Key takeaways from Nvidia's 4Q15 and full year results (Part 11 of 14)
Nvidia’s strong connection to the automobile market
Along with Audi, Hyundai, General Motors (GM), and Honda (HMC), Nvidia (NVDA) is a founding member of the Open Automotive Alliance launched by Google (GOOGL) in 2014. Audi’s navigation system uses Nvidia’s processors, which received best in-vehicle infotainment system awards for two consecutive years.
In October 2014, Honda announced that its Connect audio and infotainment system for mid-level cars would incorporate Nvidia’s Tegra processors. The system will launch in Honda’s 2015 Civic and CR-V models in Europe. Honda is the nineteenth global automaker to use Nvidia’s technology for an in-vehicle infotainment system.
High-end automakers like Audi, Tesla (TSLA), BMW, Mini Cooper, Rolls-Royce, Maserati, Lamborghini, Bentley, and Porsche have employed Nvidia processors. Nvidia technology is now slowly finding its way to mid-level and low-level cars.
As the chart above shows, semiconductor revenue from in-car infotainment is by far the biggest automotive growth channel. Estimates project that this revenue will reach $8.54 billion by 2018.
Consider investing in the Market Vectors Semiconductor ETF (SMH) to gain exposure to Nvidia. The company makes up about 1.94% of this ETF.
Launch of Android infotainment system powered by Tegra processors
Nvidia is the first car company to roll out an Android-based embedded infotainment system powered by Tegra. On the surface, it looks just like a normal deal. However, if we dig deeper, we can see that it demonstrates how mid-level car companies are looking to use Nvidia’s Tegra chips to enhance their infotainment solutions.
Nvidia expects approximately 25 million vehicles to employ Tegra processors in the next five years. Taking this into account, the company expects its automotive segment to have a compound annual growth rate of 30%–40%.
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