Although the digital segment of the semiconductor industry is highlighted by rapid technological change and swift movements in market share, we find relative safety and sustainable competitive advantages in the USD 46 billion-plus analog segment. Investors have several compelling reasons to take a close look.
First, leading analog chipmakers have valuable intangible assets associated with proprietary designs that span decades. Second, as analog chips often make up a tiny portion of a product's bill of materials, and design wins are based on performance rather than price, analog firms are able to prosper from long product lives and high customer switching costs. Third, since analog chips handle real-world signals that digital parts can't process, we see no imminent substitutes. Finally, analog is a fragmented marketplace where several firms can earn outsize economic profits over the course of the cycle. Wee most excited about analog growth opportunities in the USD 28 billion automotive semiconductor market.
Automotive Chip Content per Vehicle Is Rising
Driving Overall Automotive Semiconductor Revenue
Source: Gartner, Morningstar Research estimates
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