Tuesday , June 22 2021

Opinion: All eyes are on semiconductor companies amid chip shortages – investors should look at these four lesser known names



A lot of attention has been paid to semiconductor companies, as supply chain constraints have reduced the availability of everything from cars to laptops to gaming consoles.

The largest chipmakers and foundries – Intel INTC,
+ 1.30%,
Nvidia NVDA,
+ 2.77%,
AMD Advanced Micro Devices,
+ 1.76%,
Taiwan Semiconductor Manufacturing TSM,
+ 1.79%,
Globalfoundries and Qualcomm QCOM,
+ 1.77%
– have received the most headlines.

Most have done well despite the circumstances. Revenues and prices are up because every unit they can produce is sold.

Once the challenges have been identified, it has become clear that semiconductors are a hot topic, and for investors, that can be seen as an opportunity.

Furthermore, several other names outside the regular in the semiconductor space guarantee attention from investors who want to attach to the growing need for chips.

Here are four that I think deserve attention:

Marvell Technology

Marvell Technology MRVL,
+ 2.13%
reported just under $ 800 million in revenue, while in its last quarter earnings per share (EPS) of 29 cents. That was the fourth consecutive quarter of accelerated revenue growth and record revenue.

Marvell has done a fun job building its unique identity in the chip space, focusing on opportunities in the data center and the edge, and separating it from its consumer business.

The strategy has paid off well for the company. It has received upgrades from major research companies such as Citigroup, B. Riley and Benchmark.

The company is attentive to growth in key markets, including 5G, automotive and cloud, and has excelled with many major chipmakers.

In addition, the recent closure of Inphi’s $ 10 billion acquisition helped the company’s total addressable market (TAM) exceed $ 23 billion and strengthen its network and data center business by adding optical capabilities. As a result, the company is in the right business segments, and the opportunity for growth is evident based on the continuous growth from year to year of its top and bottom lines.

Lattice Semiconductor

Lattice Semiconductor LSCC,
+ 1.86%
came out with earnings earlier this week, delivering growth on both the top and bottom lines on total revenue of just over $ 115 million.

Perhaps the least recognized name on this list, Lattice has made a name for its pure-play focus on delivering low-cost, energy-efficient field-programmable gate arrays (FPGAs). These chips, which are used in servers, automobiles, 5G and the Internet of Things (IoT), are found alongside chips from Qualcomm, Intel, AMD and others. In addition, certain features such as device instant-on for PCs and infotainment rely on Lattice’s technology.

In its last fourth quarter, the company saw growth of its key segments above 20%, with its communications and computing group 28%. Furthermore, the company has done an excellent job in managing inventory during the supply crisis and has shown confidence that demand would be managed due to the shortage.

Applied Materials

Nearly twice the pre-pandemic level and more than 3.5 times the low in March 2020, Applied Materials AMAT,
+ 1.16%
has been a name that investors have become enthusiastic about while taking advantage of current semiconductor supply constraints.

Unlike other names on this list, Applied Materials is not a chipmaker, but rather supplies key materials to chipmakers, which is more in demand than ever before.

The company has also recently unveiled plans to continue growth by enabling its customers to accelerate profits in chip performance despite the delay in Moore’s law.

These plans will include the company providing materials needed to develop completely new types of silicon for 3D packaging and chiplets, which are expected to gain momentum in future innovation cycles.

AMAT also just announced a new go-to-market approach to increasing revenue continuity, announcing its plans to generate 70% of future service and component revenue through subscription-like long-term agreements.

The combination of demand for chips, the complexity and limited competition in this space, and a bullish perspective make Applied Materials an interesting name for investor consideration.

Micron Technology

Micron Technology MU,
+ 1.58%
is best known for its DRAM and NAND flash memory solutions. This focus area tends not to be as exciting as central processing units (CPUs), graphics processing units (GPUs), or systems (SoC) for servers, PCs and smartphones. Still, it’s a lucrative business that Micron has been extremely strong in performing against the odds.

There are many reasons to love Micron. In the short term, delivery constraints have been an advantage for Micron, as memory drives our infrastructure and devices. These catalysts have driven 30% total revenue growth for Micron in its last quarter and perhaps a most notable growth of 44% at the top line of its mobile business unit.

The mobile growth can also be attributed to Micron’s innovation, including its recent multichip package (MCP). The MCP reflects a new 2020 offering that combines both DRAM and high-speed flash storage to improve data rate, improve efficiency, and increase throughput by reducing space occupied by printed circuit boards (PCBs). I expect mobile growth to be robust as smartphone volumes continue to exceed market expectations – one of the reasons for the growing supply constraints.

With general demand for semiconductor on the rise, but also expected growth in autonomous driving, infotainment, 5G, IoT, memory and networking, these four companies stand to benefit and all show the right trajectory in growth, indicating that they may have earned the right to more attention for investors.

Daniel Newman is the main analyst atFuture Research, which provides research, analysis, consulting and / or consulting services to Nvidia, Intel, Salesforce, Qualcomm, Microsoft, Amazon, Oracle, Lattice Semiconductor, Marvell and dozens of companies in the technical and digital sectors. Neither he nor his company has any shareholdings with listed companies. Follow him on Twitter@danielnewmanUV,




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