Global Supply Restructuring And Trade Disputes Will Undercut Legacy Positions

Key Takeaways

• Rising onshoring, geopolitical risks, and evolving customer preferences threaten Himax’s revenue growth, margins, and long-term earnings stability.
  
• Industry shifts toward integrated chips and advanced display technologies risk making legacy products obsolete, demanding heavy R&D investment to stay competitive.
  
• Himax’s leadership in advanced display and AI technologies, diversified supply chain, and expansion into high-growth sectors position it for strong, sustained revenue and margin growth.

Catalysts

A fabless semiconductor company, provides display imaging processing technologies in China, Taiwan, Korea, Japan, the United States, and internationally.

• The ongoing restructuring of global supply chains and increased onshoring, particularly in the U.S. and Europe, threatens to diminish the dominance of Asian-based suppliers like Himax, creating sustained pressure on long-term revenue growth as the customer base becomes more fragmented and less reliant on traditional suppliers.
  
• Intensifying geopolitical tensions—including persistent U.S./China trade disputes and the risk of increased tariffs or outright technology restrictions—introduce significant operational risk for Himax, jeopardizing not only long-term demand but also disrupting global manufacturing and distribution, which may erode both gross margin and earnings stability.
  
• Himax’s core display driver markets are showing early signs of commoditization, with pricing pressure and average selling price erosion likely to outpace any gains from moderate technological improvements; this trend raises the probability of margin compression and stagnating revenue in the coming years, particularly as display technologies become increasingly standardized.
  
• The semiconductor industry is rapidly progressing toward integrating display drivers and image sensors directly into system-on-chip designs by larger IDMs, reducing the addressable discrete market that Himax competes in and directly threatening future sales, thereby capping growth potential and endangering long-term earnings trajectories.
  
• New and disruptive display technologies such as microLED, OLED-on-silicon, and quantum-dot displays risk rendering Himax’s legacy products obsolete unless the company deploys significant, sustained R&D investments, a move that could drain cash flows and materially limit profit growth if the transition fails to keep pace with industry evolution.

Himax Technologies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Himax Technologies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Himax Technologies's revenue will grow by 5.7% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 9.5% today to 13.0% in 3 years time.
• The bearish analysts expect earnings to reach $140.0 million (and earnings per share of $0.81) by about July 2028, up from $87.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.4x on those 2028 earnings, down from 19.6x today. This future PE is lower than the current PE for the US Semiconductor industry at 30.9x.
• Analysts expect the number of shares outstanding to grow by 0.11% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.19%, as per the Simply Wall St company report.

Himax Technologies Future Earnings Per Share Growth

Risks

• Himax’s deepening leadership in automotive display ICs, including pioneering technologies like TDDI, LTDI, and Tcon, positions it to benefit from the growing content value per vehicle and a robust pipeline with over 500 design-in projects, which could substantially boost long-term revenue and margins even amid short-term market volatility.
  
• The company’s expansion into high-growth verticals such as AR glasses, ultralow power AI (WiseEye), and co-packaged optics demonstrates strong secular alignment with the proliferation of intelligent, energy-efficient, and connected devices, which could drive multi-year earnings growth as new products enter mass production and diversify the revenue base.
  
• Himax’s diversified global supply chain strategy, with strengthened manufacturing capabilities in Taiwan, China, Korea, Singapore, and India, enhances resilience against geopolitical risks and tariffs, reducing supply chain disruption risk and supporting stable net margin performance over time.
  
• An unrivaled position in advanced driver ICs, OLED solutions, and local dimming Tcon—combined with large-scale, multi-year collaborations with Tier 1 customers in automotive, tablets, and premium notebooks—signals that underlying demand from secular shifts in display technology adoption could support sustained revenue growth and gross margin expansion, contradicting a bearish outlook.
  
• Accelerated momentum in the validation, scaling, and upcoming mass production of cutting-edge offerings such as co-packaged optics (CPO) and WLO microdisplays, including strong customer engagement from leading AI and AR players, could unlock substantial new long-term end-markets and materially increase both topline revenue and profit contribution as these solutions ramp up.

Valuation

• The assumed bearish price target for Himax Technologies is $7.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Himax Technologies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.3, and the most bearish reporting a price target of just $7.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $140.0 million, and it would be trading on a PE ratio of 12.4x, assuming you use a discount rate of 12.2%.
• Given the current share price of $9.76, the bearish analyst price target of $7.0 is 39.4% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.