4 Things You Didn't Know About Himax Technologies, Inc.

By Leo Sun Markets Fool.com

Himax Technologies (NASDAQ: HIMX) generally doesn't get much media coverage, but the Taiwanese company is one of theworld's biggest manufacturers of display drivers for LCD screens. Himax controls about 11% of that market, according to IHS, making it the third-largest player behind Samsungand Novatek.

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Himax might look like a straightforward supply chain play on the growing number of mobile devices and 4K TVs worldwide, but the company also has several unique qualities. Let's take a look at four lesser-known facts about Himax that may change your perception of this display driver maker.

Image source: Getty Images.

1. Its founder opened Taiwan's first TFT-LCD plant

Himax founder Dr. Biing-Seng Wu holds61 patents worldwide related to flat-panel LCD technologies. Dr. Wu is credited for developing Taiwan's first thin-film-transistor liquid-crystal display(TFT-LCD) panel and opening the country's first TFT-LCD plant, which paved the way for many other Taiwanese firms to enter the market.

2. It's expanding into augmented reality

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Analysts expect Himax's revenue to fall 16% this year, due to weak seasonal demand for its display drivers. But looking further ahead, Himax expects sales to eventually rebound on demand for its LCOS (liquid-crystal-on-silicon) products, which are used in augmented reality headsets.

LCOS modules process the images that are projected onto heads-up overlays. In its latest investor presentation, Himax states that few companies "provide the combination of R&D, joint development, and manufacturing expertise" in LCOS modules that it offers, and there is a "significant barrier of entry to new market entrants." Himax currently categorizes LCOS module sales under its non-driver revenues, which accounted for19% of its top line last quarter.

3. Google owns a stake in Himax

Back in 2013, Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google acquired a 6.3% stake in Himax, which supplied the LCOS chips for Google Glass. However, the Google Glass floppeddue to issues with privacy, pricing, andits awkward appearance, and was temporarily discontinued in 2015.

Image source: Google.

But that doesn't mean that Google plans to give up on AR just yet. The company plans to launch a new version of Glass in the near future, and it recently upgraded Android's Google Assistant with the computer vision-enabled Google Lens forvisual searches.

Google also remains invested in thesecretive AR start-up Magic Leap, and is still refining its AR computing platform Project Tango -- which enables apps to recognize surfaces and surroundings without a GPS or external wireless signals. If these plans bear fruit, demand for Himax's LCOS modules could surge over the next few years.

4. It could be developing a 3D-sensing camera for the iPhone

Recent rumors suggest that Himax willsupply components for a 3D-sensing camera in Apple's (NASDAQ: AAPL) upcoming iPhone 8, which would help it process computer vision and AR-related apps. The reports claim that Himax, ChipMOS, and STMicroelectronics will supply components for Lumentum, which will produce the 3D sensing modules for Apple.

Himax will reportedly design the glass components of the module. Speaking to Barron's, Morgan Stanley analyst Charlie Chan pointed out that Himax's wafer-level optics technology could "further reduce the size" of the modules to "fit the 3D sensing in smartphones." If Apple's move into 3D-sensing cameras sparks a paradigm shift across the mobile industry, Himax could gain another valuable stream of non-display driver revenue.

The key takeaways

For now, Himax's growth will remain pinned to display driver sales for smartphones, tablets, computer monitors, and TVs. But if we look further down the road, its non-driver businesses of LCOS modules and other 3D-sensing components could rise as the augmented, mixed, and virtual reality markets take off.

Tech M&A advisory firm Digi-Capital believes that the AR market willgrow from under $1 billion today to $90 billion by 2020 -- with nearly half of that revenue coming from AR hardware sales. Research firm IDC believes salesof AR headsets will surge from $209 million in 2016 to $48.7 billion by 2021. If those bullish forecasts are correct, Himax will certainly be in a good position to ride the trend.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has a disclosure policy.