By Stephen Nellis

SAN FRANCISCO/MUNICH U.S. semiconductor company Qualcomm on Tuesday said it will supply chips to power in-car infotainment systems to luxury automakers Mercedes and BMW.

Qualcomm is the leading supplier of the chips used in smartphones, a market that has slumped over the past year.

But the company is also working with automakers to power various functions in vehicles, from infotainment systems to advanced driver assistance systems, and its automotive revenue grew 13% in its most recent quarter despite its smartphone outlook falling short of analyst estimates.

Qualcomm said in a statement it will supply BMW with chips that will help power voice commands inside the car. It also said it will supply chips for the next version of the Mercedes E class models, which will be available in the U.S. in 2024.

The company expects to have $4 billion in revenue from the automotive sector by 2026, rising to $9 billion by the end of the decade, Chief Executive Cristiano Amon said in an interview on the sidelines of the Munich auto show.

The U.S. chip designer had announced in late 2022 its "pipeline" in the automotive business was $30 billion, thanks to its Snapdragon Digital Chassis product used by car makers and their suppliers for assisted and autonomous driving technology, as well as in-car infotainment and cloud connectivity.

"One of the things we're very focused on the company is to find new areas for growth... automotive is one of those areas," Amon said.

Asked about the upcoming IPO of Britain-based Arm Holdings Ltd, the chip designer owned by SoftBank Group Corp, Amon said: "We are not necessarily participating in the IPO, but we believe that Arm plays an important role in the ecosystem. We want to see an independent Arm."

(Reporting by Stephen Nellis in San Francisco, Victoria Waldersee and Christina Amann in Munich; Editing by Rashmi Aich and Kim Coghill)