The semiconductor industry is thriving, driven by technological advancements and the rising demand for gadgets that rely on chips. With AI-driven features and innovative enhancements integrated into smartphones, computers, and appliances, semiconductors have become a crucial part of daily life, accelerating their demand across industries.
Amid this surge, investors could consider keeping an eye on fundamentally sound semiconductor stocks such as Taiwan Semiconductor Manufacturing Company Limited (TSM), Photronics, Inc. (PLAB), and Qorvo, Inc. (QRVO). These companies are poised to benefit from the rapid growth in semiconductor demand.
Key innovations in AI, machine learning, 5G networks, big data, and electric vehicles have boosted the demand for semiconductor chips. With frequent groundbreaking innovations in gadgets that utilize these chips, both the average consumer and tech enthusiasts are increasingly drawn to these products, driving further demand.
According to a study by Counterpoint, global smartphone shipments are expected to grow by 5% year-over-year in 2024, reaching 1.23 billion units—the highest in the past five years. The inclusion of generative AI features in smartphones is a key factor driving this increased demand.
Similarly, the PC market is seeing rising demand for chips, especially in graphical processing units (GPUs) used for gaming, crypto-mining, and video editing. This ongoing need for more advanced GPUs continues to fuel growth in the PC segment.
Gartner, Inc. (IT) reports that worldwide PC shipments reached 60.6 million units in the second quarter of 2024, marking a 1.9% increase from the same period in 2023. This highlights the growing importance of semiconductors in supporting various computing functions.
The semiconductor industry’s performance reflects these trends. The Semiconductor Industry Association (SIA) reported that global semiconductor sales reached $149.9 billion in the second quarter of 2024, an 18.3% increase compared to the second quarter of 2023.
Looking ahead, the World Semiconductor Trade Statistics (WSTS) forecasts a 12.5% growth in the global semiconductor market, with the market expected to reach $687 billion in 2024 alone. This growth outlook underscores the immense potential for continued success in the semiconductor sector.
So, considering these trends, let’s analyze the fundamentals of three Semiconductor & Wireless Chip stocks, beginning with #3.
Stock #3: Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices. The company provides a range of wafer fabrication processes and also offers customer and engineering support services.
On October 3, TSM announced the signing of a memorandum of understanding with Amkor Technology, Inc. (AMKR) to collaborate and bring advanced packaging and test capabilities to Arizona to further expand the region’s semiconductor ecosystem.
Through this agreement, TSM would utilize AMKR’s contract turnkey advanced packaging and test services. The collaboration allows TSM to better serve its customers by streamlining processes. By capitalizing on AMKR’s expertise, TSM can enhance the efficiency of its operations and meet customer demands with improved speed and quality.
On August 20, ESMC, a joint venture between TSM, Robert Bosch GmbH, Infineon Technologies AG (IFNNY), and NXP Semiconductors N.V. (NXPI), announced a ceremony to mark the initial phase of land preparation for the joint venture’s first semiconductor lab in Dresden, Germany.
The facility is expected to bring TSM’s advanced manufacturing capabilities closer to European customers, fostering stronger partnerships and expanding its influence in the European market.
TSM’s trailing-12-month levered FCF margin of 22.86% is 117.20% higher than the 10.53% industry average. Its trailing-12-month EBIT margin of 43.62% is 780.3% higher than the 4.96% industry average. Likewise, the stock’s trailing-12-month gross profit margin of 54.45% is 8.4% higher than the industry average of 50.26%.
During the fiscal third quarter that ended September 30, 2024, TSM’s net revenue increased 39% year-over-year to $23.50 billion. Its gross profit grew 48.1% from the year-ago value to $13.59 billion. Moreover, the company’s income from operations was $11.16 billion, up 58.2% year-over-year.
In addition, TSM’s net income and EPS totaled $10.06 billion and $0.39, indicating a growth of 54.2% for both from the prior year’s quarter, respectively.
Analysts expect the company’s revenue for the fiscal fourth quarter (ending December 2024) to increase 32.4% year-over-year to $26.24 billion. For the same quarter, the company’s EPS is expected to grow 51% from the prior year’s period to $2.17. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of TSM have surged 51.8% over the past six months and 124.1% over the past year to close the last trading session at $200.78.
TSM’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
TSM has an A grade for Sentiment and Quality. It is ranked #8 out of 91 stocks in the Semiconductor & Wireless Chip industry.
