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Semiconductor Sales Rise Year Over Year: 5 Stocks to Buy

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The global semiconductor industry has been one of the biggest beneficiaries of the pandemic that turned 2020 into a great year for microchip makers. This saw semiconductor sales jump year over year according to the Semiconductor Industry Association (SIA).

Growing demand for electronics, including smartphones, PC and the ongoing 5G boom gave a boost to semiconductor sales in 2020. And the situation is likely to stay so given the ongoing supply crunch in microchips due to soaring demand.

Global Semiconductor Sales Jump

Global semiconductor sales hit $439 billion in 2020, growing 6.5% from 2019’s total of $412.3 billion. Also, global semiconductor sales came in at $39.2 in December, jumping 8.3% year over year and 2% from the prior month.

The semiconductor industry also had an impressive fourth quarter, wherein sales grew 8.3% to $117.5 billion compared to fourth-quarter 2019. Overall, fourth-quarter sales grew 3.5% from the third quarter.

Maximum growth was in the Americas in 2020, with a sales increase of 19.8%. Annual sales also increased 1% and 5.3% in Japan and Asia Pacific, respectively, but declined 6% in Europe.

5G Smartphones, PC Demand Drive Sales

Strong sales of 5G smartphones help have been driving microchip sales despite the overall slowdown in the smartphone market. Besides, demand for microchips got a boost from the 5G boom in Europe and some countries in Asia, including China and Singapore.

In fact, demand for consumer electronic goods during the pandemic has resulted in a supply crunch for microchips. Moreover, carmakers, which have been trying to bounce back after taking a beating during the pandemic, are now faced with another roadblock in the form of a shortage in the supply of semiconductors.

Microchips are an important part of both the auto industry as well as the infotainment industry. The recovery of the automotive sector was faster than projected, due to pent-up demand during the shutdown period, which is now hampering the balance between demand and supply.

The supply shortage is a sign that microchips are in high demand and the situation is likely to remain so.

Our Choices

The semiconductor market is likely to continue thriving in 2021. Below are five chip stocks that investors can gain from in the current scenario.

MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) is a provider of power analog semiconductor solutions to varied markets. The company develops and produces analog radio frequency, microwave and millimeter-wave semiconductor devices, and components for applications in optical, wireless and satellite networks.

The company’s expected earnings growth rate for the current year is 89.8%. The Zacks Consensus Estimate for current-year earnings has improved 14.1% over the past 60 days. MACOM Technology Solutions carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 31.9%. The Zacks Consensus Estimate for current-year earnings has improved 5.7% over the past 60 days. Maxim Integrated Products holds a Zacks Rank #2.

Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) is the world's largest dedicated integrated circuit foundry. It manufactures proprietary IC designs using its advanced production processes.  

The company’s expected earnings growth rate for the current year is more than 18.3%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 60 days. Taiwan Semiconductor has 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 12.1%. The Zacks Consensus Estimate for current-year earnings has improved 14.8% over the past 60 days.Texas Instruments carries a Zacks Rank #2.

Semtech Corporation (SMTC - Free Report) manufactures and markets a wide range of analog and mixed-signal semiconductors for commercial applications.

The company’s expected earnings growth rate for the current year is more than 13.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. Semtech Corporation has a Zacks Rank #2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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