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Micron Scores Big Automotive Deals With Intel and Qualcomm

Leo Sun, The Motley Fool

Shares of Micron (NASDAQ: MU) tumbled more than 30% over the past six months as an oversupply of chips and soft demand hammered memory prices worldwide. Micron is the fourth-largest maker of NAND chips and the third-largest maker of DRAM chips in the world and is often considered a "pure play" on the memory market -- since its main rivals have more diversified businesses.

That reputation made it a market darling when memory prices were climbing, but it became a big target for the bears when prices started dropping . TrendForce's DRAMeXchange expects NAND and DRAM prices to drop another 20% in 2019, and analysts still expect Micron's revenue and earnings to fall 15% and 33%, respectively, this year.

A woman sits in a driverless car.

Image source: Getty Images.

However, Micron isn't simply sitting still and waiting for the tide to turn. It recently landed two new deals to significantly increase its presence in the automotive industry -- a driverless partnership with Intel 's (NASDAQ: INTC) Mobileye and an infotainment-system deal with Qualcomm (NASDAQ: QCOM) .

Micron teams up with Intel (again)

Micron and Intel previously worked together to develop 3D NAND and 3D Xpoint memory chips. That's why it wasn't surprising when Intel's Mobileye chose to integrate Micron's memory chips into its EPM5 platform for fully autonomous vehicles. The EPM5 platform runs on Mobileye's fifth-generation EyeQ 5 computer vision chip, which is set to power autonomous vehicles in 2020.

Mobileye currently provides ADAS (advanced driver-assistance systems) -- which perform semi-autonomous tasks like lane changes and parking assistance -- for over 90% of the world's automakers. Nearly 30 automakers already use its EyeQ chips, which serve as Mobileye's foundation for launching a fully driverless platform.

Intel, Mobileye, BMW , Fiat Chrysler , and Delphi are codeveloping an autonomous driving platform that could launch in 2021. Intel also produces the Atom Automotive chip for infotainment systems, which likely will be bundled into that platform.

Mobileye plans to integrate Micron's LPDRAM, Xccela NOR Flash, and eMMC memory chips into its ADAS solutions for Level 1 to Level 5 driverless vehicles. Level 5 (fully autonomous vehicles) process large amounts of data from cameras, sensors, radars, and a LiDAR system at a faster rate than a human driver's brain, so maintaining a high-memory bandwidth is essential for avoiding collisions. This partnership also could broaden Micron's reach beyond traditional DRAM and NAND chips into less cyclical niche markets.

Qualcomm enlists Micron to counter NVIDIA

Qualcomm introduced its Snapdragon Automotive platform for in-car infotainment systems in 2014. The platform was powered by modified versions of its mobile chipsets, which added 3G/4G connectivity to vehicles. Qualcomm recently launched its third-generation Snapdragon Automotive Cockpit platform, which runs on its 800-series SoCs.

A driverless car detects obstacles.

Image source: Getty Images.

Qualcomm has a much smaller presence in the automotive market than Intel or NVIDIA (NASDAQ: NVDA) , which powers infotainment and driverless platforms with its Tegra CPUs. However, several major automakers -- including Jaguar/Land Rover, Honda , and Chinese EV maker BYD -- are installing its platform in upcoming vehicles.

Those customers could help Qualcomm diversify its business away from its core smartphone SoC and wireless licensing businesses -- which face ongoing challenges from rival chipmakers, defiant OEMs that want lower licensing fees, and regulators who are accusing the company of anti-competitive business practices.

That's where Micron comes in. The chipmaker recently announced that it was working with Qualcomm to develop "highly advanced solutions for next-generation in-vehicle cockpit compute systems" to improve the platform's in-cabin experiences. Specifically, Micron will integrate and optimize its new high-density "automotive grade" LPDDR4X memory chips for Qualcomm's third-gen Snapdragon Automotive platforms.

This partnership, like Micron's deal with Intel, should help Micron diversify its core business away from traditional DRAM and NAND chips and the cyclical consumer electronics and enterprise markets. It also supports Micron's goal of offsetting the cyclical downturn in memory prices with content share gains in adjacent markets like connected cars and Internet of Things (IoT) devices. As for Qualcomm, the partnership could help it catch up to NVIDIA, which is leveraging its lead in infotainment systems to launch its fully autonomous Drive PX platforms.

But will these deals move the needle for Micron?

Micron's automotive deals with Intel and Qualcomm could help it profit from the growth of the connected and driverless car markets. But they probably won't move the needle for Micron over the next few quarters since its core business remains heavily dependent on the stabilization of DRAM and NAND prices.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool owns shares of Qualcomm. The Motley Fool has a disclosure policy .