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The Chip Industry's Little Engine That Could


As cars get more gadgets such as television screens and the ability to connect to smartphones, they need more semiconductor chips. This Mercedes-Benz F125 concept car was shown at the 2012 International Consumer Electronics Show in Las Vegas, Nevada on Jan. 10, 2012. Photo: David Paul Morris/Bloomberg Close

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As cars get more gadgets such as television screens and the ability to connect to smartphones, they need more semiconductor chips. This&nbsp;Mercedes-Benz F125 concept car was shown&nbsp;at the 2012 International Consumer Electronics Show in Las Vegas, Nevada on Jan. 10, 2012. Photo: David Paul Morris/Bloomberg

Mobile devices may be the focus of the chip industry, but there's another type of mobile that's driving revenues.

Automobiles.

On a day when Intel dominated the headlines by announcing it promoted its COO to CEO to speed up the company's shift toward mobile devices, Infineon Technologies AG, Europe's second-biggest chipmaker, saw its stock rise the most in almost four years on a higher-than-expected sales forecast.

Why? Stronger automotive production in Asia and North America, CEO Reinhard Ploss said on a conference call with analysts. Neubiberg, Germany-based Infineon got 43 percent of its 3.9 billion euros in sales last year from automakers, according to Bloomberg data.

Another big maker of chips for automobiles -- Texas Instruments -- also forecast sales higher than some analysts expected last month, helped by more orders from car-parts suppliers in the U.S. and industrial-equipment makers in the U.S. and China, as my colleague Ian King reported.

It's not that cars are rolling off the assembly line appreciably faster than they have in the past. The key reason demand for car chips is growing is automakers are increasingly trying to distinguish their vehicles by adding more gadgets to them -- every new feature, such as backup sensors or in-car televisions, needs semiconductors to power them.

Vehicle production rose to 84.1 million last year, while mobile phone shipments rose to 1.7 billion, according to Bloomberg Industries. Meanwhile, two other major drivers of the semiconductor industry -- personal computer shipments and hard disk drive shipments -- fell to 350.4 million and 578.5 million, respectively.

Mobile devices are clearly in the driver's seat, but the steady demand for higher-tech cars is providing a needed lift to an industry trying to shift with the times.

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