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By Meg Flippin, Benzinga
Advanced driver assistance systems are no longer reserved for luxury cars and trucks alone. Increasingly they are finding their way into all sorts of vehicles, including compact passenger vehicles, and for good reason – these systems increase safety and visibility.
It’s why the advanced driver assistance systems – or ADAS – market is projected to see double-digit growth in the years to come. Today the market is valued at $34.93 billion. By 2031 it’s forecast to reach $73.74 billion, growing at a CAGR of 10.8% during the forecast period. It’s also partly why Valens Semiconductor (NYSE: VLN), the Israeli chipmaker, expects revenue in 2025 to grow 25% to 30% year-over-year and why, by 2029, it’s forecasting revenue of between $220 million and $300 million.
"We have a tremendous growth opportunity ahead. Our growth strategy includes leveraging our core technology to serve new markets undergoing digital transformation, diversifying our revenue sources and augmenting organic growth with strategic acquisitions that will expand our market reach,” said Gideon Ben-Zvi, Chief Executive Officer, during Valens' recent investor day. “We believe this strategy can generate sustainable growth and create significant long-term value for our shareholders."
It’s All About The Chipsets
Valens makes high-performance chipsets that are integrated into a range of devices powering state-of-the-art audio and video installations, next-generation videoconferencing, ADAS and autonomous driving. The company says its A-PHY technology provides reliable and optimized connectivity solutions for OEMs that need long-reach, high-resolution video.
Take the ADAS market, for starters. Valens says its A-PHY standard-compliant chipsets support the highest camera resolutions on the market, providing OEMS with high bandwidth and zero latency, two things that are becoming important as data rates rise in lockstep with the proliferation of sensors built into vehicles. The company’s chipsets also power centralized radar, which is a radar architecture that relies on a central processor to collect and analyze data from multiple radar sensors. Valens says its chipsets provide high downstream bandwidth and fast controls on the uplink, supporting the satellite radar architecture of tomorrow. Then there’s LiDAR, a remote sensing technology that leverages lasers to measure distances. Valens says its chips can support 360-degree lidars with adaptive digital signal processing and error correction.
That tech prowess has landed the company some recent design wins. In the fall, Valens announced it achieved three automotive design wins from leading European OEMs for its VA7000 MIPI A-PHY chipsets. Each of the OEMs plans to embed Valens’ MIPI A-PHY chipsets in certain vehicle models with the start of production in 2026.
Valens pegged the estimated production volume totaling approximately 500,000 vehicles per year. Once it ramps up, Valens expects the design wins to generate over $10 million in annual revenue for five to seven years. Valens said at the time that the design wins are validation of its position in the ADAS market, as well as MIPI A-PHY’s position as the industry’s standard for next-generation sensor connectivity. “As a former CTO and executive for major automotive OEMs, I can attest to how the industry has been waiting for a safe and resilient high-performance connectivity standard,” said Dr. Peter Mertens, Chairman of Valens, when the design wins were announced. “This is exactly what Valens has brought to the industry. I anticipate that this OEM validation will open the floodgates for further adoption of this important connectivity technology.”
Beyond The ADAS Market
But ADAS isn’t the only market where Valens expects to grow. The company’s chipsets are powering advanced video-conferencing, industrial machine vision and medical imaging. In video conferencing, Valens expects increased demand to be driven by AI meeting solutions that deliver high-quality video experiences for both remote and in-person meetings. With the ongoing trend of more video peripherals and more meeting rooms of all sizes, Valens plans to capitalize on its high-speed connectivity solutions, including its USB3 extension offering. The total addressable market for video-conferencing solutions is expected to grow to $350 million by 2029, forecasts Valens.
Then there’s industrial machine vision which Valens says will be a total addressable market of $460 million by 2029. As for medical imaging, while Valens has supplied that market with chipsets for years, it’s now focusing on new opportunities specific to medical endoscopies and the shift to single-use devices for this procedure. The U.S. FDA is urging this transition to enhance patient safety and eliminate risk factors. Valens says its chipsets offer a simple, reliable and cost-effective solution for one-time use endoscopies. The annual total addressable market for single-use endoscopes could reach $625 million pending full regulatory approval and market adoption, reports Valens. All told, Valens says its verticals have a combined total addressable market of approximately $5.5 billion by 2029.
Acquisitions are another potential growth driver. The company plans to pursue buys of companies that are revenue-generating and have a clear path to profitability in the ProAV, Industrial and Machine Vision markets. With over $133.1 million of cash and cash equivalents as of September 30, 2024, Valens says it has the firepower to pursue acquisitions that align with its strategy and goals for long-term growth and profitability. "Looking ahead, we are confident in our ability to capitalize on opportunities in both existing and new markets,” said Ben-Zvi. “With a talented team and more than 17 years of experience delivering cutting-edge technology, and a very strong balance sheet, we are well positioned to execute our disciplined growth strategy and deliver long-term value for our shareholders.”
ThinkEquity Gets It
It's not just Valens that’s optimistic about its future. Wall Street firm ThinkEquity recently initiated coverage of the stock with a buy rating and a $5 price target, which implies a triple-digit upside from where shares are currently trading. ThinkEquity analysts pointed to Valens' financial position, expanding product portfolio and “proactive” approach to the market for the buy rating. “Valens is well-positioned to deliver sustainable growth and create long-term value for stakeholders," wrote the ThinkEquity analysts.
Featured photo by Vitaly Sacred on Unsplash.
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