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Global Semiconductor Sales Rise YoY in August: 4 Stocks to Buy

Global sales of semiconductors rose year over year in August, according to the Semiconductor Industry Association (SIA). The global semiconductor industry, which plays a key role in the high-growth technology space, has been relatively less battered by the coronavirus pandemic.

Moreover, with the economy reopening, sales of smartphones rebounding in markets like China and more people spending time on their mobile phones, the semiconductor industry might stand to benefit in the near term.

Global Semiconductor Sales Increase YoY

According to SIA, worldwide sales of semiconductors increased 4.9 % in August to $36.2 billion from $34.5 billion a year earlier. Also, sales in August were 3.6 % higher than the July total of $35 billion. Moreover, sales into the Americas remained strong in August, increasing 23.6% year over year.

Regionally, sales increased on a month-over-month basis in the Americas (2.6%), China (2.9%), Asia Pacific/All Other (2.1%), Japan (1.5%) and Europe (5.5%). However, on a year-over-year basis, regionally sales increased in Americas (23.6%), China (3%), and Asia Pacific/All Other (2.1%), but decreased in Japan (-1.4%) and Europe (-10.1%).

Chipmakers to Gain With Further Economy Reopening

Although the industry has shown steady growth, it has fallen short of other technology counterparts like Internet and cloud computing. Per the IDC Semiconductor Applications Forecaster, the coronavirus outbreak is going to impact the industry.

Slowing smartphone sales during the coronavirus pandemic was a cause of concern for not only mobile manufacturers but also chipmakers. However, this is slowly changing, with economies gradually opening up.

China — one of the biggest markets for chipmakers — is finally rebounding. In August, SIA projected worldwide sales of $426 billion for semiconductors in 2020, reflecting a 3.3% increase from the 2019 sales total of $412.3. Also, the global semiconductor market is projected to grow 6.2% in 2021.

Microchip demand is also likely to get a boost with the 5G boom in Europe and parts of Asia, including China and Singapore. IDC expects 5G volumes to grow this year, which should act as a tailwind to the semiconductor market.

Our Choices

With economies reopening, smartphone sales rebounding and the 5G boom, it is likely that semiconductor manufacturers will benefit in the days to come. Below are four chip stocks that investors can gain from in the current scenario.

STMicroelectronics N.V. STM is a global independent semiconductor company, which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices.

The company’s expected earnings growth rate for next year is 56.1%. The Zacks Consensus Estimate for current-year earnings has improved 15.3% over the past 60 days. STMicroelectronics holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Materials, Inc. AMAT is one of the world’s largest suppliers of equipment for the fabrication of semiconductor, flat panel liquid crystal displays, and solar photovoltaic cells and modules. The company also offers deployment and support services related to the equipment supplied.

The company’s expected earnings growth rate for next year is 33.9%. The Zacks Consensus Estimate for current-year earnings has improved 6.8% over the past 60 days. Applied Materials carries a Zacks Rank #2.

Silicon Laboratories, Inc. SLAB is a leading provider of silicon, software and solutions for the Internet of Things, Internet infrastructure, industrial automation, consumer and automotive markets. They solve the electronics industry's toughest problems, providing customers with significant advantages in performance, energy savings, connectivity and design simplicity.

The company’s expected earnings growth rate for next year is 18.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the past 60 days. Silicon Laboratories holds a Zacks Rank #2.

Qorvo, Inc. QRVO is a leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications.

The company’s expected earnings growth rate for next year is 11.5%. The Zacks Consensus Estimate for current-year earnings has improved 7% over the past 60 days. Qorvo carries a Zacks Rank #2.

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