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5 Solid Stocks to Tap a Booming Semiconductor Market

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Global semiconductor sales reflected both a month-over-month and a year-over-year increase in October, according to the Semiconductor Industry Association (“SIA”). Also, the body said that global sales of semiconductors are projected to see impressive growth in 2020 and 2021. Much like the tech sector, the global semiconductor industry, which plays a key role in the high-growth technology space, has been left somewhat less unaffected by the coronavirus pandemic.

One of the major reasons behind this impressive show is growing demand for smartphones, as people are spending more time on their mobile phones. This, thus, could act as a tailwind for the industry in the near term.

Semiconductor Sales Jump in October

The SIA said on Dec 4 that global semiconductor sales reached $39 billion in October from $36.8 billion in October 2019, increasing 6% year over year. Also, sales increased 3.1% from September’s figure of $37.9 billion.

Regionally, sales increased 14.2%, 6.3% and 5.3% year over year in the Americas, China and Asia Pacific, respectively. However, sales plummeted on a year-over-year basis in Japan and Europe where it declined 1% and 4.8%, respectively. On a month-over-month basis, sales jumped in all the regions. Sales grew 6% and 3.2% in Europe and the Americas, respectively. Also, it increased 2.9%, 1.6% and 2.8% in China, Japan and Asia Pacific, respectively.

Global Sales Projected to Grow

A separate report released by the World Semiconductor Trade Statistics (“WSTS”) projects impressive growth for the industry in the coming days. The WSTS projects semiconductor sales to touch $433.1 billion in 2020, up 5.1% year over year from $412.3 billion. Moreover, 2021 is projected to witness robust chip sales. Sales are projected to rise 8.4% in 2021.

The forecast for both 2020 and 2021 is higher than the projections made by the WSTS in July. It had earlier projected sales growth of 3.2% and 6.2% for 2020 and 2021, respectively.

Slowing smartphone sales during the coronavirus pandemic was a cause of concern for not only mobile manufacturers but also chipmakers. However, that seems to be changing now with economies having opened up. Microchip demand is also likely to get a boost from the 5G boom in Europe and parts of Asia, including China and Singapore. These are likely to aid the chip market in the days to come.

Our Choices

Given the growing demand for smartphones and the ongoing 5G boom, the semiconductor industry is likely to be benefited. Below are four chip stocks that investors can gain from in the current scenario.

Micron Technology, Inc. (MU - Free Report) through global brands, namely Micron, Crucial and Ballistix, manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory, NAND flash memory, NOR Flash, 3D XPoint memory and other technologies.

The company’s expected earnings growth rate for next year is 28.3%. The Zacks Consensus Estimate for current-year earnings has improved 28.3% over the past 60 days. Micron sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Maxim Integrated Products, Inc. (MXIM - Free Report) is an original equipment manufacturer of semiconductor analog and mixed-signal integrated circuits. The company has a broad product portfolio that includes analog-to-digital converters, amplifiers and comparators, communications devices, data converters and management components, sensors and wireless products.

The company’s expected earnings growth rate for the current year is 24.8%. The Zacks Consensus Estimate for current-year earnings has improved 14.2% over the past 60 days. Maxim Integrated Products holds a Zacks Rank #2 (Buy).

NVIDIA Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.

The company’s expected earnings growth rate for the current year is 66.8%. The Zacks Consensus Estimate for current-year earnings has improved 6% over the past 60 days.NVIDIA holds a Zacks Rank #2.

Texas Instruments Incorporated (TXN - Free Report) is an original equipment manufacturer of analog, mixed-signal and digital-signal processing integrated circuits.

The company’s expected earnings growth rate for the current year is 4.4%. The Zacks Consensus Estimate for current-year earnings has improved 8.3% over the past 60 days.Texas Instruments carries a Zacks Rank #2.

Inphi Corporation (IPHI - Free Report) operates as a provider of fabless high-speed analog semiconductor solutions for the communications and computing markets. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days.Inphi Corporationhas a Zacks Rank #2.

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