- Semiconductor chips are used in almost everything electronic or digital.
- TSMC Ltd., one of the world’s largest semiconductor companies, plans to open new plants outside Taiwan as demand for chips rise and backlogs pile up.
- The Dow Jones US Semiconductors Total Stock Market Index (DWCSEM) has gained 56% in one year at the market closing of July 26, 2021.
Semiconductors are used in almost everything electronic, from mobile phones, laptops, electric vehicles to data center and cloud computing. In addition, artificial Intelligence, 5G technology, and the Internet of Things also need semiconductor chips.
The Taiwan-based TSMC Ltd. holds almost half of the global share of the semiconductor market. The supply side was working well until the advent of the pandemic that badly disrupted the industry. Although the demand for smartphones, laptops, and cars rose, supply has been short.
The scarce chip supply is putting additional pressure on manufacturers to produce more. Moreover, in 2021, the renewed focus on the EV industry has fuelled more demand for semiconductors as these electronic components are used across the auto business.
Due to the supply shortage, the companies either had to halt production or run production at a reduced capacity. Recently, TSM announced the construction of a US$12 billion fabrication plant in Arizona, US. Besides this, there are plans to start another factory in Japan and a manufacturing unit in Germany. These new facilities are expected to reduce the dependency of the US and Europe on the Taiwan-based foundry.
Another critical factor to consider is the emerging geopolitical environment that compelled TSM to expand to other continents, according to TSM chairman Mark Liu, reported by FT.
Also, the shifting of production to new areas may increase the cost of chips, which customers would eventually bear. For instance, chip manufacturing in Taiwan is around 40-70% cheaper than in the US, owing to the financial support from China, Taiwan, and South Korea, according to the Boston Consulting Group and Semiconductor Industry Association.
Keeping this in mind, the US is incentivizing the semiconductor industry. In June, it approved about US$52 billion for production and research on semiconductor and telecommunication equipment and offered a 25% tax credit to chipmakers willing to invest in the US.
The Dow Jones US Semiconductors Total Stock Market Index (DWCSEM) has gained 56% in one year as of July 26, 2021. The Nasdaq Composite Index (COMP) gave around 43% annual return.
Therefore, the semiconductor industry can expect solid growth until something major disruption like a pandemic happens again. The semiconductor shortage was in the news primarily due to the automotive industry. Still, other industries like consumer electronics, home appliances and medical devices were also affected by the chip shortage.
Semiconductors chips are the core device for digital technology, ranging from large servers, cloud-computing to e-commerce. Let's glance at the top 10 semiconductor companies worldwide in terms of market capitalization and their one-year performance.
Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM) is the largest dedicated chip foundry worldwide. TSM stock jumped 39% in one year and 9.43% YTD. Its market capitalization is US$584 billion and has a P/E ratio of 29.96. Its dividend yield is 1.21%.
NVIDIA Corporation (NASDAQ: NVDA) is a known name in graphic processing units (GPU) designing. NVDA stock rose 85% in one year and 43.69% YTD. It has a market capitalization of US$ 470 billion and a P/E ratio of 89.32. Its current dividend yield is 0.08%.
Intel Corporation (NASDAQ: INTC) has a market capitalization of US$ 213 billion. This chipmaker and microprocessor designer and manufacturer has a P/E ratio of 11.66. Its dividend yield is 2.62%. The stock increased nearly 10% in one year and 5.22% YTD.
Broadcom Inc. (NASDAQ: AVGO) holds a diverse portfolio ranging from radio frequency filters to networking semiconductors. Its market capitalization is US$ 192 billion, and its P/E ratio is 43.72. The company has a dividend yield of 2.98%. AVGO stock price soared 54% in one year and 6.93% YTD.
Texas Instruments Incorporated (NASDAQ: TXN) has a market capitalization of US$ 169 billion and a P/E ratio of 25.57. The dividend yield is 2.18%. The stock grew 42% in one year and 11.09% YTD.
Advanced Micro Devices, Inc. (NASDAQ: AMD) market capitalization is US$ 109 billion with a P/E ratio of 38.71. It does not pay any dividends. The stock gave a 33% in one year and -2.80% YTD.
Micron Technology, Inc. (NASDAQ: MU) has a P/E ratio of 20.08 and a market capitalization of US$ 82 billion. It does not pay any dividends. The stock price grew 48% in one year and -3.43% YTD.
Analog Devices, Inc. (NASDAQ: ADI) has a market capitalization of US$ 59 billion, a P/E ratio of 38.37 and a dividend yield of 1.69%. The stock grew 42% in one year and 8.03% YTD.
NXP Semiconductors N.V. (NASDAQ: NXPI) market capitalization is US$ 53 billion, the P/E ratio is 129.5, and the current dividend yield is 1.15%. The stock rose 65% in one year and 20.04% YTD.
Marvell Technology, Inc. (NASDAQ: MRVL) has a market capitalization of US$ 47 billion, a P/E ratio of 62.71. Its dividend yield is 0.41%. The stock price grew 66% in one year and 19.04% YTD.
Please note: The above constitutes a preliminary view and any interest in stocks/cryptocurrencies should be evaluated further from an investment point of view.
The reference data in this article has been partly sourced from Refinitiv.