The semiconductor industry that reached unprecedented heights following the COVID-19 outbreak in 2020 has been struggling for months. However, the worst appears to be over as sales are finally rebounding, as projected by experts.
After taking a hit last year, semiconductor sales are steadily improving. According to the Semiconductor Industry Association (SIA), sales improved in the second quarter and are poised to grow in the near term as demand remains high across multiple industries.
Semiconductors Sales Bounce Back
According to the latest report from SIA, global semiconductor sales totaled $124.5 billion in the second quarter, up 4.7% from the first quarter. Also, sales grew 1.7% month over month in June to $41.5 billion.
Sales are still down year over year but industry experts believe that the market will rebound in the near term as predicted earlier. Semiconductor sales have now grown for four straight months.
John Neuffer, SIA president and CEO, said, “Although global semiconductor sales in 2023 remain behind the totals from last year, revenue ticked up in June for the fourth consecutive month and notched solid quarter-over-quarter increases, providing optimism the market will continue to rebound over the second half of the year.”
The increased demand for electronic goods and the rise of remote working and learning during the pandemic led to a significant surge in semiconductor sales.
Nevertheless, increased demand and supply-chain challenges caused by lockdowns led to a worldwide semiconductor shortage, disrupting various end-user industries such as automobiles, power, lighting and electronics.
In 2022, the supply-chain crisis eased, and demand for semiconductors slowed. Despite the industry’s ongoing challenges, 2022 became a standout year for the semiconductor sector, with sales increasing 3.2% to reach $573.5 billion from $555.9 billion in 2021.
The current short-term decline in the semiconductor industry can be attributed to various interconnected factors, including increasing prices, geopolitical tensions and lingering pandemic aftereffects. Despite these challenges, the demand for semiconductors remains robust.
The global adoption and growing utilization of consumer electronics, along with the expanding prevalence of artificial intelligence, the Internet of Things and machine learning technologies, are the key drivers of the increasing demand for semiconductors. This trend is expected to further bolster the demand for semiconductors in the foreseeable future.
Our Picks
Given the bright prospects, it would be wise to invest in semiconductor stocks. Below are four chip stocks that investors can gain from in the near term.
NVIDIA Corporation NVDA is the worldwide leader in visual computing technologies and inventor of the graphic processing unit (GPU). Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms. NVIDIA’s GPU success can be attributed to its parallel processing capabilities supported by thousands of computing cores, necessary to run deep-learning algorithms.
NVIDIA’s expected earnings growth rate for next year is 38.3%. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the past 60 days. NVDA presently sports a Zacks Rank #1 (Strong Buy).
Lam Research Corporation LRCX supplies wafer fabrication equipment and services to the semiconductor industry. LAM’s products are used by semiconductor manufacturers in front-end and WLP processes, creating memory, microprocessors, and other logic-integrated circuits for a broad range of electronic devices.
Lam Research Corporation’s expected earnings growth rate for next year is 23.5%. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the past 60 days. LRCX currently sports a Zacks Rank #1.
NXP Semiconductors NXPI provides high-performance mixed-signal and standard product solutions that leverage its RF, analog, power management, interface, security as well as digital processing expertise. NXPI seems well-positioned to capitalize on the level 2-5 automotive market. Additionally, NXP Semiconductors is the leader in general-purpose microcontrollers and application processors in industrial and IoT markets.
NXP Semiconductors’ expected earnings growth rate for next year is 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the past 60 days. Presently, NXPI carries a Zacks Rank #2.
ON Semiconductor Corporation ON 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’s products provide clock management and data flow management for precision computing and communications systems, and power management for distributing and monitoring the supply of power to different elements within virtually every electronic device.
ON Semiconductor’s expected earnings growth rate for next year is 9.4%. The Zacks Consensus Estimate for current-year earnings has improved 6.6% over the past 60 days. ON currently has a Zacks Rank #2.
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Lam Research Corporation (LRCX): Free Stock Analysis Report
NXP Semiconductors N.V. (NXPI): Free Stock Analysis Report
ON Semiconductor Corporation (ON): Free Stock Analysis Report
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