Semiconductor companies that make chips for autos are expected to see huge benefits if electric car sales continue rise. Here are some of Goldman, UBS and Morgan Stanley's top stock picks in the sector. Electric vehicles need more chips — and more sophisticated chips — than cars with internal combustion engines. One of UBS' top picks in the chipmaking space is Germany's Infineon , which is one of the automotive industry's key semiconductor suppliers. The stock is buy-rated by the investment bank. "Electric cars need power semiconductors to manage power and Infineon is a leader in the space," UBS tech hardware analyst Francois-Xavier Bouvignies told CNBC, adding that the company has around 30% of the market share in power management semiconductors (a chip used in EVs and normal cars). Cars with internal combustion engines typically use around $80 worth of semiconductors in the powertrain — what propels a car forward — but electric vehicles use around $550 worth, Bouvignies said. UBS also has a buy rating on Japanese semiconductor maker Rohm , which is developing the silicon carbide chips that are set to play an important role in the electrification of the car, according to Bouvignies. Another European chipmaker set to benefit from the electrification of the car is ST Micro , which is expanding deeper into the automotive sector and investing significantly in car chips, Bouvignies said. While ST Micro is likely to benefit from the move towards electric vehicles, UBS has a neutral rating on the stock because of its exposure to the smartphone industry and Apple in particular. Elsewhere, Morgan Stanley U.S. semiconductor analyst Joseph Moore highlighted in a note to investors last week that Tesla , the world's best-known electric carmaker, is planning to build an "impressive" new chip. The bank reiterated its overweight rating on Tesla and its $900 price target. The so-called "Dojo" chip was announced by Tesla CEO Elon Musk alongside a new robot at the Tesla A.I. Day last week. "They [Tesla] don't seem to be arguing that they have the best chip, but that their fabric is better than the competing fabric to stitch lots of chips in parallel," said Moore. "It looks impressive," he added. "But evaluating PowerPoint presentations on chips that aren't in use yet is really difficult." Goldman's Taiwan picks Earlier this month, analysts at Goldman Sachs confirmed their buy ratings on several Taiwanese semiconductor stocks that work with the automotive industry after holding meetings with companies in the sector. In a note on Aug. 17, the bank reiterated its buy rating on Taiwan's United Microelectronics , a semiconductor foundry (or manufacturer), saying: "The company remains bullish on the overall demand outlook." United Microelectronics' management also expects a gradual rise in revenue from automotive customers, with "strong" demand for some components, Goldman said, and the stock remains on the bank's conviction list. Goldman is also buy rated on TSMC , the world's biggest chip producer. The company expects to see "strong long term structural demand" in sectors including autos, according to Goldman's analysts in an Aug. 19 research note. Elsewhere, semiconductor designer Realtek was given a buy rating by Goldman thanks in part to a strong pipeline of automotive projects. Meanwhile, rival MediaTek is set to see "solid" sales driven by strong demand from the gaming and automotive sectors, Goldman's analysts stated in an Aug. 18 note. They are buy-rated on the stock. "The medium to long-term trend remains intact as we expect addressable market expansion and product mix improvements," the Goldman analysts added.
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Semiconductor companies that make chips for autos are expected to see huge benefits if electric car sales continue rise. Here are some of Goldman, UBS and Morgan Stanley's top stock picks in the sector.