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Why Himax Technologies Looks Good

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Display-drivers maker Himax Technologies (Nasdaq: HIMX  ) came out with its earnings last week, beating the Street's revenue expectations. My fellow Fool Seth Jayson gave us a briefing on how the numbers were in the fourth quarter. I'll now take a detailed look and find out what's in store for the company in the future.

Solid technology and clients
Himax manufactures primarily display driver integrated circuits (IC) and touch controllers for use in monitors, smartphones, tablets, and televisions, among other devices. The company is a leader in this space and has around 1,200 patents in its kitty. Moreover, it boasts of a strong clientele, supplying its display drivers to companies such as Samsung, Innolux, HannStar and Chi Mei Optoelectronics (the last two who, in turn, supply to Dell and HP), among others.

This combination of innovation and a strong customer base has helped Himax become a successful player in the booming display industry, which is expected to exceed $100 billion by this year.

Exploring the smartphone way
Himax is currently milking the smartphone and tablet markets. Sales of its small and medium-sized drivers, which are used in tablets and smartphones, jumped 26% from last year, constituting almost half of its revenue. Also, the company is partnering with Asian chip makers in Taiwan, China, Japan, and Korea to supply its drivers to smartphone manufacturers in these countries. Most component manufacturers, such as Foxconn and Cirrus Logic, have production facilities in this region and so it makes sense for Himax to increase its exposure in this market.

Himax continues to explore the realm of mobile-computing components, focusing on the manufacture of touchscreen controllers. The company is now selling this component to a leading smartphone manufacturer (which it doesn't want to identify at the moment). I believe that success in this product line will lead Himax to new heights, like those of peer Atmel (Nasdaq: ATML  ) , which supplies its touchscreen controllers to a range of companies such as LG and Sony, and has a solid pipeline of contract wins.

The Foolish takeaway
Himax is venturing into new markets and diversifying its product portfolio as well. But what really makes me optimistic is that the company has caught the wave of the thriving mobile-computing industry. All these factors certainly make Himax a stock to watch.

To stay on top of the latest developments at Himax, add it to your Watchlist.

Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article.  Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Related Tickers

10/25/2016 1:32 PM
HIMX $8.00 Down -0.22 -2.68%
Himax Technologies CAPS Rating: ***
ATML.DL $0.00 Down +0.00 +0.00%
Atmel CAPS Rating: ***