Click here to access additional TSM ratings for Stability, Momentum, Value, and Growth.
Stock #2: Photronics, Inc. (PLAB)
PLAB is a global manufacturer and seller of photomask products for integrated circuits, flat panel displays (FPD), and circuit pattern transfer onto semiconductor wafers and substrates. The company sells its products to semiconductor and FPD manufacturers, designers, foundries, and high-performance electronics manufacturers.
When talking about PLAB’s trailing 12-month EBITDA margin of 35.95%, it is 266.6% higher than the industry average of 9.81%. The stock’s trailing-12-month levered FCF margin of 10.95% is 4.1% more than the sector average of 10.53%. Plus, its trailing-12-month net income margin of 16.22% is 329.8% higher than the 3.77% industry average.
For the fiscal third quarter that ended on July 28, 2024, PLAB’s revenue came in at $210.98 million. Its gross profit registered at $75.14 million. Moreover, the company’s non-GAAP net income attributable to PLAB increased marginally year-over-year to $31.92 million. Meanwhile, its EPS stood at $0.51.
As of July 28, 2024, PLAB's cash and cash equivalents amounted to $537.33 million, compared to $499.29 million on October 31, 2023. Its total current assets came in at $892.64 million, up from $785.45 million on October 31, 2023.
The consensus revenue estimate of $940 million for the fiscal year ending October 2025 reflects a year-over-year rise of 9%. Its EPS for the same period is expected to grow 5.8% from the prior year to $2.20.
Shares of PLAB have surged 2.7% over the past month and 17.2% over the past year to close the last trading session at $23.74.
PLAB’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
PLAB has a B grade for Value and Quality. In the same industry, it is ranked #7 out of 91 stocks.
To access PLAB’s additional grades for Growth, Stability, Momentum, and Sentiment ratings, click here.
Stock #1: Qorvo, Inc. (QRVO)
QRVO develops and commercializes technologies for wireless, wired, and power markets. The company’s operations span three segments: High Performance Analog (HPA); Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG). It also offers foundry services for defense and aerospace clients.
On January 31, QRVO announced a definitive agreement to acquire Anokiwave, a supplier of high-performance silicon integrated circuits for intelligent active array antennas used in defense, SATCOM, and 5G applications. Anokiwave’s high-frequency beamforming and IF-to-RF conversion ICs would complement QRVO’s existing RF front-end portfolio.
The combination of QRVO’s capabilities with Anokiwave’s technology would enable QRVO to deliver highly integrated solutions and SiPs for defense, aerospace, and network infrastructure.
QRVO’s trailing-12-month EBIT margin of 11.12% is 124.3% higher than the 4.96% industry average. The stock’s trailing-12-month levered FCF margin of 19.06% is 81% more than the 10.53% industry average. Additionally, its ROTC of 4.92% is 76.6% higher than the industry average of 2.79%.
QRVO’s revenue for the fiscal 2025 first quarter, which ended on June 29, 2024, increased 36.2% year-over-year to $886.67 million. Its non-GAAP operating income rose 110.1% from the year-ago value to $98.13 million.
Additionally, the company’s non-GAAP net income amounted to $83.52 million, or $0.87 per share, up 148.7% and 155.9% from the previous year’s quarter, respectively.
For the September 2024 quarter, QRVO expects a sequential increase in revenue, gross margin, and EPS. It projects revenue of approximately $1.025 billion, with a potential leeway of $25 million. Non-GAAP gross margin is expected to be between 46% and 47%. Meanwhile, non-GAAP earnings per share is forecasted to be between $1.75 and $1.95.
Street expects QRVO’s revenue and EPS for the next fiscal year (ending March 2026) to increase 7.8% and 27.9% year-over-year to $4.26 billion and $7.94, respectively. Furthermore, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of QRVO have gained 4.7% over the past month and 14% over the past year to close the last trading session at $104.50.
QRVO’s promising outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
QRVO has a B grade for Growth, Value, and Quality. It is ranked #4 out of 91 stocks within the Semiconductor & Wireless Chip industry.
Beyond what we stated above, we have also given QRVO grades for Momentum, Sentiment, and Stability. Get all the QRVO’s ratings here.
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TSM shares fell $1.08 (-0.54%) in premarket trading Monday. Year-to-date, TSM has gained 94.72%, versus a 24.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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