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Microchip (MCHP) Boosts Auto Connectivity With VSI Acquisition

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Microchip Technology (MCHP - Free Report) is expanding its footprint in the automotive technology landscape with the acquisition of VSI Co. Ltd. The Seoul, Korea-based company is a well-known provider of high-speed, asymmetric camera, sensor, and display connectivity technologies for in-vehicle networking (IVN).

The acquisition aligns with the growing market projections for automotive radar cameras and LiDAR modules, which are predicted to grow more than double in revenues by 2028 and reach $27 billion, according to Yole Group.

The growth is fueled by the rising demand for Advanced Driver Assistance Systems (ADAS), in-cabin monitoring, safety features and the transition towards next-generation software-defined vehicles (SDV) with multi-screen digital cockpits.

With Microchip’s prominent role as a promoter member of the Automotive SerDes Alliance (ASA) and the growing adoption of ASA Motion Link (ASA-ML) specifications by key players such as BMW, this acquisition strengthens MCHP’s position as a leader in providing advanced solutions for the automotive industry’s evolving needs.

 

Microchip Benefits From a Strong Portfolio

The latest acquisition is in sync with MCHP’s goal to lead in next-generation automotive networking solutions, aligning with the industry shift toward standardized ASA-ML technology for advanced in-vehicle networking.

Further solidifying its presence in the automotive industry in the third quarter of fiscal 2024, Microchip announced its Detroit Automotive Technology Center, featuring a 24,000-square foot facility with new high-voltage and E-Mobility labs catering to automotive clients for design development and optimization.

Expanding the Trust Portfolio platform has been a significant growth driver. MCHP recently launched the ECC608 TrustMANAGER with Kudelski IoT keySTREAM, SaaS, which enhances IoT security and facilitates dynamic provisioning and management of cryptographic credentials for interconnected systems.

In the third quarter of fiscal 2024, MCHP launched its latest TrustAnchor security IC, designed to surpass automotive secure authentication standards, offered as Crypto Authentication or CryptoAutomotive, emphasizing larger key sizes and improved cybersecurity features.

MCHP is also riding on consistent strength in its microcontroller business. It has recently announced the launch of the AVR DU family of microcontrollers, offering enhanced USB connectivity, power delivery, security features and cost-saving benefits for embedded designs.

Microchip also introduced the AVR EB family of microcontrollers to mitigate noise, vibration and system harness in BLDC motor applications, providing a smaller, more cost-effective solution for sophisticated waveform control and increased efficiency.

Despite a robust and expanding portfolio, persistent inflation and high-interest rates have contributed to a weak macro environment. This has negatively impacted MCHP’s prospects.

Microchip expects net sales to be $1.225-$1.425 billion for the fourth quarter of fiscal 2024. Non-GAAP earnings are anticipated between 46 cents per share and 68 cents.

The Zacks Consensus Estimate for revenues is pegged at $1.33 billion, indicating a 40.57% year-over-year decline. The consensus mark for earnings is pegged at 57 cents per share, suggesting a 65.24% year-over-year decline.

Zacks Rank & Stocks to Consider

Microchip currently has a Zacks Rank #5 (Strong Sell).

MCHP’s shares have dropped 1% year to date against the Zacks Computer & Technology sector's rise of 10.9%.

Some better-ranked stocks in the broader technology sector are NetApp (NTAP - Free Report) , Bentley Systems (BSY - Free Report) and NVIDIA (NVDA - Free Report) , each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NetApp shares have gained 18.9% in the year-to-date period. NTAP’s long-term earnings growth rate is currently projected at 8.79%.

Bentley Systems shares have declined 4.3% in the year-to-date period. BSY's long-term earnings growth rate is currently projected at 12%.

NVIDIA shares have gained 83% in the year-to-date period. NVDA's long-term earnings growth rate is currently projected at 30.93%.

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