01 Jul Indie Semiconductor: Putting the Pedal to the Metal!
Indie Semiconductor, Inc. (NASDAQ: INDI), a Company offering automotive semiconductors and software solutions for the automotive industry announced the completion of its business combination with Thunder Bridge Acquisition II, Ltd, a special purpose acquisition company (SPAC) on June 9, 2011. The transaction resulted in gross proceeds of close to $400 million for Indie and the new company retained the existing management team including Donald McClymont, the Company’s Co-founder and CEO, Ichiro Aoki, Co-founder and President; Scott Kee, Co-founder and Chief Technology Officer; Thomas Schiller, Chief Financial Officer and EVP of Strategy among others.
Indie Semiconductor, Inc. (NASDAQ: INDI)
Market Cap: $1.34B; Current Share Price: 9.88 USD 
Data by YCharts
The Company’s shares began trading on the NASDAQ on June 11, 2021 and it rang the opening bell on the NASDAQ on June 29, 2021 in celebration of the successful completion of its business combination.
Speaking on the occasion, Donald McClymont, Co-founder and CEO of Indie, commented,
“We couldn’t be more excited about our future and how our highly innovative semiconductor solutions come precisely at a time when there is a dramatic shift occurring in the automotive industry towards highly integrated and efficient platforms. With partnerships across leading Tier 1 and OEM customers, a proven track record of having shipped over 100 million units and a talented global team, we look forward to delivering and exceeding what our customers demand, and in turn creating long term shareholder value.”
Strengths
Indie aspires to be the “Autotech Partner” to everyone and is standard and partner agnostic. The Company’s solutions include ADAS/Autonomous Connectivity, User Experience and Electrification and has tie-ups with Tier 1 auto suppliers such as Aptiv, Valeo and Methode and counts among its client’s industry leaders like Tesla, Mercedes-Benz Daimler, GEELY, BMW, Audi, Porsche among others.
The Company provides best-in-class mixed signal Security Operations Center (SOC), which is capable of preventing cybersecurity threats and can proactively handle any issues and challenges arising in the computers, servers or networks related to connected cars. Indie has a robust supply chain in place, which provides reliability and scalability and can cater to diverse markets cutting across geographic regions.
Indie has shipped more than 100 million devices for use in manufacturing by automotive tier 1 companies and is steadily increasing its OEM penetration.
Image Source: Company
The Company also develops leading-edge ultrasound solutions and has a strong pipeline of system basic chips, FMCW LiDAR and Edge processors. Indie’s FMCW LiDAR Integration solutions that include optical engine, mixed signal processor SOC, scene scanner, power management and AI processors reduce power consumption by 10 times and cost by 20 times.
In addition, the Company also caters to wireless charging telematics, driver monitoring and cloud access. The global automotive telematics industry is expected to reach over $320.6 billion by 2026, growing at a CAGR of 26% from $40.4 billion in 2018 according to a report by Orion market reports. An increasing consumer demand for vehicles, growth of smartphones, integration of IoT in automotive industry, government regulations and the rise of ride sharing apps such as Uber and Ola will drive the growth in the market.
The automotive telematic market offers a wide-range of services such as on-road assistance, crash notification, vehicle tracking/recovery, location / tracking services and can be either embedded, tethered or integrated.
Ecommerce and logistics industries will contribute to the demand for these systems, owing to the need for monitoring and transparency. Furthermore, customers seek the convenience offered by these systems that enable real-time traffic updates, alternate routes, places of interest nearby to name a few. The market for portable navigation devices that can be easily transferred from one vehicle to another will see the most growth owing to their cost and convenience. The industry is seeing ground breaking innovations and adaptation of advanced technologies to stay one step ahead of the competition.
The Company is also working on delivering a differentiated user experience through innovative CarPlay solutions, Infotainment and LED Lighting solutions.
Most Importantly the Company is seeking to gain a stronghold in the electrification space with its charging controllers and diagnostics solutions.
Opportunities
LiDAR, which stands for light detection and ranging, is a remote sensing method used for determining geospatial measurements. The American Geosciences Institute defines LiDAR as “a remote sensing method that uses light in the form of a pulsed laser to measure ranges (variable distances) to the Earth. These light pulses—combined with other data recorded by the airborne system— generate precise, three-dimensional information about the shape of the Earth and its surface characteristics. The technology can be further categorized as Topographic that uses near-infrared laser and Bathymetric that uses water-penetrating green light to calculate elevations.
The technology was primarily used in aircrafts and helicopters and came to the limelight after the introduction of GPS. The system consists of a specialized GPS receiver that is aided by a laser and a scanner. LiDAR has multiple applications and use cases such as measuring riverbed elevations, seafloor mapping; land management activities like urban planning, agriculture, mining and forestry and emergency and hazard management such as monitoring and mapping tsunamis, floods, landslides or volcanic eruptions.
