While analysts laser-focus on MicroVision's pursuit of the elusive automotive OEM contract, a subtle shift in the company's narrative hints at a potentially more immediate and lucrative path to profitability: industrial automation.

MicroVision's Q1 2024 earnings call paints a picture of frustration and cautious optimism regarding the automotive LiDAR landscape. CEO Sumit Sharma candidly describes a complex web of OEM demands, shifting timelines, and financial burdens that have complicated their pursuit of a game-changing contract.

Sharma and CFO Anubhav Verma highlight the industry-wide challenges of navigating a period of low initial volumes, demanding NRE costs, and OEMs seeking financially stable Tier-1 LiDAR suppliers capable of weathering the storm until mass adoption later in the decade.

However, amidst the intricate dance with automotive giants, both executives repeatedly emphasize an emerging focus on "non-automotive industrial channels with shorter sales cycles" and "medium- to long-term partnerships with significant multi-year revenue opportunities in the industrial sector."

This isn't just lip service. Verma specifically points to "forklifts and warehouse automation applications" as ripe targets, highlighting partnerships with "significant multi-year revenue opportunities." This focus on industrial automation isn't new. MicroVision has long touted its MOVIA LiDAR sensor for industrial applications. But the Q1 earnings call signals a deliberate shift in emphasis, suggesting a more proactive approach towards this market.

Why the sudden urgency?

The answer likely lies in the stark contrast between the two markets. Automotive OEMs, while representing the ultimate prize, demand significant upfront investment, lengthy qualification processes, and agonizingly slow revenue ramp-ups.

Industrial automation, on the other hand, offers quicker sales cycles, lower development costs, and more predictable revenue streams. As Verma aptly puts it, industrial sales can "reduce the dependence on low volumes in the short to medium term," bridging the gap until the automotive market blossoms.

Let's examine the potential.

MicroVision expects to generate $8 to $10 million in revenue for 2024, with $3.1 million already secured in backlog. Assuming a conservative estimate of 20% of this revenue coming from industrial automation (approximately $1.6 to $2 million), and extrapolating this growth to a conservative 50% year-on-year increase, MicroVision could generate over $5 million in industrial automation revenue by 2026.

Projected Industrial Automation Revenue

This may seem modest compared to the potential billions of the automotive market. However, as Verma stresses, profitability is paramount. MicroVision aims to generate "operating profits unlike some of our peers who are focused on revenue with a low gross margin profile."

Assuming a healthy gross margin of 30% (in line with their anticipated blended gross margin), this industrial automation revenue could contribute $1.5 to $2.5 million to their bottom line by 2026, a significant step towards profitability in a market where many LiDAR companies are bleeding cash.

Furthermore, MicroVision's expertise in embedded perception software offers an additional advantage. The company plans to monetize its software through licensing agreements, creating an additional high-margin revenue stream.

MicroVision's shift towards industrial automation could represent a strategic masterstroke. By leveraging its existing MOVIA platform and perception software expertise, the company can generate valuable near-term revenue, strengthen its balance sheet, and prove its viability as a Tier-1 supplier to discerning OEMs.

While the automotive dream remains tantalizingly out of reach, MicroVision may have found a lucrative stepping stone in the burgeoning world of industrial automation.

"Fun Fact: The global industrial automation market size was valued at USD 205.46 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 9.3% from 2023 to 2030. This presents a significant opportunity for MicroVision's MOVIA LiDAR sensor."