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European chip-making company, STMicroelectronics (STM - Snapshot Report) and Great Wall Motor Company Limited (“GWM”) have announced a strategic partnership to set up a joint development laboratory at GWM’s Technical Center.

Established in 1976, Great Wall Motor Company Limited is a Chinese automobile manufacturer. The company has over 50 subsidiaries with more than 56,000 employees. GWM was China’s third largest automaker in 2011, producing up to 0.48 million cars.

The company, progressing rapidly with a growth rate of 28% in 2012, aims to produce a million units by the year 2015. Its product range comprises three main categories namely Haval SUV, Great Wall PC and Wingle Pickup.

This new lab is designed to facilitate advanced research and development solutions in safety, car infotainment, new-energy technologies and other automotive applications.

As per the agreement, STMicro will contribute its latest automotive-electronics technologies and solutions including GDI (Gasoline Direct Injection), BCM (Body Control Modules) and others for a wide range of automotive applications. The collaboration will lead to the development of automotive solutions, which will improve vehicle performance and fuel-efficiency.

The automotive electronics market is expected to witness strong growth over the coming years. According to a report from research firm IMS, the global market for automotive electronics is set to rise to $240 billion in 2020, up from $157 billion in 2010, an increase of more than 50%.  Another report, from Market, states that the global market for automotive electronics is estimated to touch $191.3 billion in 2013 and is projected to reach $314.4 billion by 2020.

The major trends driving demand for increased penetration of electronics in automobiles include regulatory mandates for improving fuel economy, requirements for advanced safety systems, consumer demand for safety, security, comfort and growth of hybrid and electric vehicles.

Consequently, STMicro’s increasing focus on developing better solutions for the automotive electronics market should generate good returns.

In the first quarter of fiscal 2013, STMicroelectronics’ loss was narrower than the Zacks Consensus Estimate of 17 cents. Total revenue of $2.01 billion was down 7.1% sequentially, better than normal seasonality.

STMicroelectronics carries a ZacksRank #2 (Buy). Other stocks that have been performing well and are worth considering include Magnachip Semiconductor (MX - Snapshot Report), Microchip Technology (MCHP - Analyst Report) and Aspen Tech Inc (AZPN - Snapshot Report), all carrying a Zacks Rank #2.

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