The Global LiDAR market is estimated to grow at a CAGR of 24.50% from 2019-2026 to reach USD 9.479 million by 2026, according to a report by Data Bridge Market Research. The growth in the market will be driven by technological advancements and increasing demand in a host of sectors. LiDAR technology is best suited to meet the demands of autonomous vehicles, military and Defense applications, aerospace and agriculture industry to name a few. However, the lack of industry standards of operations, high costs and non-interoperability of technologies may hamper the growth in the industry.
Furthermore, the Global ADAS /Automation market size is expected to be worth USD 83.0 billion by 2030, growing at a CAGR of 11.9 percent, from USD 27.0 billion in 2020 according to a report by Markets and Markets. The growing adoption of automation solutions in the automotive industry, an emerging market for vehicles with cutting-edge technology such as LiDAR, ultrasonic sensors and radars, will drive the growth in the market.
Technological advancements and an increasing focus on enhanced safety features such as driver assist systems are the primary drivers of growth in the global automotive vision system market. Vision assist systems use a combination of high-resolution imaging and advanced software and hardware systems to fulfill a very important need for improving visibility in poor weather conditions, by detecting and tracking objects in a vehicle’s trajectory. These systems lead to better road safety and prevention of accidents owing to poor visibility.
Image Source: Company
The Automotive Vision System market also includes Night Vision Systems (NVS), Adaptive Cruise Control, Blind Spot Detection (BSD), lane keeping assistance to name a few. Most of the new-age cars incorporate this technology in their vehicles to meet the demand for improved safety. The growth in the market is also due to development of economical detection systems, leading to their growing acceptance and adoption. However, the systems are also susceptible to malfunctioning, which may hamper the market from reaching its full growth potential.
According to a report by Reports and Data, the Global Automotive Vision Systems market, which stood at USD 11.9 billion in 2018, will grow at a CAGR of 14.4 percent and reach 34.9 billion by 2026. Some governments also mandate the use of Advanced Emergency Braking System (AEBS) and Electronic Stability Control (ESC) to gain a higher safety rating.
Threats
The global automotive industry is battling a chip shortage leading to production halts or shifts in production to models that require fewer chips. A survey by Automotive news estimates that the cost of this shortage on the industry is likely to be over $110 billion in lost revenue and is likely to last for the rest of 2021. The shortage was primarily caused by the rise in demand for electronic goods, owing to the coronavirus pandemic. Currently, 53 percent of the manufacturers source their chips from other countries, and the industry as a whole is reeling under the impact of the shortfall.
Ford was the latest automobile maker to slash its production in July due to the ongoing semiconductor chip shortage. The company will be reducing production at eight plants, with 6 in the U.S, which is likely to affect production of the Ford F-150 and Ford Bronco Sport to the Ford Mustang and Ford Explorer.
This poses a huge problem for the industry and will have adverse impact on the supply-chain for automotive manufacturers.
The automotive semiconductor market is extremely competitive and has many players vying for the same market space. The Company is likely to face many challenges in establishing itself in this competitive landscape.
The lack of proper infrastructure and a latent demand in developing economies will hamper the company from reaching its full potential.
Financial Highlights
The Company reported a 74 percent increase in revenue in the first quarter 2021 at $8.1 million, compared to the same period last year. Indie also reported a 210 basis points expansion in its non-GAAP gross margin to 40.3 percent from its March 2020 levels.
Commenting on the results, Thomas Schiller, chief financial officer and executive vice president of strategy stated,
“We are effectively navigating global supply chain dynamics and are well positioned to capitalize on ADAS, connected car, user interface and electrification applications in support of the world’s premier vehicle OEMs. For the second quarter of 2021, we anticipate accelerating year-over-year top line growth and sustained gross margin expansion, setting the stage for indie to nearly double revenue in 2021”.
The Company believes that the global automotive semiconductor market is at an inflection point and could grow to a market opportunity worth $59 billion by 2025, growing at a CAGR of 12 percent, from $33 billion in 2020. Out of this, Indie’s potential addressable market is likely to leapfrog from $16 billion in 2020 to $38 billion in 2025, with contribution from its various segments namely connected car, electrification, safety system and user experience.
Furthermore, Indie is positive about silicon content gains, which are likely to accelerate from $310 per vehicle today to $4000 per vehicle in the future, driven by sales of sensing CPV, Compute CPV and Signal and Power CPV.
Conclusion
Indie Semiconductor is on the approval list of over 12 Tier-1 approved vendor lists and has a backlog position of more than $2 billion and more than $2.5 billion in possible opportunities. The recent transactions have provided the Company with enough financial wherewithal to extend its product line, improve scalability and consolidate its offerings in the Automotive sector.
The Company is helmed by an experienced management team with a wealth of experience working together, this will hold the company in good stead.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://www.marketsandmarkets.com/Market-Reports/driver-assistance-systems-market-1201.html
https://www.caranddriver.com/news/a36503933/chip-shortage-affecting-car-supply-survey/
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