The semiconductor sector has been warming up over the past year, thanks to rising demand for chips across multiple industries. The PHLX Semiconductor Index, which tracks the top stocks in the sector, rose 52% over the past 12 months, compared to the Nasdaq's 24% gain during the same period.

However, not all semiconductor stocks benefited from that rally. Qualcomm (NASDAQ:QCOM), the biggest mobile chipmaker in the world, increased just 12%. Himax Technologies (NASDAQ:HIMX), which makes display driver ICs and timing controllers, dropped 23%. Let's take a look at why these two stocks underperformed the broader industry and whether either stock will fare better this year.

What do Qualcomm and Himax do?

Most of Qualcomm's revenue comes from its mobile chips, which power smartphones, tablets, and other gadgets. But the lion's share of its profits come from its licensing business, which leverages its portfolio of wireless patents to collect high-margin licensing fees and royalties from mobile device makers across the world.

Himax's business is split into three units -- display drivers for large panels (like monitors), display drivers for small/medium panels (like tablets and smartphones), and non-driver products (including chips for AR/VR, IoT, and 3D-sensing devices). The small/medium category accounted for nearly half of Himax's sales in 2016.

How fast are Qualcomm and Himax growing?

Qualcomm's revenue fell 7% annually in 2016, due to a 10% drop in chipmaking revenue and a 4% decline in licensing revenue. Qualcomm's chipmaking business has been squeezed by competition from cheaper rivals like MediaTek and first-party ARM chips from OEMs like Apple (NASDAQ:AAPL), Samsung, Huawei, and Xiaomi.

Its licensing business has been hurt by increasing demands from OEMs and government regulators to lower its fees. However, Qualcomm's decline is expected to stop this year with 1% sales growth, fueled by stronger sales of its new Snapdragon chips for high-end phones, wearables, cars, servers, and other connected devices.

Himax's revenue rose 16% annually in 2016, fueled by 22% growth in large panel drivers, 10% growth in small/medium panel drivers, and 23% growth in non-driver products. However, its revenue is expected to fall 3% this year, due to "weaker seasonality and market demand" in its core businesses and lower revenue from its higher-margin AR/VR-related businesses.

But looking ahead, Himax believes that its non-driver business will rebound in the second half of 2017 on the renewed strength of its wafer level optics and CMOS image sensor products. AR-associated LCOS (liquid crystal on silicon) products could also spur growth if more AR devices hit the market, and industry watchers expect Himax to supply 3D sensing units for this year's iPhone.

How profitable are Qualcomm and Himax?

Qualcomm's net income rose 8% in 2016, and its diluted earnings (boosted by buybacks) jumped 18%. Analysts expect its earnings to rise just 5% this year, due to the ongoing regulatory pressures on its licensing business. Apple's recent lawsuits against Qualcomm in the U.S. and China -- which claim that the chipmaker uses unfair patent licensing fees and practices -- could also set a legal precedent for other OEMs to demand lower fees. That pressure won't fade anytime soon -- analysts expect Qualcomm's earnings to rise just 3% in 2018.

Himax's non-GAAP net income and earnings both rose 95% in 2016, thanks to lower operating expenses and the growth of its higher-margin non-driver products. However, analysts expect Himax's earnings to fall 23% this year due to its aforementioned weaknesses. However, the launch of the next iPhone, which is expected to occur during Himax's fourth quarter, could boost its earnings by 48% in fiscal 2018. Mizuho Securities estimates that the new iPhone's 3D-sensing component could account for 5% of Himax's 2017 earnings and 15% of its 2018 earnings.

Valuations and dividends

Qualcomm trades at 18 times earnings, which is lower than the industry average of 22 for broad line semiconductor companies. Himax has a higher P/E of 28, but that's also lower than the industry average of 75 for specialized semiconductor companies.

Qualcomm pays a forward dividend yield of 3.6%, which is supported by a payout ratio of 63%. It has hiked that dividend annually for 14 straight years. Himax pays a forward yield of 1.6%, which is supported by a payout ratio of 89%. However, its $0.13-per-ADR share dividend in 2016 (calculated by its earnings that year) represented a big drop from the $0.30 it paid in 2015. Himax hasn't declared its dividend for 2017, but it will likely remain well below 2015 levels.

The winner: Qualcomm

Qualcomm faces a lot of near-term headwinds, but its lower valuation, higher dividend, and its projected growth for 2017 make it a better pick than Himax. Himax isn't a terrible stock, but I consider it more of a speculative supply play on the next iPhone and AR/VR devices than a sustainable long-term investment.