25 Aug Pixelworks Inc : What’s in the works?
Pixelworks, Inc. (NASDAQ: PXLW) offers semiconductor and software solutions that can be incorporated in cinemas, smartphones, tablets, and projectors. The Company’s product finds place in leading smartphone brands such as the recent iQOO 8 series smartphones from iQOO brand of vivo that incorporated pixelworks X5 Pro visual processor.
Pixelworks, Inc. (NASDAQ: PXLW)
Market Cap: $291.01M; Current Share Price: 5.55 USD
Data by YCharts
Strengths
In March 2021, the Company announced that the new OPPO Find X3 series phones – the Find X3 and Find X3 Pro, incorporated the Company’s patented high-efficiency color calibration and flesh tone management technology. The result is unparalleled color accuracy for all apps, use cases and content, in addition to advantages such as absolute color accuracy, high-efficient calibration and true flesh tone. Pixelworks color and flesh tone management were also part of a firmware update of OPPO Reno 5 Pro+ smartphone, which was made available to customers in January 2021.
The Company has signed a multi-year collaboration agreement with TCL for incorporating Pixelworks display into future smartphone models across diverse price points. TCL will leverage pixelworks visual processors and technologies to advance the performance of its future NXTVISION Displays and will carry out some enhancements to the Company’s motion processing SDR to HDR conversion, color accuracy and adaptive display features, as well as a new set of AI-based innovations, aiming to redefine the visual experience.
Image Source: Company
Pixelworks offerings include TrueCut®, a cinematic video platform that helps filmmakers maintain a consistent motion appearance, while delivering creative options for visual storytelling. Furthermore, the Company provides SoC solutions for the Consumer Electronics industry, including OTA/OTT streaming for Cordcutters and UltraHD 4K Blu- Ray products. Iris mobile display processors, the Company’s solution for mobile HDR, blur-free sports, vibrant colors and deep contrast, addresses the needs of the smartphones and tablets market.
In addition, the Company’s Projector display processing solutions find a place in leading OEMs projectors for education, business, and consumer applications. Pixelworks has an extensive intellectual property portfolio with more than 350 patents related to the visual display of digital image data and efforts are on to develop advanced video algorithms that help improve overall system performance and functionality.
As per the Company’s Q2,2021 financial results, mobile revenues grew sequentially and year-over-year to a record, owing to rising demand from Smartphone OEMs amidst a number of newly launched smartphones. Revenues stood at $14.1 million as compared to $9.3 million in the first quarter of 2021. The Company also reported an increase in projector revenue by over 100% sequentially and 30% year-over-year.
The Company has entered into a co-development agreement with an existing Japanese OEM, to develop an advanced SoC for a next-generation product family for the 3LCD Projector market.
Weakness
In June 2021, the Company was dropped from the Russell 2000 index during its annual index rebalancing that reflected the changes in the U.S equity market at large. Various factors such as company rankings, market capitalization and sector composition are taken into consideration for adding or deleting companies from the index.
The event has a significant impact on the demand, price and trading volumes of companies / sectors. The Russell 2000 index is considered to be a comprehensive indicator of the economy and many ETF’s and fund managers use this index as a basis for investment funds and index-based derivatives. Most of these entities try to mirror the investments in the index by buying stocks that are added to the index and selling stocks that are dropped from it.
However, being dropped does not necessarily mean that the stock was underperforming, it can also be due to the limited number of stocks that can be accommodated in a particular index. The price dips that typically occur after a stock is dropped can also be an opportunity to buy, if fundamentals remain strong.
Opportunities
Display technology is a constantly evolving field with emphasis on innovation and delivering better experiences for customers. The technology finds a prominent place in virtually every field be it mobile / smartphones, tablets, medical equipment, military equipment, aeronautic equipment to name a few.
The global display market is poised to be worth over USD 177.1 billion by 2026, growing at a CAGR of 3.6%, from USD 148.4 billion in 2021 according to a report by Markets and Market. The surging demand for interactive displays in smartphones, video delivery and projector market and the growing demand for high performance, superior functionality and power saving alternatives provide excellent opportunities for growth and expansion for the company.
According to a report by Markets and Markets, the global embedded systems market is projected to reach USD 116.2 billion by 2025, growing at a CAGR of 6.1%, from USD 86.5 billion in 2020. The rapid technological advancements, growing demand for leading-edge display systems for use in advanced driver-assistance systems (ADAS), increasing demand for solutions for electric and hybrid vehicles and demand for embedded microprocessors for high-end display systems for use in smartphones, wearables and projectors is driving the growth in the market.
Threats
Technology is a constantly evolving field. A breakthrough innovation of today can easily become outdated in a matter of years. To sustain in such a highly competitive environment, companies need to constantly be one step ahead of the competitors in research and development and delivering highly differentiated experiences for their customers.
There is a possibility that original equipment manufacturers may build their own semiconductor chips, a move that many players are contemplating, owing to the chip shortage crisis that severely hit the automobile industry recently. Google intends to build Google Tensor, a smartphone processor to be incorporated in Pixel 6 and Pixel 6 Pro phones.
Key Takeaways
The Company announced strategic plans to develop its subsidiary, Pixelworks Semiconductor Technology (Shanghai) Co., Ltd, which was its primary research and development center in Asia, to a profit center for its mobile, projector, and video delivery businesses. The plans will be executed and brought into operation by the end of 2021.
The idea is to seek qualification for filing an IPO on the Shanghai Stock Exchange’s Sci-Tech innovAtion board, also known as the STAR Market, with a view to gain access to new capital markets and better growth opportunities. The Company is aiming to get a listing by the first half of 2023.
This move will also help it separate its TruCut cinematic content platform from the manufacturing side, in case of a potential interest in buying its business. TruCut also provides valuable licensing opportunities for the Company in the content development and steaming landscape.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://www.marketsandmarkets.com/Market-Reports/embedded-system-market-98154672.html
https://www.thestreet.com/investing/futures/russell-2000-index-reconstitution-markets-change
https://pixelworks.gcs-web.com/static-files/871f6216-3c37-4704-ad8c-35a785bcaad4
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