TE Connectivity Ltd. (TEL), Cognex Corporation (CGNX), Microchip Technology Inc. (MCHP): Electronics Companies Inside Your Automobile

Shares are priced at a bit of a premium, discounting some of the long-term upside I would expect. Still, they may well be a good holding, considering the strong likelihood that the company will make further investments and acquisitions in growth businesses.

Microchip Technology Inc. (NASDAQ:MCHP) – Micro-controller applications multiplying in the auto market

Micro-controller producersecond-largest end market is likely automotive, as it has extended existing capabilities to that sector. Automotive comfort, safety, and networking applications are key to its business. For instance, its touch controllers are utilized by the automotive industry. All signs point toward further growth in demand for micro-controllers, the semiconductors that allow for embedded control applications.

Microchip Technology Inc. (NASDAQ:MCHP) expanded its presence in the auto sector last year through the acquisition of SMSC, a semiconductor solutions play with a focus on increasing the amount of data on-board automobiles, as well as in consumer products and PCs etc.

I continue to believe that Microchip Technology Inc. (NASDAQ:MCHP) will, in the long haul, outperform the broader semiconductor industry due to the growing set of applications for its devices. (See my previous blog on the micro-controller producers). I reiterate that it is a good holding for long-term total return, as, unusually so, a high-yielding semiconductor firm.

Electronics firms and auto

Of these three selections, the closest to a pure-play auto supplier is TE Connectivity Ltd. (NYSE:TEL). The others, Cognex Corporation (NASDAQ:CGNX) and Microchip Technology Inc. (NASDAQ:MCHP), are hoping for a continued surge in the demand for electronics products by OEMs for production and as vehicle content. Given the economic advantages, including lower cost and higher productivity that can be gained by producers, there seems to only be upside. It is likely that further entrants will aim to capitalize on the trend.

In previous posts, I have mentioned contract manufacturers such as Kimball International (NASDAQ:KBALB) and Benchmark Electronics, Inc. (NYSE:BHE). Keep an eye on the direction of this market and choose stocks accordingly.

See my prior post: Purchase These Four Automotive-exposed stocks, including information on Kimball and others.

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