Global sales of semiconductors rose year over year in May, according to the Semiconductor Industry Association (SIA). Also, the agency predicted that global semiconductor sales will increase in both 2020 and 2021.
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 increased 5.8% in May to $35 billion from $33 billion a year earlier. Sales also increased 1.5% month over month. Global semiconductor sales in April totaled $34.4 billion.
On a year-over-year basis, sales increased significantly in the Americas (25.5%) and more modestly in China (4.9%), Asia Pacific/All Other (2.5%), and Japan (1.5%), but decreased 12.9% in Europe. Additionally, SIA endorsed the WSTS Spring 2020 global semiconductor sales forecast, and projected worldwide sales at $426 billion in 2020, reflecting a 3.3% increase from the 2019 sales total of $412.3. Also, the global semiconductor market is projected to grow 6.2% in 2021.
Chipmakers to Gain With Economy Reopening
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, the coronavirus outbreak is going to impact the industry.
Slowing smartphone sales during the coronavirus pandemic was a cause of concern for not only mobile manufacturers but also chipmakers. However, this is slowly changing now with economies finally opening up.
China — one of the biggest markets for chipmakers — is finally rebounding. Also, Micron Technology MU last month during it third-quarter 2020 earnings call reported revenue growth of 13% on a sequential basis driven by data center and mobile markets. Most of the company’s fab and assembly sites continued with full production during the quarter, with the Singapore and Taiwan facilities reaching record production.
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 and Singapore. 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.
With economies reopening, smartphone sales rebounding and the 5G boom, it is likely that semiconductor manufacturers will benefit in the days to come. Below are four chip stocks investors can gain from in the current scenario.
Semtech Corporation SMTC designs, manufactures and markets a wide range of analog and mixed- signal semiconductors for commercial applications comprising Signal Integrity Products, Protection Products, Power and High-Reliability Products, Wireless and Sensing Products, and Systems Innovation Group.
The company’s expected earnings growth rate for the current year is more than 7.9%. The Zacks Consensus Estimate for current-year earnings has improved 13.9% over the past 60 days. Semtech Corporationhas a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NVIDIA Corporation NVDA is the worldwide leader in visual computing technologies and 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 36.4%. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the past 60 days. Nvidia carries a Zacks Rank #2.
Micron Technology, Inc. through global brands, namely Micron, Crucial and Ballistix, manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory (DRAM), NAND flash memory, NOR Flash, 3D XPoint memory and other technologies.
The company’s expected earnings growth rate for next year is 46.4%. The Zacks Consensus Estimate for current-year earnings has improved 29% over the past 60 days. Micron holds a Zacks Rank #2.
Marvell Technology Group Ltd. MRVL is a fabless designer, developer and marketer of analog, mixed-signal and digital signal processing integrated circuits.
The company’s expected earnings growth rate for next year is 50%. The Zacks Consensus Estimate for current-year earnings has improved 8.2% over the past 60 days. Marvell Technologycarries a Zacks Rank #2.
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 0.4% over the past 60 days. Taiwan Semiconductorhas a Zacks Rank #2.
5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
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