HiMax Technologies (NASDAQ:HIMX) management said on its earnings call in May that the company is in a great position to benefit from the growing augmented reality (AR) segment.
CEO Jordan Wu has specifically noted that AR will increase HiMax's liquid crystal on silicon (LCOS) and wafer-level optics (WLO) revenue for the second half of 2016, adding that the company "believes this is just the beginning of a long-term growth story."
According to Wu earlier this year, "We believe applications for AR expanding from AR glasses and head-up displays for automotive applications to smartphones will advance the evolving AR market to become a multi-billion dollar industry."
Technology CEOs are rarely negative about their prospects in emerging technologies, but there are a handful of good reasons why Wu is bullish on HiMax's AR position.
The first is that the company has been working on AR-related technologies for 15 years, and that has allowed HiMax to bring in some significant design wins this past year.
Back in June, the news came out that HiMax's HX8396-A display driver IC (integrated circuit) will be in the new Lenovo Phab 2 Pro, which HiMax says is the world's first augmented reality smartphone. The Phab 2 Pro is built with Google's Project Tango platform, which allows for location-specific content for AR games and other apps.
HiMax is also widely believed to have a spot in Microsoft's forthcoming augmented reality headset, HoloLens. According to one analyst from Nomura, the HoloLens may not reach huge production volumes initially but could be big enough to add "meaningful contribution" to HiMax.
And Nomura isn't the only one anticipating HiMax's bet on AR. Morgan Stanley said back in January that it expects 4% of the company's total revenue to come from virtual reality and 14% from augmented reality this year. HiMax doesn't break out its revenue in that much detail, but there is growing evidence that augmented reality is playing a more significant role at the company.
HiMax already works with more than 30 AR customers right now, and the news from this year shows that the company is serious about improving its AR revenue. That's good news considering the AR market will be worth an estimated $90 billion by 2020.
HiMax's stock has been pushed up about 30% since the beginning of the year on these new tech prospects and currently trades at about 51 times its current earnings (compared to the tech industry average of about 25).
Considering HiMax's current investments in AR and its long history with the technologies, I think the company will be able to deliver augmented reality revenue growth this year and into the near future. While that's not the only reason investors should buy HiMax, it's becoming clear the company has an early advantage in the space and is already working with enough companies to deliver on its AR potential.
Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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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