Although COVID-19 lockdowns in Malaysia have exacerbated the global chip shortage, governments’ initiatives worldwide to keep critical factories up and running and address supply chain vulnerabilities bode well for semiconductor manufacturers. With chip suppliers reallocating capital and increasing supply to the automotive and electronics markets, the shortage is expected to reduce gradually. According to the World Semiconductors Trade Statistics, the worldwide semiconductor market is expected to grow by 25.1% in 2021.

Investors’ confidence in the semiconductor industry is evident from the iShares Semiconductor ETF’s (SOXX) 59.8% return over the past year. The global semiconductor market is expected to reach $778 billion by 2026, registering a CAGR of 7.7%.

Therefore, we think it could be wise to bet on quality large-cap semiconductor stocks such as Broadcom Inc. (AVGO), STMicroelectronics N.V. (STM), United Microelectronics Corporation (UMC), and Qorvo, Inc. (QRVO). They are expected to deliver substantial returns in the near term based on their market dominance, consistent innovations, and diverse portfolio.

Broadcom Inc. (AVGO)

AVGO is a global technology company that focuses on semiconductor and infrastructure software solutions. Its product offerings serve the data center, networking, software, broadband, wireless, storage, and industrial markets. The company has a market capitalization of $207.8 billion.

This month, AVGO launched the world’s lowest power L1/L5 GNSS receiver chip with GNSS innovations, the BCM4778, optimized for mobile and wearable applications. This third-generation chip should enable the company to maintain its tradition of raising the bar for mobile GNSS and allow its customers to experience 35% smaller and 5% less power consumption features.

AVGO’s net revenue for the fiscal third quarter that ended August 1, 2021, increased 16.4% year-over-year to $6.78 billion. The company’s net income grew 28.3% from the year-ago value to $3.12 billion. Its EPS rose 28.9% from the prior-year quarter to $6.96. Also, the company’s cash flow increased 11.4% from the year-ago value to $3.54 billion.

Analysts expect AVGO’s revenue to increase 14.7% year-over-year to $27.4 billion in the fiscal year 2021. Also, the company has an impressive earnings surprising history; it surpassed the consensus EPS estimates in each of the trailing four quarters. In addition, its EPS is expected to increase 26% in the current year. Moreover, the stock has gained 17% over the past nine months and 41.5% over the past year.

AVGO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Also, the stock has a B grade for Momentum, Growth, and Quality. We’ve also graded AVGO for Sentiment, Stability, and Value. Click here to access all of AVGO’s grades. AVGO is ranked #2 out of 97 stocks in the B-rated Semiconductor & Wireless Chip industry.

Click here to check out our Semiconductor Industry Report for 2021

STMicroelectronics N.V. (STM)

Headquartered in Geneva, Switzerland, STM is a microelectronics and semiconductor chip manufacturer with a market capitalization of $42.14 billion.  The company operates through Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group segments. STM also offers products such as Data Converters, Audio ICs, and also many other solutions.

This month, STM collaborated with Paco Rabanne to introduce a new “Phantom” fragrance for men. This fragrance is packed in a bottle that is connected to an embedded NFC, using a contactless technology supported by smartphones to connect to its online “Phantom Universe.” Through this innovative approach, STM has been able to bring a sustainable and advanced luxury fragrance bottle to its customers globally.

For the second quarter that ended July 3, 2021, STM’s net revenues increased 43.4% year-over-year to $2.99 billion. The company’s gross profit grew 66% from the year-ago value to $1.21 billion. Its operating income increased 361.3% from the prior-year quarter to $489 million. Also, the company’s net income increased 357.8% year-over-year to $412 million.

STM’s revenue is expected to increase 22.6% year-over-year to $12.53 billion in the fiscal year 2021. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Moreover, its EPS is expected to increase by 60.8% in the current year. Over the past nine months, the stock has soared 25.7%. Also, the stock has returned 58.9% over the past year.

STM’s POWR Ratings reflect this promising outlook. The stock has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. Also, the stock has a B grade for Quality, Value, and Momentum.

