The "Smart" in Smartphone

03/06/2014 9:00 am EST

Focus: STOCKS

Tyler Laundon

Editor, Cabot Small-Cap Confidential

 

Have you ever wondered how your iPad knows which way is up and which is down? Or how your digital camera's image stabilization feature works? The technology behind all of these features is motion sensing, explains Tyler Laundon in Daily Profit.

In fact, motion sensing is the technology behind many of the fastest growing consumer tech categories. The smartphone and tablet features are just a small sample.

Without motion sensors, smartphones wouldn't be able to replace the clunky dashboard GPS. Remote-controlled planes and aerial drones would never leave the ground. Wearable technologies, like fitness bands, wouldn't exist.

As manufacturing costs come down and functionality goes up, we're going to see much more advanced sensing applications emerge in everyday consumer devices.

And the features that seemed cutting-edge a year ago, will show up in toys that we buy for our kids and grandchildren.

And, of course, we'll see emerging technologies—things like self-driving cars and voice-controlled devices, introduced in this decade.

The technology is amazing when you think about what's required to make all of these products as smart as they are.

Tiny motion sensors in many consumer devices host a compass, an accelerometer, and a gyroscope—without all three, they wouldn't work. Together, these components tell the device how fast it's moving and how it's oriented.

Analog Devices (ADI) is one of the largest semiconductor companies in the motion-sensing space, with a market cap of $15.87 billion. STM Electronics (STM) is a slightly smaller manufacturer; its market cap is $7.6 billion.

Motion sensors have been a staple in consumer goods for years, but new advances are making them even smaller and more energy-efficient. That's allowing manufacturers to make sensors that are "always on." And this capability is behind the wearable devices that are able to track activity around the clock.

I expect we'll see a much wider application of motion sensor technology in home applications over the coming years as well. Recent acquisitions, like Google's purchase of smart thermostat manufacturer Nest, show that large companies see growth in home appliances. The "connected home" will require sensors in every appliance in order to function.

While motion sensors have been around for a while, I think investors would be wise to take a look at ADI, STM, and some of the smaller companies to see what they have cooking. I see almost limitless consumer and industrial applications, and the companies that continue to push sensor technology forward are likely to be extremely lucrative investments.

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