By Daniel Newman
A mass of attention has been brought 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 (NAS:INTC) , Nvidia (NAS:NVDA) , Advanced Micro Devices (NAS:AMD) , Taiwan Semiconductor Manufacturing (NYS:TSM) , Globalfoundries and Qualcomm (NAS:QCOM) — have gotten most of the headlines.
Most have done well despite the circumstances. Revenue and prices are up as every single unit they can produce is sold.
As the challenges are sorted out, it has become clear that semiconductors are a hot commodity, and for investors, that could be considered an opportunity.
Furthermore, several other names beyond the regulars in the semiconductor space warrant attention from investors looking to attach to the growing need for chips.
Here are four that I believe warrant attention:
Marvell Technology (NAS:MRVL) reported just under $800 million in revenue while delivering earnings per share (EPS) of 29 cents in its most recent quarter. That was the fourth consecutive quarter of accelerated earnings growth and record revenue.
Marvell has done a nice job building its unique identity in the chip space, focusing on opportunities in the data center and the edge, and divesting itself of its consumer business.
The strategy has paid off well for the company. It has received upgrades from key research firms like Citigroup, B. Riley and Benchmark.
The company has been attentive to growth in key markets, including 5G, automotive and cloud, coexisting nicely with many big chipmakers.
In addition, the recent close of its $10 billion acquisition of Inphi helped take the company’s total addressable market (TAM) over $23 billion and strengthen its networking 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 year-over-year growth of its top and bottom lines.
Lattice Semiconductor (NAS:LSCC) came out earlier this week with earnings, 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 itself for its pure-play focus on delivering low-cost, power-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 capabilities like device instant-on for PCs or infotainment rely on Lattice’s technology.
In its most recent quarter, the company saw growth of its key segments above 20%, with its communications and computing group reaching 28%. Further, the company has done an excellent job managing inventory during the supply crunch and displayed confidence that it would manage demand through the shortage.
Up nearly two times from its pre-pandemic level and more than 3.5 times from its March 2020 low, Applied Materials (NAS:AMAT) has been a name that investors have grown more enthusiastic about while benefiting from the current semiconductor-supply constraints.
As opposed to other names on this list, Applied Materials isn’t 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 empowering its customers to accelerate gains in chip performance despite the slowing of Moore’s Law.
These plans will include the company offering materials required to develop entirely new types of silicon for 3D packaging and chiplets, which are expected to gain momentum in coming innovation cycles.
AMAT also just announced a new go-to-market approach to shore up revenue continuity, announcing its plans to generate 70% of future service and parts revenue through subscription-like long-term agreements.
The combination of demand for chips, the complexity and limited competition in this space, and a bullish outlook make Applied Materials an interesting name for investor consideration.
Micron Technology (NAS:MU) is best known for its DRAM and NAND flash memory solutions. This focus area doesn’t tend to be as exciting as building central processing units (CPUs), graphics processing units (GPUs), or systems (SoC) for servers, PCs and smartphones. Still, it is a lucrative business that Micron has been extremely strong in executing against the opportunity.
There are many reasons to like Micron. Short-term, the supply constraints have been a boon for Micron, as memory fuels our infrastructure and devices. These catalysts have driven 30% overall revenue growth for Micron in its most recent quarter and perhaps a most noteworthy 44% top-line growth 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 offering from 2020 that combined both DRAM and fast flash storage to improve data access speed, improve power efficiency and increase yield by reducing space occupied on printed circuit boards (PCBs). I expect the mobile growth to be robust as smartphone volumes continue to outpace market expectations — one of the reasons for the growing supply constraints.
With overall semiconductor demand on the rise, but also expected growth in autonomous driving, infotainment, 5G, IoT, memory and networking, these four companies stand to benefit and are all showing the right trajectory in growth, indicating that perhaps they have earned the right to more investor attention.
<EMPHASIS>Daniel Newman is the principal analyst at </EMPHASIS>Futurum Research<EMPHASIS>, which provides or has provided research, analysis, advising, and/or consulting to Nvidia, Intel, Salesforce, Qualcomm, Microsoft, Amazon, Oracle, Lattice Semiconductor, Marvell and dozens of companies in the tech and digital industries. Neither he nor his firm holds any equity positions with any companies cited. Follow him on Twitter <INTERNET LOCATION="EXTERNAL" URL="https://twitter.com/danielnewmanuv">@danielnewmanUV</INTERNET>.</EMPHASIS>