Israel's Ceva expands into growing market for auto safety chips
By Tova Cohen
TEL AVIV (Reuters) - Israeli chip designer Ceva Inc has set its sights on the rapidly growing market for automotive safety technology as it seeks to diversify beyond processors used in mobile phones.
Faltering demand in computer and phone markets, once the mainstays of the semiconductor industry, has prompted firms to look to formerly unappealing areas such as auto electronics for sales growth.
Competitors are now lining up to prove their worth in advanced driving assistance systems (ADAS), a field that covers technology used to boost driver safety, from in-car cameras and collision-warning systems to self-driving cars.
Ceva already licenses its designs to chipmakers such as Intel and Samsung, who embed its digital signal processors (DSP) within their chip sets, reducing the time and cost it takes them to bring products to market.
One of Ceva's DSPs, the XM4, supports vision technologies and this is a particular area it wants to develop.
"The market for this is much bigger than what we cover in the cellphone market," Ceva Chief Executive Gideon Wertheizer told Reuters. This could range from drones to virtual reality headsets and the Internet of Things, he said.
"We have significantly increased our customers for visual technology in 2015, the same technology that will be used in cars for ADAS purposes," he said.
Research firm IHS forecasts ADAS chip and sensor revenue will reach $4 billion by 2020, up from $1.6 billion in 2014.
Wunderlich Securities analyst Matthew Robison, who rates Ceva a "buy" with a $28 price target, said it was in a strong position to compete with Israel's Mobileye and NXP's Freescale operation in the car safety field.
HIGHER ROYALTIES
Mobileye is a pioneer and market leader for driving assistance systems using vision chips and software. NXP is a more recent entrant and other chip makers are expected to enter the fray as the market expands.
Licensing Ceva's vision technology could help new competitors reduce the time and costs they need to develop their own platforms for this market and take on the market leaders, analysts say.
Robison said Mobileye appears to be focused on automakers such as Tesla that are developing autonomous cars while NXP is focused on suppliers to the car industry for safety systems.
"Self-driving cars may be far in the future, but the building blocks that start with active safety involve a significant amount of content," Robison said.
"Expect systems involving large numbers of sensors, eventually scaling to 8-10 cameras per car," he said.
Ceva's platform, a combination of DSPs, vision-based software and algorithms, has secured the critical ISO 26262 safety standard required to enter the automotive market.
The company has landed its first client, a top maker of components that enable ADAS capabilities in cars.
Ceva did not name the customer but Robison said it could be a company such as Bosch, Delphi or Toshiba. Wertheizer also said a few more customers were in the pipeline.
Wertheizer said he would not rule out Mobileye and NXP eventually becoming clients too, using Ceva's microprocessors to help them cut costs and time when developing products.
Royalties for ADAS chips will be significantly higher than for smartphones but Wertheizer said it would take time for it to build up a significant business.
Ceva, whose shares rose 29 percent in 2015, has a market value of $465 million compared with Mobileye's $8.7 billion.
"When the market is big and mainstream that is when you will see us. Usually we do not pioneer technology, we come in after with more advanced technologies," Wertheizer said.
(Editing by David Clarke)
