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Global Semiconductor Sales Hit Record High in Q2: 5 Picks

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Global semiconductor revenues hit a record high in the second quarter of 2018 according to an IHS Markit report. This definitely is good news for chipmakers, as the industry seems to be braving trade war fears with ease. Chip stocks are likely to remain unaffected, as China so far has been targeting the United States with tariffs on commodities that include agricultural goods and industrials, given its current goal of building up its own tech industry. 

Now, with semiconductor revenues hitting a record high in the second quarter, the industry will get a much-needed respite from trade war fears. Moreover, the global semiconductor market is poised to grow at a rapid pace in 2018 and 2019. Given this scenario, it makes good sense to indulge in semiconductor stocks. 

 Global Semiconductor Sales Grow in Q2

Global semiconductor sales reached $117.9 billion during the second quarter of 2018, increasing 6% quarter over quarter, according to the Semiconductor Industry Association (SIA). Also, the figure reflects a 20.5% year-over-year increase. Understandably, the semiconductor industry has been performing well globally, marking the highest-ever quarterly sales in Q2 after hitting record high monthly sales in June.

Compared with June last year, semiconductor sales grew across all regions, led by China. While semiconductor sales were up 30.7% in China, Americas and Europe accounted for 26.7% and 15.9%, respectively. The increase can be attributed to growing demand for electronic goods globally. Per IC Insights’ latest update to the McLean Report, sales of the top 15 semiconductor companies increased 24% in the first half of 2018.

 

Industry Remains Unaffected by Trade Disputes

Per IC Insights, the total semiconductor market is expected to grow 14% in 2018, surpassing $500 billion. Understandably, demand for electronic goods across the globe has been helping the semiconductor market. The report further states that semiconductor content in electronic goods alone is anticipated to reach 31.4% in 2018, surpassing the all-time high of 28.8% in 2017.

Chip stocks were on a rally till some time back. However, a number of U.S.-based semiconductor companies generate the majority of their revenues from China and additional tariffs have been a cause for concern. That said, China so far has been targeting the United States with tariffs on commodities that include agricultural goods and industrials, given its current goal of building up its own tech industry.

The raised forecast is based on robust growth in the memory and analog segments. Needless to say, the United States is the largest semiconductor manufacturing country and growing demand for chips only paints a rosier picture for the industry.

Our Choices

Increasing demand for chip stocks amid lingering trade war concerns has been going in favor of the industry with global semiconductor sales registering its highest ever quarterly sales in the second quarter of 2018.  Moreover, the semiconductor industry is poised to grow at a robust pace through 2018 and 2019. Obviously, it makes good sense to invest in semiconductor stocks now. 

However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Maxim Integrated Products, Inc. (MXIM - Free Report) designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits.

The company has an expected earnings growth of 14.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.5% over the last 60 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments (TXN - Free Report) is a global semiconductor design and manufacturing company that develops analog ICs and embedded processors. 

Texas Instruments has a Zacks Rank #2 (Buy). The company has an expected earnings growth of 32.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.1% over the last 60 days.

Vishay Intertechnology, Inc. (VSH - Free Report)  is one of the world's largest manufacturers of discrete semiconductors (diodes, MOSFETs, and infrared optoelectronics) and passive electronic components (resistors, inductors, and capacitors). 

Vishay Intertechnology has a Zacks Rank #2. The company has expected earnings growth of 39.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 12.4% over the last 60 days.

ON Semiconductor (ON - Free Report) is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices ranging from high-speed fiber optic networking equipment to the precise power management functions found in portable electronics.

ON Semiconductor Corporation carries a Zacks Rank #2. The company has expected earnings growth of 26% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.6% over the last 60 days.

STMicroelectronics N.V.(STM - Free Report) is a global independent semiconductor company which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications.

STMicroelectronics carries a Zacks Rank #2. The company has expected earnings growth of 42.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.4% over the last 60 days.

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