AMS shares hit 20-month low, 3D sensing suppliers face big challenges

Source: Content compiled from Reuters and others, thank you.

Apple chip supplier AMS AG recently released its fourth-quarter revenue forecast, and although the Austrian company has reached an agreement with other smartphone manufacturers, the company's stock price still fell 25% because investors were not optimistic about it.

Shares of the sensor-focused chipmaker hit a 20-month low on Tuesday after some analysts questioned whether the company can meet its $2.7 billion revenue target for 2019 amid signs of weakening demand for chips.

AMS share price trend over the past six months

UBS said in a note that "AMS' fourth-quarter guidance was disappointing," while UBS analysts said they were skeptical that AMS would achieve its 2019 revenue targets and 2020 operating margin targets.

AMS has invested heavily in R&D and production expansion to make a difference in markets such as 3D sensing, but the company has not yet fully utilized these facilities to increase competition and its dependence on Apple remains.

Analysts predict that AMS will need two or three major new deals to hit its 2019 revenue targets, something Chief Executive Officer Alexander Everk believes is achievable.

“We have had success multiple times and we are seeing the growth that you just described. And all of the investments that we’ve made in the past ... are well positioned to support our growth targets in 2019,” Everke told analysts.

AMS said increased production of the company's recently launched global smartphone platform helped lift its third-quarter earnings before interest and taxes (EBIT) to $60.2 million, or 13 percent of the company's total revenue, from $40.5 million last year.

Although AMS did not name its clients, analysts assumed it was Apple. According to analysts' estimates, this US mobile phone license contributed about 40% of AMS's sales.

After months of delays, Apple's product appears to be on track, with analysts estimating that AMS's facial recognition sensors are already in all three of the newly launched iPhones. Analysts estimating that AMS's facial recognition sensors are already in all three of the newly launched iPhones.

AMS has been working to sell sensors to Android customers in a bid to reduce its reliance on Apple, something that became even more important after the U.S. tech giant struck a $600 million deal this month with German rival Dialog Semiconductors.

Swiss-listed AMS also announced new deals on Monday, including for two Asian Android smartphone makers in time-of-flight solutions, which capture three-dimensional space using dedicated image sensors.

AMS also said it has started producing 3D facial recognition sensors for two Android customers, including Xiaomi, China's fourth-largest smartphone maker.

Analysts said Huawei's new Mate 20 Pro phone also uses AMS sensors for facial recognition, which means they have added the second-largest smartphone maker to its customer list.

AMS said it has reached agreements with major Asian manufacturers for OLED display sensors.

Following a strategic review, AMS said it planned to reduce its focus on environmental sensors, which can be used to detect temperature or humidity, but it did not say whether the business would be sold.

After the restructuring, AMS has three main businesses: optical sensors, such as those used in the new iPhone, image sensors for self-driving car applications, and audio sensors.

Founded in 1981, ams was originally a company engaged in ASIC and ASSP products in the fields of automobile, communication and industrial applications. After more than 30 years of development, they adjusted the company's business strategy as market demand changed and grew into a well-deserved giant in the sensor field in the industry.

From the 2017 financial report of AMS, we can see that nearly 70% of the company's revenue in that year came from the consumer and communications markets, and the share in the automotive, industrial and medical markets was only about 30%. As we all know, the prospects of smartphones are full of uncertainties. In order to further promote the leading application of sensor products and technologies, AMS is also expanding its development space outside of smartphones, that is, the automotive, industrial and medical markets with unlimited potential.

And all this was achieved by buying seven companies in 15 months.

• In July 2015, ams announced the acquisition of NXP's advanced CMOS integrated sensor products. Through this acquisition, ams can effectively expand its environmental sensor technology, while enhancing its development capabilities in the field of chemical sensors and smart lighting solutions, providing customers with one-stop environmental sensor products and services;

• In November 2015, ams spent 220 million euros to acquire CMOSIS (New Vision), headquartered in Antwerp, Belgium. The company is a leading supplier of high-performance CMOS image sensors for demanding image applications, providing general or customized surface and line scan image sensors. Through high-speed on-chip analog-to-digital converters and digital interfaces, it provides low-noise, rolling and global shutter, high dynamic range and high frame rate image solutions. CMOSIS's image sensors are widely used in a variety of high-end markets, including machine vision, medical, broadcasting, transportation, and scientific and photographic imaging. Through this transaction, ams has successfully laid out growth markets such as Industry 4.0, the Internet of Things, and medical care;

• In June 2016, ams acquired Cambridge CMOS Sensors (hereinafter referred to as CCMOSS), a leader in micro-hot plate structure technology for gas sensing and infrared applications. It is reported that the micro-heating plate of CCMOSS gas sensor adopts MEMS structure, and its gas sensors are widely used in the automotive, industrial, medical and consumer markets. CCMOSS's deep expertise in this field and ams' advanced MOX gas sensing materials have a high degree of synergy. This also makes ams a leader in gas and infrared sensing;

• In July 2016, ams announced the acquisition of MAZeT from Jena, Germany. The latter was founded in 1992 and has produced a large number of color and optical sensing systems since its establishment. Through the acquisition, MAZeT will have about 80 employees joining ams. ams hopes to strengthen their position in high-performance sensors in the automotive and pharmaceutical companies, where optical sensors are expected to achieve technological innovations in autonomous driving and new diagnostics;

• In December 2016, ams once again wielded the acquisition stick and acquired Incus Labs, a privately held company based in the UK that provides digital active noise reduction technology for headphones and in-ear headphones. ams said that Incus IP technology will expand their existing active noise reduction product line while allowing them to maintain their reputation for excellent performance and design capabilities at a very competitive cost advantage;

• In January 2017, ams signed an acquisition agreement with Heptagon, a high-performance optical packaging and micro-optical device manufacturer. Heptagon is a major supplier of mobile device applications that focus on the consumer market and require large-volume, small-size optical packaging. Through this acquisition, ams has consolidated its market position in the field of optical sensing technology;

• In July 2017, ams acquired 100% of Princeton Optronics, a leading supplier of Vertical Cavity Surface-Emitting Lasers (VCSELs). Princeton Optronics is committed to developing and supplying high-performance VCSELs for use in smartphones, consumer products, automobiles, and industry. The company has set an industry benchmark for energy efficiency and precise control of beam divergence, creating advantages for its applications. In the automotive and industrial markets, their technology can achieve high-temperature operation and provide high-power pulsed lasers and laser arrays to support future automotive and industrial applications. This acquisition also allows ams to fill an important link in 3D imaging.

But now it seems that the 3D sensing market they are betting on is facing challenges in many directions. It seems that the company's CEO needs to consider more issues.

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