Micron and Qualcomm Sign Long-term Agreement to Secure Supply of AI Automotive Storage

Micron Technology is extending the reach of AI chip demand from data centers to the automotive sector, locking in customers and stabilizing revenue sources through long-term supply agreements.

On Thursday, Micron announced it had signed long-term agreements with a number of automotive suppliers, including chip designer Qualcomm, audio product manufacturer Harman, and automotive parts suppliers such as Visteon, JOYNEXT, DENSO, Astemo, and Hyundai Mobis. The agreements aim to provide a stable supply of storage and memory components for AI-enabled vehicles, and to help partners optimize production planning and future investments in advanced vehicle platforms by locking in prices.

The signing of these agreements reflects the accelerating transformation of the automotive industry towards software-defined vehicles. Qualcomm President and CEO Cristiano Amon stated, "As vehicles become increasingly software-defined, automakers need technology platforms that can integrate high-performance computing, connectivity, and memory functions."

Automotive Sector Becomes a Key Pillar for Micron's Diversified Strategy

Micron's concentrated signings in the automotive field are part of its broader strategic plan. In June this year, Micron CEO Sanjay Mehrotra disclosed that the company had signed 16 strategic customer agreements. He expects that growth led by data centers will gradually be supplemented by AI functions from smartphones, high-end PCs, automotive applications, and robotics.

The core application scenarios for automotive chips include advanced driver-assistance systems (ADAS) and digital cockpits, both of which place high demands on the performance and stable supply of memory chips. By establishing long-term relationships throughout the industry chain, Micron can achieve a more predictable income structure on the demand side.

Micron is the only U.S. manufacturer producing high-bandwidth memory chips (HBM), which are widely used in Nvidia AI processors. Driven by the rapid adoption of AI tools, the demand for memory chips remains strong, allowing Micron and its competitors, SK Hynix and Samsung Electronics, to maintain high product margins.

This demand backdrop is also driving the entire semiconductor industry to accelerate capacity expansion. The application scenarios of memory chips span data centers, consumer electronics, and automotive, giving Micron growth potential across multiple end markets.

Institutional Investors Reevaluate Semiconductor Sector Allocations

Although memory chip companies like Micron are currently benefiting from the AI demand boom, some institutional investors have begun to pay closer attention to the valuation levels of the semiconductor sector. According to Reuters, as concerns rise regarding slowing capital expenditure growth from hyperscaler cloud computing providers, some actively managed funds have reduced their exposure to chip stocks, shifting instead to shares of the cloud giants themselves, as well as to software, financial, and healthcare sectors that benefit from AI applications.

UBS estimates that capital expenditure by hyperscaler cloud providers will grow 76% this year to $673 billion, but the growth rate will slow to 25% next year and further to 6% by 2028. Alexis Bossard, global equity portfolio manager at Edmond de Rothschild Asset Management, commented, "Once they stop increasing capital expenditure, it is undoubtedly a positive for the hyperscalers themselves, but for the semiconductor industry, it is a negative signal."

The Philadelphia Semiconductor Index has more than doubled over the past year, but it has declined nearly 18% from its June high. According to Bank of America Merrill Lynch’s July fund manager survey, 82% of respondents believe semiconductors are currently the most crowded trade in the market, and none indicated they are shorting the sector.