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Company Spotlight: austriamicrosystems Seeks Growth by Tapping the NFC market & Acquisition

Austriamicrosystems is a rapidly growing provider of RFID reader ICs. In stark contrast to many RFID chip vendors, austriamicrosystems ignores the tag market entirely, focusing strictly on more sophisticated reader ICs that highlight the company’s considerable R&D and manufacturing abilities.  Two recent strategic moves, in conjunction with the company’s vertically integrated operational structure and well-established track record of innovative, high-performance ICs, have led to rapid share gains and revenue growth. Although austriamicrosystems might not yet be among the “household” names in the RFID market, don’t be surprised if that changes during the next 1-2 years. Despite the low profile austriamicrosystems has historically maintained, VDC expects the combination of rapid growth with ongoing innovation (especially in regards to the performance/size ratio its ICs offer) will drive increasingly strong awareness of this company in the near term.

Over the course of the past 24 months, austriamicrosystems has pursued a multifaceted growth strategy that encompasses cooperative partnerships with complementary technology suppliers (e.g., Infineon, NXP), acquisition and product portfolio expansion. We believe this strategy, combined with the company’s operational and product differentiation, has been instrumental in driving its recent market share and revenue growth.

Unlike many fabless IC/semiconductor firms, austriamicrosystems operates its own manufacturing and testing facilities at its Austria-based headquarters, resulting in a vertically-integrated organizational structure that affords complete control over the R&D, manufacturing, testing and QC processes. Due in large part to the end-to-end visibility and deep product knowledge the company’s vertically integrated model affords (and its ownership of all IP used in its products) austriamicrosystems’ reader modules are among the highest performing offerings on the market. The company is further differentiated as one of the few providers that offers ICs for multiple frequencies, including HF, UHF/EPC and NFC.

In regards to inorganic growth, in July 2011 the company completed the acquisition of Texas Advanced Optoelectronic Solutions (TAOS), a provider of optoelectronic sensors that simplify the measurement and analog-to-digital conversion of light for a range of devices, including smartphones, tablets and notebook computers. The addition of TAOS materially extends the breadth of austriamicrosystems’ product line and already has resulted in significant contract wins with smartphone OEMs such as Samsung. We expect this accretive activity, combined with in-house product development, to drive significant near-term growth.

From an internal development perspective, austriamicrosystems recently introduced two NFC IC offerings, leveraging its expertise in RFID ICs to develop enabling components for the nascent (but rapidly growing) NFC market. The company is targeting its NFC IC at automotive, payment, ticketing and access control applications. In our opinion, entering the NFC market was a strategically sensible move for austriamicrosystems. Not only does NFC overlap with the company’s existing RFID business, it also positions the company to capture a share of the exponential near-term growth expected in the NFC market.

For 2012, austriamicrosystems faces some strong expectations. In its 2011 consolidated year-end financial results (representing all its businesses, not just RF), austriamicrosystems issued guidance that forecasts 25% revenue growth for 2012, after posting 32% revenue growth during 2011, representing annual revenues exceeding $383 million. While this is certainly an ambitious goal, VDC expects this target will be met, if not exceeded. Not only is the company riding its 2011 momentum, the aforementioned Samsung contract (to provide light sensors for the Galaxy smartphone lineup) won in late Q4 ’11 is expected to drive additional growth not reflected in last year’s results. Provided austriamicrosystems does not deviate significantly from the strategically successful path of innovation, partnership and acquisition that it has pursued thus far, we think it has a bright future ahead.

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