Semiconductor is a winning industry with a built-in advantage. Chipmakers enjoy unprecedented demand for their products and pricing power during a time of supply constraints. They are primed for growth as bottlenecks subside in 2022 and beyond. Semiconductor stocks hold sublime importance and the chipmaking industry is speeding up.
The importance of semiconductors has increased immensely around the world. In December 2021, the World Semiconductor Trade Statistics reported that the annual global sales of semiconductors were expected to grow by 8.8% in 2022. That would exceed $600 billion in sales.
Semiconductor stocks have registered an incredible rally in 2021 that is expected to last well into 2022. The difference can be judged by the fact that chip makers were growing at a rate of 6.8% in 2020, a number that jumped to over 25% last year. We expect the same upthrust among semiconductor stocks.
NXP Semiconductors (NXPI)
The Netherlands-based, NXP Semiconductors (NXPI) earns its revenue from selling chips to the automotive industry. NXP is a profitable company that attracts market shares from making chips for industrial uses, the Internet of Things, as well as chips for infrastructure applications.
Wall Street will be looking for positivity from NXPI as it approaches its next earnings report date. The company is expected to report EPS of $3.01, up 12.31% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $3 billion, up 19.73% from the year-ago period. That will sum up a great 2021 and begin with solid momentum in 2022.
In December last year, NXP announced a strategic partnership with Foxconn Industrial Internet, a subsidiary company of Foxconn Technology. The partnership between the two companies aims to accelerate automotive innovation. NXP will provide Foxconn Industrial Internet with its comprehensive portfolio of automotive technologies.
Namely, the joint project will focus on the development of a fully digital cockpit solution based on the NXP i.MX 8 QuadMax. NXP claims that this will enable global automotive companies to deliver a vivid in-vehicle experience for their customers. Essentially, the cockpit will include digital clusters and a head-up display (HUD) system. The digital cockpit solution is expected to start mass production in 2023.
Being a profitable chipmaking firm, NXPI stock is a good stock to buy this year from the category of semiconductor stocks.
ASML Holding (ASML)
ASML Holding (ASML) is a notable name in the chipmaking industry. The company manufactures and sells advanced semiconductor equipment systems.
In brief, the company manufactures complex lithography systems that are crucial to the production of microchips. The company’s products are used by various major chipmakers. It is also the only company in the world capable of making extreme ultraviolet lithography machines. This essentially makes them the sole enabler for big tech companies to manufacture their products. Therefore, most of the electronics we use today may not exist without ASML machines.
In the past year, ASML stock soared over 50%. This is largely due to the global chip shortage, which the company has benefitted from. Last October, the company reported third-quarter revenue of over $5.94 billion, a 32% increase year-over-year. Besides that, net income was over $1.97 billion, which is a 63% annual increase.
ASML stock is a solid semiconductor stock as Morgan Stanley has given an overweight rating with a price target of $902.
MaxLinear Inc. (MXL)
MaxLinear (MXL) provides radiofrequency, high-performance analog, and mixed-signal communications systems on-chip solutions, also known as SoCs. MXL is a pioneer in communication technology. The company focuses on developing technology that solves some of the world’s most challenging communication technology problems.
Furthermore, its product offerings help to support the existing 5G wireless infrastructure, which benefits the company given the current 5G trend.This trend is increasing with time.
In December 2021, German-based Centec chose MaxLinear as its partner to manufacture next-generation Multi-Gigabit Whitebox switch solutions. This solution leverages upon the newly released MaxLinear 2.5G Ethernet Quad-port PHY. By doing so, it helps to meet the next generation Metro and Enterprise network requirements. Ultimately, this helps customers quickly adopt the speed-upgrade to Multi-Gigabit Ethernet. During the third quarter of 2021, MaxLinear reported a 46.7% increase in revenue to over $229 million.
The company is moving in the right direction and its financial performance is improving as well. Recent research from IDC Research states that nearly two billion Wi-Fi 6 devices will enter the market just in 2022. This means that it will improve sales of MXL.
MXL semiconductor stocks look solid at the moment and could be a decent buy this year.
Synopsys Inc. (SNPS)
Synopsys (SNPS) identifies itself as an electronic design automation company and the company mainly focuses on silicon design and verification. Additionally, it offers intellectual property, software security, and quality-related services. The company mainly develops products and software for the semiconductor and software development industry. In doing so, it also offers a wide portfolio of application security testing tools and services.
The demand for semiconductors is currently much greater than the supply. In 2021, several manufacturers had to strategically pause production as a result of the chip shortage. This excess demand creates an excellent market for Synopsys’ software.
As a result of the excess in demand, Synopsys accelerated its revenue growth in fiscal 2021. The company grew revenues 14% in fiscal 2021 after increasing 10% in fiscal 2020 and 8% in fiscal 2019. This pushed the top line to over $4.2 billion.
Apart from the financials, in December last year, the company announced that Juniper Networks has chosen Synopsys to accelerate its development of photonic-enabled chips. This partnership will help Juniper Networks to develop the next generation of chips used in optical communications. Specifically, Juniper Networks intends to tap into Synopsys’ solutions to design and optimize its hybrid silicon and InP optical platform.
All in all, the company is doing great and SNPs is a solid stock in the semiconductor stocks.
Broadcom Inc. (AVGO)
Broadcom (AVGO) is a renowned name in the chipmaking industry. The company develops and supplies various semiconductor devices.
Broadcom has delivered long-term appreciation through a combination of organic growth, and capital deployment into new and adjacent opportunities. The company has obtained this success through merger and acquisition activity. Moreover, AVGO has also been returning capital to shareholders through buybacks and dividends.
Broadcom recently announced that it had agreed to a deal to purchase computer software firm AppNeta. AppNeta is a leading SaaS-based network performance monitoring solution for the distributed enterprise, that specializes in network performance monitoring.
Broadcom recently posted earnings for the fourth fiscal quarter, reporting earnings per share of $7.81, beating estimates by $0.04. The revenue over the period was $7.4 billion which was up more than 14% year-on-year.
AVGO has established itself as one of the leading figures in semiconductor stocks. The stock price is high up the ranks which limits the upside. Analyst banking firm Piper Sandler has given AVGO stock an overweight rating with a price target of $750.