The semiconductor industry remained crippled by the lingering supply chain issues, hampering optimum productivity. Moreover, the Ukraine-Russia war has further strained the accessibility of raw materials. Vinay Gupta, the International Data Corporation’s Asia-Pacific research director, said, “The semiconductor supply is not going to increase immediately.”
However, given its varied usage across industries, the global IoT Chip market is estimated to grow at a CAGR of 15.5% from 2022 to 2028.
On the other hand, the Senate is expected to pass the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act this week. The $52 billion bill is expected to boost U.S. domestic chip production in manifolds while also providing tax credits for investments in the sector.
The legislation “is going to advance our nation’s competitiveness and our technological edge,” President Biden said while urging Congress to “pass this bill as soon as possible.”
The forward movement in this bill could propel the fundamentally strong semiconductor stocks, Intel Corporation (INTC), United Microelectronics Corporation (UMC), and Photronics, Inc. (PLAB), to skyrocket.
Intel Corporation (INTC)
Industry leader INTC designs, manufactures, and sells computer products and technologies worldwide. It operates through CCG; DCG; IOTG; Mobileye; NSG; PSG; and All Other segments. The company serves original equipment manufacturers, original design manufacturers, and cloud service providers.
On July 25, 2022, INTC and MediaTek announced their agreement to manufacture chips using Intel Foundry Services’ advanced process technologies. This alliance is expected to fortify future growth possibilities for both companies.
In addition, on July 12, 2022, INTC launched the first set of its open-source AI reference kits, which were built in collaboration with Accenture plc (ACN). These highly affordable kits come with advanced technology and are designed to help developers and data scientists to introduce AI quickly into their applications.
INTC’s Datacenter and AI segment revenue increased 22.1% year-over-year to $6.03 billion for the first quarter ended April 2, 2022. Its net income came in at $8.11 billion, up 141.4% year-over-year, while its EPS came in at $1.98, up 141.5% year-over-year.
Analysts expect INTC’s revenue to grow 2.6% year-over-year to $76.43 billion in 2023. Its EPS is expected to grow 2.7% per annum for the next five years. It has surpassed EPS estimates in each of the trailing four quarters. The stock has gained marginally year-over-year to close the last trading session at $39.16.
INTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
INTC has an A grade for Value and a B grade for Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #27 out of 94 stocks. Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for INTC.
United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC operates as a semiconductor wafer foundry in Taiwan, Singapore, China, Hong Kong, Japan, the United States, Europe, and internationally. The company provides services for circuit design, mask tooling, wafer fabrication, and assembly and testing.
On June 23, 2022, UMC announced that the Science Based Targets initiative (SBTi) approved its emissions reduction targets. UMC became the first semiconductor foundry globally to obtain this approval.
Also, on April 26, 2022, DENSO Corporation, a leading mobility supplier, and United Semiconductor Japan Co., Ltd., a subsidiary of UMC, announced their collaboration regarding power semiconductors’ production. This deal is expected to boost productivity and help stabilize overwhelming demand.
UMC’s operating revenues increased 34.7% year-over-year to NT$63.42 billion ($2.12 billion) in the first quarter that ended March 31, 2022. Its net income came in at NT$19.81 billion ($662.09 million), up 90% year-over-year, while its EPS came in at NT$1.61, up 89.4% year-over-year.
For fiscal 2022, UMC’s revenue is expected to grow 21.1% year-over-year to $9.32 billion. Its EPS is estimated to increase 34.1% per annum for the next five years. It surpassed the EPS estimates in each of the four trailing quarters. Over the past month, the stock has lost 6.5% to close the last trading session at $6.87.
UMC has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. In addition, it has an A grade for Quality and a B for Growth and Value.
UMC is ranked first in the Semiconductor & Wireless Chip industry. Click here to see the additional POWR Ratings for UMC (Momentum, Stability, and Sentiment).
Photronics, Inc. (PLAB)
PLAB and its subsidiaries manufacture and sell photomask products and services in the United States, Taiwan, Korea, Europe, China, and internationally. It sells its products to semiconductor and FPD manufacturers, designers, foundries, and other high-performance electronics manufacturers.
On May 25, 2022, Frank Lee, CEO, said, “We expect favorable demand trends to continue for advanced mobile displays, high-end logic devices and mainstream IC applications as our customers release new designs and build out new capacity.”
For the second quarter ended May 1, 2022, PLAB’s revenue increased 28% year-over-year to $204.51 million. Its net income came in at $29.84 million, up 183.5% year-over-year, while its EPS came in at $0.49, up 188.2% year-over-year.
PLAB’s revenue is expected to come in at $818.87 million in 2022, representing a 23.4% year-over-year rise. The company’s EPS is expected to increase 120.9% year-over-year to $1.90 in 2022. It surpassed EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 63.7% to close the last trading session at $21.79.
It’s no surprise that PLAB has an overall A rating, equating to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, Sentiment, and Quality.
PLAB is ranked #3 in the same industry. Click here to see the additional POWR Ratings for PLAB (Momentum and Stability).
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INTC shares were trading at $39.49 per share on Tuesday morning, up $0.33 (+0.84%). Year-to-date, INTC has declined -22.13%, versus a -16.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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