Logistic hindrances continue to mar the optimal productivity of the U.S. semiconductor industry. Moreover, Congress is yet to pass the $52 billion CHIPS Act.
However, the demand for semiconductor goods has been overwhelmingly strong. “Overall, the semiconductor industry remains on track to deliver another healthy year of growth as the super cycle that began in 2020 continues this year,” said Mario Morales, group vice president, Semiconductors at IDC.
According to Fortune Business Insights, the semiconductor market is projected to grow at a CAGR of 9.2% from 2022 to 2029.
Therefore adding quality semiconductor stocks United Microelectronics Corporation (UMC), STMicroelectronics N.V. (STM), Broadcom Inc. (AVGO), and QUALCOMM Incorporated (QCOM) to your portfolio could be wise, given their fundamental strength.
United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC operates as a semiconductor wafer foundry in Taiwan, Singapore, China, Hong Kong, Japan, the United States, Europe, and internationally. The company provides circuit design, mask tooling, wafer fabrication, and assembly and testing services.
On June 23, 2022, UMC announced that the Science Based Targets initiative approved its emissions reduction targets. UMC became the first semiconductor foundry globally to obtain this approval- a landmark step toward sustainable growth.
Moreover, on April 26, 2022, DENSO Corporation, a leading mobility supplier, and United Semiconductor Japan Co., Ltd., a subsidiary of UMC, announced their collaboration regarding power semiconductors’ production in the face of growing automotive demand.
UMC’s operating revenues increased 34.7% year-over-year to NT$63.42 billion ($2.12 billion) in the first quarter that ended March 31, 2022. Its net income came in at NT$19.81 billion ($662.09 million), up 90% year-over-year, while its EPS came in at NT$1.61, up 89.4% year-over-year.
For fiscal 2022, UMC’s revenue is expected to grow 21.1% year-over-year to $9.32 billion. Its EPS is estimated to increase 34.1% per annum for the next five years. It surpassed the EPS estimates in each of the four trailing quarters. The stock has lost 20.2% over the past month to close the last trading session at $6.70.
UMC has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, it has an A grade for Quality and a B for Growth and Value. UMC is ranked first among 95 stocks in the B-rated Semiconductor & Wireless Chip industry. Click here to see the additional POWR Ratings for UMC (Momentum, Stability, and Sentiment).
STMicroelectronics N.V. (STM)
Headquartered in Geneva, Switzerland, STM and its subsidiaries design, develop, manufacture, and sell semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. Its segments are Automotive and Discrete Group; Analog, MEMS, and Sensors Group; and Microcontrollers and Digital ICs Group.
On July 6, 2022, STM launched its latest FlightSense Time-of-Flight, a solution for user detection, gesture recognition, and intruder alert. It got certified at the highest level by Intel Corporation (INTC) and is a game-changing product in the PC market.
In addition, on June 20, 2022, STM launched its new chip, ST-ONE, to increase energy efficiency in a wide variety of ac-dc adapters, fully compliant with USB-PD 3.1, including laptop and smartphone chargers.
STM’s net sales increased 17.6% year-over-year to $3.54 billion for the first quarter that ended April 2, 2022. Its net income came in at $747 million, up 105.2% year-over-year. Also, its EPS came in at $0.79, up 102.6% year-over-year.
Analysts expect STM’s revenue to be $15.19 billion in 2022, representing a 19.1% year-over-year rise. In addition, the company’s EPS is expected to increase by 5% per annum for the next five years. It surpassed EPS estimates in three of the four trailing quarters. Over the past month, the stock has lost 7% to close the last trading session at $32.71.
STM’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
In addition, it has a B grade for Growth, Value, Sentiment, and Quality. STM is ranked #2 in the same industry. Click here to see the additional POWR Ratings for STM (Momentum and Stability).
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices focusing on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.
On May 26, 2022, AVGO announced that it would acquire all of the outstanding shares of VMware Inc. (VMW) in a cash-and-stock transaction. Also, on May 23, 2022, AVGO launched its high bandwidth monolithic automotive Ethernet switch device, the BCM8958X.
Vijay Janapaty, AVGO’s vice president and general manager of Physical Layer Products (AVGO), said, “Broadcom continues to lead with a comprehensive Ethernet solution for new automotive architectures.”
“Our new high bandwidth BCM8958X automotive switch along with our field proven 802.3ch Ethernet 2.5G/5G/10Gbps and 100M/1G PHYs enable our customers to create future-proofed networking ECUs,” he added.
AVGO’s non-GAAP net revenue increased 22.6% year-over-year to $8.10 billion for the second quarter that ended May 1, 2022. Its non-GAAP net income came in at $4 billion, up 34.2% year-over-year, while its non-GAAP EPS came in at $9.07, up 37% year-over-year.
For 2022, analysts expect AVGO’s revenue to increase 20% year-over-year to $32.93 billion. Its EPS is expected to increase 31.9% year-over-year to $36.94 in 2022. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has lost marginally over the past nine months to close the last trading session at $494.46.
AVGO has an overall A rating, which indicates a Strong Buy in our proprietary rating system. Additionally, it is graded A in terms of Growth and Quality and a B for Sentiment.
Within the Semiconductor & Wireless Chip industry, it is ranked #5. Click here to see the additional POWR Ratings for Value, Momentum, and Stability for AVGO.
QUALCOMM Incorporated (QCOM)
QCOM engages in developing and commercializing foundational technologies for the wireless industry worldwide. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On June 27, 2022, QCOM, through its Qualcomm® Wireless Reach™ initiative, and FHI 360 announced that their Wireless Solutions for Fisheries in Senegal project would officially be adopted by the Senegalese government and expanded nationwide.
The Senegal Ministry of Fisheries and Maritime Economy said, “The WISE project contributes to the sustainable management of fisheries and improves the safety and security of artisanal fishermen and the income of actors through digital solutions.”
QCOM’s non-GAAP revenues came in at $11.16 billion for the second quarter that ended March 27, 2022, up 40.8% year-over-year. Its non-GAAP net income came in at $3.66 billion, up 67.6% year-over-year, while its non-GAAP EPS came in at $3.21, up 68.9% year-over-year.
QCOM’s revenue is expected to increase 33.1% year-over-year to $44.55 billion in 2022. Its EPS is estimated to increase by 14.3% per annum for the next five years. It surpassed EPS estimates in each of the trailing four quarters. The stock has gained 10.2% over the past month to close the last trading session at $144.37.
QCOM's overall B rating equates to a Buy in our POWR Ratings system. In addition, it has a B grade for Growth and Quality.
Click here to check additional QCOM ratings (Value, Momentum, Stability, and Sentiment). QCOM is ranked #10 in the same industry.
UMC shares were trading at $6.77 per share on Monday morning, up $0.07 (+1.04%). Year-to-date, UMC has declined -42.14%, versus a -17.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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