how to magnify that into an entirely driverless system.
Furthermore, the company proposes a comprehensive driverless system ranging from silicon to sensors for auto manufacturers. This suggests that automakers can basically use BlueBox's computer, sensors and other components in their cars to make them driverless. All in all, it is a much more inclusive system as compared to NVIDIA's Drive PX.
Conclusion
Despite Apple’s woes, NXP Semiconductors diversification makes it a prime pick. The company’s growing presence in the automotive segment makes the stock a decent buy at current levels.
Start a free seven-day trial of Premium Membership to GuruFocus.
