The Age of Microchips
These days, computers are getting smaller than ever, and the smaller they get, the more versatile they become. We are using microchips, more scientifically known as semiconductors, in almost anything right now, from our bodies to appliances, cars, phones, and watches. As these chips become smaller, their capabilities and facilities get more advanced as well.
Microchips play a particularly vital role in wireless communication devices, artificial intelligence, and the internet of things. With the advancement of the 5G internet, industries have the opportunity to design and manufacture devices that work with 5G to communicate with other devices. Also, autonomous machines, which have to make a spontaneous decision according to what happens, can use semiconductors to a great deal. And finally, smartwatches, smart clothes, and other smart things are among the most common users of semiconductors.
Therefore, these little devices have made a considerable change in our world. They have also been a steadily growing investment in the market. Several companies make and design semiconductors around the globe, all of which can be great investment opportunities. However, during the global pandemic of 2020 and 2021, many microchip manufacturing companies, also known as fabs, were forced to reduce their production rate. This, along with the growing demand for these tiny miracles, has led to a global microchip shortage. This makes an excellent opportunity to revisit our stock investment options and include some of the following companies in the mix.
Which microchip manufacturing companies to invest in?
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing was founded in 1987 in Taiwan. This company is the largest microchip manufacturing facility globally, making 10,761 different microchips for different purposes and 499 customers.
One of the most significant points about Taiwan Semiconductor Manufacturing is its not using its brand name to sell its microchips. This point makes TSM a desirable option for companies because they won’t have to compete with the company that has made the microchip. As this is the case for most of the other manufacturers out there, this could be a significant selling point for TSM.
Taiwan Semiconductor Manufacturing is capable of manufacturing over 12 million microchips in different sizes annually. It also includes several subsidiaries in the United States and China, making microchips according to their customers’ needs.
TSM had net revenue of 12.68 billion US dollars in the fourth quarter of 2020. Analysts believe that this company’s revenue will reach 54.6 Billion US dollars by the end of 2021, and this amount will hold during the next year.
The stock for Taiwan Semiconductor Manufacturing is currently traded for $124.50 per share. This stock has experienced a 2.68% growth per year during the last five years. On the other hand, this growth is predicted to be more than 24% per year in the next five years.
Texas Instruments (TXN)
Texas Instruments is an American company that has been making innovative chips, microchips, and nanochips for the last few decades. This company has been responsible for most of the advancements in the semiconductor, or microchip, industry.
What’s more, the mass-production of microchips by Texas Instruments has made it much more affordable for companies to embed these chips in their gadgets and appliances. For instance, the object-detection microchips used to cost about 20 million dollars in the 1980s. This technology now costs $20 and is implemented in most vehicles made all over the world.
Currently, Texas Instruments has more than 100,000 customers from all over the world. These customers are industrial, automotive, personal electronics, communications equipment, and enterprise systems industries. The microchips designed and made for these companies can perform various tasks from making calculations to storing information, detecting objects, making communications, and making autonomous decisions.
Texas Instruments had 3.95 million dollars revenue in the first quarter of 2021. This company is predicted to have 16.6 billion dollars of income in 2021. The Stock for TI is currently traded for $196.93 per share. This number has grown by more than 20% in the last five years. Analysts believe that it will increase by another 10% in the next year.
Nvidia is mainly known as the manufacturer of graphic cards, gaming laptops, and other computer parts. However, this company currently the leading brand name in the microchip industry as well. In fact, Nvidia started its work by inventing and manufacturing the first Graphic Processor Unit, GPU, to be used in computers and gaming consoles. Today, it makes another type of microchip called the Tegra Processor for home entertainment and cloud services.
Nvidia had a revenue of 5.3 billion dollars in the first quarter of 2021. This company is predicted to generate 22.1 billion dollars by the end of this year. Nvidia has experienced a 77% increase in revenue since the previous year, 2020. Analysts estimate that there will be another 32% growth in Nvidia’s revenue by the end of the year.
The stock for Nvidia is currently traded for %599.50 dollars per share. This is 52.83% more than it has been in the last five years. What’s more, the stock for Nvidia is forecasted to grow by another 25.19% per year in the next five years.
Advanced Micro Devices (AMD)
Advanced Micro Devices started its work as a Silicon Valley startup in 1969. Since then, this company has managed to get into the list of the biggest manufacturers of computer and graphic processors worldwide. AMD’s reputation rests mainly on its high-performance computing and graphic microchips, which are one-of-a-kind. These chips can be integrated into computer architectures that make some of the world’s most powerful systems.
ADM made 3.2 billion dollars in the first quarter of 2021. This amount was 79.40% more than the first quarter of the previous year. The stock for ADM is currently sold for $81.34 per share. This stock is predicted to grow by 26.31% per year in the next five years.
Intel has been competing with Nvidia and AMD ever since its foundation in 1968. This company is mainly known for its computer processors. The biggest brands in laptop and phone industries even use Intel processors alongside Nvidia GUPs at their devices’ hearts.
However, after the presidential command about addressing the microchip shortage early in 2021, this company has spent 20 million dollars to make two new chip manufacturing units in Arizona, USA. This company has decided to focus on making various types of chips to address the country’s current shortage.
Intel’s revenue reached 17.88 billion dollars in the first quarter of 2021. This company’s total annual revenue is predicted to get up to 72.13 billion dollars by the end of the following year, 2022. Intel’s stock is currently traded for $66 per share, which has grown 19% per year since five years ago.
How large is the semiconductor market in 2021?
Other than the companies mentioned above, there are some other contenders in the game worth mentioning. For instance, Broadcom (AVGO), which was recently taken over by the Malaysian millionaire, Hock Tan, is one of the biggest chip-making “fabs” in Asia. Micron Technology (MU) is another US-based company specializing in memory chips. Finally, NXP Semiconductors (NXPI) focuses on connectivity microchips and automotive technologies.
In 2020, the global market size for microchips was 440 billion dollars which had grown by 6.8% since the previous year, 2019. In 2021, this market is expected to grow another 10% and reach $448 billion. Following the shortage that was reported early in 2021, this growth might even be more. What’s clear is that companies are striving to make a prompt response to the industry’s needs.