Morgan Stanley says tech supply chains are about to see growth in the next big thing: smart tech features such as electric vehicle batteries, chips and self-driving tech. Electric vehicles are becoming more popular, and the market is set to reach $287 billion by 2025 — as big as the PC market and about 60% of total smartphone revenue, the investment bank said in a recent report. “The increasing content value of auto electronics per car, from autonomous driving functions to EV features, will make the smart EV industry a new breeding ground for the tech supply chain,” the bank’s analysts wrote. “Most if not all tech suppliers have started to dedicate [resources] to automotive-related developments,” they added. Increasing EV popularity will also add to the demand for such auto electronics, said Morgan Stanley, which forecast that EV penetration will reach 18% in 2025. On top of that, the European Union plans to ban sales of new ICE (internal combustion engine) vehicles by 2035 in order to reach its target of zero carbon emissions by 2050, the bank noted. Stock picks by sector The areas set for the most growth are semiconductors, power electronics — which are closely tied to EV growth — and optical and sensor tech, said Morgan Stanley. “We believe three major new features will ultimately be adopted in cars – autonomous driving, high-power-enabled electric vehicles, and high-speed and secure communications and infotainment,” it said. Here are some of its top picks in each sector. Power electronics: Delta Electronics (price target of 312 Taiwanese dollars, or upside of about 17%] and Chroma (price target of NT$230, or upside of about 28%). Optical and sensor tech: Sunny Optical (price target of 150 Hong Kong dollars, or upside of about 33%). Semiconductor: TSMC . Morgan Stanley said that TSMC is a key player in the auto semiconductor market, operating as much as 70% of foundry capacity for automaker applications. It gave the firm a price target of NT$780, representing an upside of around 54%. EV batteries: Chroma , LG Electronics (price target of 125,000 Korean won, or upside of about 26%), Nuvoton (price target of NT$168, or upside of about 37%) LG Electronics will be expanding its EV component products to 20 electric vehicle models for General Motor by 2023. That’s set to be a key source of revenue, according to Morgan Stanley.
