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4 Semiconductor Stocks to Buy Amid Consistent Industry Growth

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·6 min read
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The semiconductor industry has been facing a constant supply-chain challenge due to the chip shortage triggered by lockdowns related to the COVID-19.

The recent spike in COVID-19 cases and the resultant rigid lockdowns in China are acting as headwinds. Per a data released by the National Bureau of Statistics on May 16, 2022, the output of integrated circuits in the country in April dropped 12.1% on a year-over-year basis to 25.9 billion units, the lowest since December 2020.

Further, the prolonged Russia-Ukraine war is aggravating the supply-chain situation as both countries produce key raw materials like palladium and neon gas, needed for semiconductor manufacturing.

In spite of the current headwinds, the industry is witnessing consistent growth. This is evident from its robust performance in April 2022.

Per the latest report from the Semiconductor Industry Association, global semiconductor industry sales were $50.9 billion in April, with a respective year-over-year and a sequential increase of 21.1% and 0.7%.

The report further states that global sales jumped more than 20% on a year-to-year basis for 13 consecutive months, driven by rising demand for semiconductors across various sectors.

Compared to April 2021’s reading, sales in the Americas, Europe, Japan, the Asia Pacific/All Other, and China were up 40.9%, 19.2%, 18.5%, 18.1% and 13.3%, respectively.

Factors Fueling Industry Growth

Swelling demand for consumer electronics, automotive, industrial tools & equipment, and networking & communication products is creating growth in the semiconductor industry. Increasing adoption of AI, IoT, virtual reality by various industries like healthcare, defense and retail remain key catalysts.

Rising popularity of remote-working and online learning is driving demand for processors used in enterprise laptops and data center servers, thereby propelling the semiconductor space.

Further, the dominant position of the United States in the global semiconductor market plays an important role. Notably, the country allocated $52 billion to investment in the semiconductor industry.

The governments of other major economies are also making heavy investments to meet the spike in chip demand and reduce dependency on imports.

Last month, the government of Spain announced spending €12.25 billion on the semiconductor and microchip industry by 2027.

In December 2021, the government of India announced a package of $9.81 billion for the development of semiconductors and display of manufacturing ecosystems. Moreover, India and Taiwan are in talks to set up a semiconductor manufacturing hub in India by a Taiwanese company.

These factors are expected to consistently drive growth in the semiconductor industry in the near term and the long haul.

Per a Mordor Intelligence report, the value of the semiconductor industry landscape was $549.2 billion in 2021. It also states that the industry is expected to be worth $906.3 billion by 2027, witnessing a CAGR of 8.23% between 2022 and 2027.

Stocks to Buy

Given the upbeat scenario, here are four semiconductor stocks that are well poised to capitalize on the above-mentioned prospects. Apart from strong fundamentals, these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Monolithic Power Systems MPWR is benefiting from solid demand across the automotive, industrial, computing and storage, and communications markets. MPWR is on track to expand capacity in 2022 well beyond $2 billion, which will ramp up new product revenues. It is likely to gain from the rapid deployment of 5G on the back of a robust portfolio of legacy routers, wireless applications and 5G networking infrastructure-related products.

Further, Monolithic Power Systems is witnessing sales growth in infotainment, lighting and Advanced Driver Assistance Systems products in the automotive market, which remains a positive. Moreover, MPWR’s deep-rooted partnerships with leading auto suppliers are expected to continue driving its top line in the days ahead.

Monolithic Power Systems, currently flaunting a Zacks Rank of 1, has a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 25%.

Monolithic Power Systems, Inc. Price and Consensus

Monolithic Power Systems, Inc. Price and Consensus
Monolithic Power Systems, Inc. Price and Consensus

Monolithic Power Systems, Inc. price-consensus-chart | Monolithic Power Systems, Inc. Quote

MaxLinear MXL is continuously gaining from the solid momentum in broadband access, connectivity, infrastructure and industrial multi-markets. Growing platform design wins across multiple geographies in new end markets also remain beneficial for the company.

In addition, MXL is consistently working toward bringing advanced solutions to gain momentum among customers. It recently introduced a fully integrated SoC named Sierra for 4G/5G Open RAN radio units. Further, MaxLinear’s MxL1600 family of RF Transceivers is selected by a leading provider of wireless network solutions, ZHT, for its 5G radio remote unit small cells. This remains another tailwind to MXL.

MaxLinear has a Zacks Rank #2 and a Growth Score of A at present. The long-term earnings growth rate for the stock is currently projected at 20%.

MaxLinear, Inc Price and Consensus

MaxLinear, Inc Price and Consensus
MaxLinear, Inc Price and Consensus

MaxLinear, Inc price-consensus-chart | MaxLinear, Inc Quote

Broadcom AVGO is benefiting from strength in the networking and server storage segments. AVGO’s networking is further riding on the strong adoption of its next-gen merchant switching and routing solutions by hyperscalers, enterprises and service providers.

Moreover, a higher uptake of AVGO’s next-generation server storage solutions by hyperscalers is expected to drive top-line growth. Notably, Broadcom expects third-quarter fiscal 2022 networking and server storage revenues to grow more than 25% and 60% on a year-over-year basis, respectively. Further, the recently-announced VMware acquisition will aid prospects over the long term.

Broadcom has a Zacks Rank of 2 and a Growth Score of A, currently. The long-term earnings growth rate for the stock is currently projected at 15.6%.

Broadcom Inc. Price and Consensus

Broadcom Inc. Price and Consensus
Broadcom Inc. Price and Consensus

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

Vishay Intertechnology VSH is steadily gaining from its robust resistor, diode, MOSFET, capacitor and opto product lines. Further, a recovery in the automotive sector and strong momentum across the medical and military markets are driving the top line.

In addition, Vishay Intertechnology’s robust magnetics is continuously driving the specialty business. Further, growing momentum across the areas of power transmission and electro cars with the help of robust capacitors is a tailwind. Additionally, VSH’s firm focus on expanding its manufacturing capacities remains a major lever.

Vishay Intertechnology is currently Zacks #2 Ranked and has a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 22.7%.

Vishay Intertechnology, Inc. Price and Consensus

Vishay Intertechnology, Inc. Price and Consensus
Vishay Intertechnology, Inc. Price and Consensus

Vishay Intertechnology, Inc. price-consensus-chart | Vishay Intertechnology, Inc. Quote


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