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Global Semiconductor Sales Rise in May: 4 Stocks to Buy

Ritujay Ghosh

Global sales of semiconductors rose year over year in April, according to the Semiconductor Industry Association (SIA). However, sales dipped 1.2% month over month from $34.9 billion in March.

The global semiconductor industry, which plays a key role in the high-growth technology space, has been relatively less battered by the coronavirus pandemic. Moreover, with the economy reopening, sales of smartphones rebounding in markets like China and more people spending time on their mobile phones, the semiconductor industry might stand to benefit in the near term.

Global Semiconductor Sales Increase YoY

Worldwide sales of semiconductors rose 6.1% year over year in April to $34.4 billion from $32.4 billion a year earlier, said SIA. Sales declined year over year in Japan but increased in the Americas (24.5%), China (4.4%), and Asia Pacific/All Other (3.3%).

However, April sales of $34.4 billion were down 1.2% from March. According to SIA, the slight decline in April sales compared to the previous month is in line with seasonal trends. It also said that the global semiconductor market through April showed early signs of resilience to the economic turmoil caused by the COVID-19 pandemic.

Chipmakers Likely to Gain as Economy Reopens

Although the industry has shown steady growth, it has fallen short of other technology counterparts like Internet and cloud computing. Per the IDC Semiconductor Applications Forecaster (SAF), the coronavirus outbreak is going to impact the semiconductor industry.

Slowing smartphone sales during the coronavirus pandemic was a cause of concern for not only mobile manufacturers but also chipmakers. However, this may change now with economies finally opening up.

China, which is one of the biggest markets for chipmakers, is finally rebounding. According to China’s authorities, Apple, Inc.’s AAPL iPhone sales in China continued to recover in April. Apple sold 3.9 million iPhones in China in April, according to CINNO Research. That’s a 160% increase from March, when it sold 1.5 million smartphones.

Also, Micron Technology MU last month said that smartphone demand in China has finally started to rebound. This is likely to help Micron, one of the market leaders in DRAM and NAND flash memory chips, and even its rivals in the near term.

Microchip demand is also likely to get a boost with the 5G boom in Europe and parts of Asia including China. IDC expects 5G volumes to grow this year despite the demand uncertainty, driving strong semiconductor content as OEMs position 5G in lower tiers to broaden the reach. There are 5G phones that have started selling for under $300 in China.

Our Choices

Although the IDC has warned that semiconductor revenues might somewhat decline in 2020, rebounding smartphone sales and the 5G boom are likely to act as a tailwind to the space. Below are four chip stocks investors can gain from in this scenario.

Taiwan Semiconductor Manufacturing Company Ltd. TSM 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 30.2%. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the past 60 days. Taiwan Semiconductorsports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corporation NVDA 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 AI-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 34.9%. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 30 days. Nvidia carries a Zacks Rank #2 (Buy).

Inphi Corporation IPHI is a provider of fabless high-speed analog semiconductor solutions for the communications and computing markets. Its solutions provide interface between analog signals and digital information in high-performance systems.

The company’s expected earnings growth rate for the current year is 65.8%. The Zacks Consensus Estimate for current-year earnings has improved 24.2% over the past 60 days. Inphi has a Zacks Rank #2.

NeoPhotonics Corporation NPTN is engaged in the design and manufacture of photonic integrated circuit based modules and subsystems for bandwidth-intensive, high-speed communications networks.

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 61.8% over the past 60 days. NeoPhotonicshas a Zacks Rank #2.

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Click to get this free report Micron Technology, Inc. (MU) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report NeoPhotonics Corporation (NPTN) : Free Stock Analysis Report Inphi Corporation (IPHI) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research