In addition to the POWR Rating grades I’ve just highlighted, one can see STM’s grades for Stability, Sentiment, and Growth here. STM is ranked #3 in the same industry.

United Microelectronics Corporation (UMC)

With a market capitalization of $29.54 billion, UMC is a Hsinchu City, Taiwan-based semiconductor company. The company provides high-quality IC fabrication services, focusing on logic and various specialty technologies to serve major electronics industry sectors. Its comprehensive IC processing technologies and manufacturing solutions include Logic/Mixed-Signal, embedded High-Voltage, embedded Non-Volatile-Memory, RFSOI, BCD, etc.

This month, Fortune Venture Capital, a subsidiary of UMC, and IC packaging and testing house, Chipbond Technology Corporation, entered into a strategic partnership by issuing and exchanging new shares. With this share exchange transaction, UMC and its subsidiary, Fortune Venture Capital, are expected to hold around 9.1% of the equity in Chipbond.

UMC’s operating revenue increased 14.7% year-over-year to NT$50.91 billion ($1.84 billion) for the second quarter that ended June 30, 2021. The company’s gross profit grew 55.1% from the year-ago value to NT$15.91 billion ($573.82 million). Its operating income rose 93.5% from the prior-year quarter to NT$11.31 billion ($408.08 million). Also, the company’s net income increased 96.1% year-over-year to NT$11.87 billion ($428.06 million).

For the fiscal year 2022, analysts expect UMC’s revenue to increase 41.8% year-over-year to $10.57 billion. It has surpassed the consensus EPS estimates in three of the trailing four quarters. The company’s EPS is estimated to increase 66.7% in the current year. The stock has gained 43.6% over the past nine months and 181.3% over the past year.

It’s no surprise that UMC has an overall grade of A, which equates to a Strong Buy rating in our POWR Ratings system. Also, the stock has an A grade for Momentum, and a B for Stability and Quality.

Click here to see additional grades for UMC (Growth, Value, and Sentiment). In the same industry, UMC is ranked #4.

Qorvo, Inc. (QRVO)

Incorporated in 1957, QRVO is a provider of core technologies and radio frequency (RF) solutions to mobile, infrastructure, defense, aerospace, and Internet of Things markets. Its devices also support broadband data, telecommunications and GPS. The company operates through two segments, Mobile Products; and Infrastructure and Defense Products. It has a market capitalization of $19.53 billion.

In July, QRVO announced that the Qorvo Omnia SARS-CoV-2 Antigen Test platform completed a key milestone for the NIH Rapid Acceleration of Diagnostics (RADx) initiative. James Klein, president of Qorvo Biotechnologies, stated, “Independent external studies are a critical step in educating the market about the capabilities of the Omnia Antigen Test and an important milestone in the evolution of the Qorvo Omnia diagnostic platform. We are pleased with the results and investigator feedback from these studies.”

For the fiscal first quarter that ended July 3, 2021, QRVO’s revenue increased 41% year-over-year to $1.11 billion. The company’s operating income grew 220.5% from the year-ago value to $297.1 million. Its net income rose 194.7% from the prior-year quarter to $285.63 million. Also, the company’s EPS increased 202.4% year-over-year to $2.51.

Analysts expect QRVO’s revenue to increase 18.3% year-over-year to $4.75 billion in the fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. QRVO’s EPS is expected to increase by 24.4% in the current year. Moreover, the stock has gained 39.8% over the past year.

QRVO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, which equates to a Strong Buy rating in our POWR Ratings system. Also, the stock has an A grade for Quality, and a B grade for Sentiment and Growth. We’ve also graded QRVO for Momentum, Stability, and Value. Click here to access all of QRVO’s grades. In the same industry, QRVO is ranked #11.

AVGO shares were trading at $492.34 per share on Tuesday afternoon, down $12.51 (-2.48%). Year-to-date, AVGO has gained 15.05%, versus a 17.24% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...

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