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Applied Materials, Inc. (AMAT), KLA-Tencor Corporation (KLAC), Cree, Inc. (CREE): 3 Must-Have Semiconductor Companies

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The global semiconductor industry will grow by 6.4% to $322.30 billion this year, compared to $303.02 billion last year. The key driver for this growth is the increasing demand for silicon. Therefore, being optimistic about industry growth, many companies are using innovative and efficient technology to increase their market share. Let’s analyze three companies that recently launched new products and are using advanced technology to boost their revenue.

Two major segments will accelerate earnings

Applied Materials, Inc. (NASDAQ:AMAT)

Applied Materials, Inc. (NASDAQ:AMAT) will reduce its spending by $25 million per quarter this year in its solar segment due to the stagnant market for solar products. The company is planning to shift this reduced amount in product development into its wafer fabrication equipment, or WFE, segment. It has planned this shift to maximize on increasing demand for NAND technology. NAND technology is used in manufacturing within the WFE segment and is the main revenue driver of this segment. NAND is a flash memory technology which doesn’t require power to retain data. This technology is generally used in manufacturing smartphone chips. It also helps to reduce chip size, lower voltage demand and increase efficiency. The company is expecting the WFE segment to grow by 30% – 40% annually due to rising demand of smaller memory chips of 20 nanometer, or nm, from the earlier 28 nm. Attributed to rising smartphone usage, the company is expecting higher equipment sales. Applied Materials, Inc. (NASDAQ:AMAT) will generate overall revenue of $7.1 billion by 2014, compared to $5.5 billion in 2012.

The company’s display equipment segment observed sales growth of 46% quarter-over-quarter in the second quarter of 2013. The major reason for revenue growth was the increase in usage of both touch screen smartphones and tablets. The company is planning to strengthen its market position with OLED displays. OLED tech is used in displays and are much thinner and lighter than LCD’s. The total number of smartphones and tablets sold in the first three months of this year were 200 million and 35 million, respectively. Applied Materials, Inc. (NASDAQ:AMAT) expects that the smartphone and tablet market will achieve the targeted annual growth of 35% and 55%, respectively, this year. The company’s OLEDs demand is rising in smartphones due to wider viewing angle and thinner formats. It is expected that its global distribution of OLEDs will rise from 49 million in 2010 to 271 million in 2015 at 41% CAGR.

Increased investments and dividend yield will boost investor’s confidence

KLA-Tencor Corporation (NASDAQ:KLAC)’s is forecasting a revenue increase of 5% – 10% in the second half of this year, above the first half, due to its inspection services. These services are generally used by chip manufacturers to detect small electrical problems in their integrated circuits. The company renders its inspection services in various foundries. Due to rising demand of gadgets such as smartphones or tablets, memory chip production is also increasing. Also, multiple foundries are investing more in the 20 nm process technology. The 20 nm is a process used to develop integrated chips that provide higher speeds.

KLA-Tencor Corporation (NASDAQ:KLAC), is a leader in inspection in foundries and holds 80% market share. Therefore, as a result of the rise in gadget production, the company is expecting revenue growth from its inspection services. Overall, it is expecting to generate revenue of $3.8 billion by June 2014 as compared to $3.1 billion in June 2012.

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