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Electric vehicle giant Tesla’s  (TSLA) – Get Tesla Inc Report showman Elon Musk recently said full self-driving will become the most important source of profitability for Tesla.       

“My personal guess is that we’ll achieve full self-driving this year, yeah, with data safety level significantly greater than the present,” said Musk in Tesla’s earnings call from January.

Take a moment to imagine one of these cars Musk is betting his future on.

Self driving EVs come with cameras that serve as eyes on the road, so drivers can take their hands off the wheel. They also come with inbuilt maps, state of the art entertainment systems. 

These cars have the ability to see unseen objects faster than the human eye, they come with automatic emergency braking systems and other sensing capabilities that far exceed human abilities. 

These insane features are made possible, in large part, with the use of semiconductors or chips installed inside cars.

Micron Lead

How Do the Chips Work?

Chips are tiny tech components that are used in the devices that power much of our daily lives. They’re in everything from our automobiles and consumer electronics to our communications products, servers, and computers.

Over the years, these chips have grown smaller in size but peaked in memory, power and storage capacity.

Cars use two types of chips: NAND and DRAM. NAND chips are a type of storage technology that does not require power to retain data, saving it as blocks and relying on electric circuits to do so.

DRAM chips, traditionally used as one of the core storage components in a personal computer, are also used for data storage in cars and other electronics.

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EVs use about twice as many chips as a non-electric vehicle. And since public interest in EVs continues to rise, that means the demand for them is higher than ever. 

Some of the biggest names in chip manufacturing in the United States include Nvidia  (NVDA) – Get NVIDIA Corporation Report, Qualcomm  (QCOM) – Get Qualcomm Inc Report, Micron Technology  (MU) – Get Micron Technology, Inc. Report and Intel  (INTC) – Get Intel Corporation Report.

EV Popularity Means a Burgeoning Chip Market

Micron Technology  (MU) – Get Micron Technology, Inc. Report, which posted robust fiscal second quarter earnings on Tuesday, has already seen its cash registers ringing. The company said it has reached a tipping for its automotive revenue in Q2.

Micron Tech President and Chief Executive Sanjay Mehrotra said new EVs have morphed into “data centers on wheels” because they have significantly higher memory and storage requirements thanks to advanced driving support systems and the built-in infotainment features.

“In fact, some of these level-3 autonomous EVs have about $750 in memory and storage content, which is 15 times higher than the average car,” he added.

Micron’s Embed Business Unit, which supplies its NAND and DRAM chips to the automotive sector among others, was its best performing group and reported a 37% jump in revenue to $1.3 billion, thanks in part due to this strong demand across the automotive sector. 

“Memory and storage revenue has outpaced the rest of the semiconductor industry over the last two decades and we expect this trend to continue over the next decade, thanks to ongoing advancement of AI, 5G and EV adoption,” said Malhotra.

Micron’s embed revenue unit also benefitted from demand in industrial markets.

The Boise, Idaho., company’s auto revenues managed to set a new record despite supply chain constraints. Chip manufacturers have been grappling with the impact of global supply chain shortages that have led to a dearth of chips that are used in everything from cars to home appliances for nearly two years.

The largest U.S. chipmaker is flush with cash and reported over $1 billion in free cash flow but warned of increased costs due to Russia’s unprovoked invasion of Ukraine.

Market watchers have in the past encouraged investors to buy Micron stock driven by higher adoption of the electric vehicle trend. Seeing how its products are flourishing, it looks like they may have been right.

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