Qualcomm (QCOM) To Tie Up With Himax, Boost AR Applications

Leading wireless chipset manufacturer, Qualcomm Inc. (NASDAQ:QCOM) is reportedly partnering with semi-conductor company Himax Technologies, Inc. (NASDAQ:HIMX) to launch a high-resolution 3D sensing camera system for smartphones and automobile. Qualcomm aims to combine its computer vision expertise with Himax Technologies’ wafer-level optics (WLO) technology and module integration capability to create a 3D camera module.

Deal Prospects

Himax Technologies is gearing up with its augmented reality and 3D sensing work. The company is planning to spend $80 million to enhance its WLO capacity, which will be used to reduce the size of 3D sensing camera modules, in compliance for use in portable devices. This cloud-enabled camera module will enable high-resolution, real-time depth sensing across applications related to the Internet of Things (IoT), biometrics, automotive and others, inclusive of both indoors and outdoors operating capabilities’. The production of the module is expected to start from the first quarter of 2018, allowing Himax to move early to tap the opportunity in 3D-enabled smartphones.

Qualcomm, through its Snapdragon chips in smartphones, is well positioned to take advantage of the secular growth in smartphone 3D cameras. The company seems to have made a strategic business move by partnering with Himax Technologies to bring the technology to the market. Additionally, Qualcomm can deploy its 3D sensing camera module for automotive applications as well. In view of the acquisition of Netherlands-based mobile chipset giant NXP Semiconductors NV (NASDAQ:NXPI) , Qualcomm should enjoy an added advantage in the automotive space.

NXP Semiconductors holds the leading market share of over 14% in automotive chips, providing Qualcomm easy access to the former's existing customer base and sales channels. Thus, Qualcomm will have a better chance at targeting the fast-growing ADAS (advanced driver assistance system) on the back of its collaboration with Himax Technologies. Camera vision plays an important role in this space for various uses such as blind-spot detection and road sign recognition.

Despite such positives, aggressive competition in the mobile phone chipset market has also been hurting Qualcomm’s profits. The company faces severe competitive threats from its closest rival, Intel Corporation (NASDAQ:INTC) , which has been redesigning chipsets for the mobile computing market.

While Qualcomm currently carries a Zacks Rank #4 (Sell), Himax Technologies is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bottom Line

3D-sensing cameras could provide the next wave of growth for both Qualcomm and Himax Technologies. The companies are striving to gain from their latest technological applications. Himax Technologies anticipates significant revenues as the smartphone 3D camera market is poised to grow 50% a year until 2022, reaching a worth of $4.4 billion (based on a report by Allied Market Research). Qualcomm is also looking forward to higher sales with the jointly developed 3D sensing camera module.

Price Performance

Over the last three months, shares of Qualcomm have declined 7.2%, compared with the 5.9% decline of the industry it belongs to.

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