Broadcom Corporation (BRCM), QUALCOMM, Inc. (QCOM): These Semiconductor Companies Can Be Good Investments

Page 1 of 2

The semiconductor industry is showing continuous growth, but in a cyclical pattern with high volatility. According to World Semiconductor Trade Statistics, or WSTS, semiconductor industry sales are expected to grow 4.5% this year, against a decline of 3.2% last year. The decline in the computer market segment and rising demand for analog and embedded segments are some of the reasons behind this volatility.

In light of this growth, here is an analysis of three semiconductor companies. To enhance revenue, these companies are adopting different strategies like launching new products and closing old manufacturing facilities. But, will these strategies provide good long-term investment opportunities?

Baseband growth and 5G Wi-Fi chips

On June 13, 2013, Broadcom Corporation (NASDAQ:BRCM) introduced a new 3G baseband chip, the BCM23350 for high performance in low-range smartphones. Baseband is the chip which manages all radio transmissions; the BCM23350 has a quad-core HSPA processor which runs at a speed of 1.2 gigahertz. The quad core processor will provide multitasking and rich graphic capabilities for smartphones.

It is expected that the new BCM23550 chip will contribute $130 million to Broadcom Corporation (NASDAQ:BRCM)’s second-quarter sales in 2013, and that its  sales of baseband chips will grow 49.3% year-over-year to $522.2 million this year and $742.4 million next year.

The company recently launched 5G Wi-Fi combination chips for low-cost consumer devices and extended this technology for use in connected homes. These 5G Wi-Fi chips are three times faster and six times more power-efficient than the previous generation of Wi-Fi chips. The company will provide both standalone chips with 5G Wi-Fi and combo chips with Bluetooth capability.

These types of chips will be used in 50% of total wireless integrated circuits by the end of 2014. Broadcom Corporation (NASDAQ:BRCM) is the first company to offer 5G Wi-Fi technology across all platforms. The Wi-Fi, Bluetooth, and GPS combo chips together contribute to 25% of Broadcom Corporation (NASDAQ:BRCM)’s total revenue. The company expects to generate total revenue of $8.58 billion this year and $9.35 billion next year, up from $8 billion last year.

Snapdragon 400 processor and 3G subscriber growth in China

On June 4, 2013, announced that its wholly owned subsidiary, QUALCOMM, Inc. (NASDAQ:QCOM) Technologies, is offering a new Snapdragon 400 processor chip. This processor can be used in both 3G and 4G LTE networks. This processor will help QUALCOMM, Inc. (NASDAQ:QCOM) capture the low-cost smartphone market in China and other emerging markets. The chip will be available by end of this year.

The company dominates the smartphone processor market with 43%of market share. With the growing demand for smartphones, total revenue of the company is expected to rise to $24.36 billion this year and $26.72 billion next year, compared to $19.12 billion last year.

Strong 3G subscriber growth in China will benefit Qualcomm’s licensing business. Sale of subscriber equipment by QUALCOMM, Inc. (NASDAQ:QCOM) licensees generates more than 90% of patent licensing royalty revenue. Chinese wireless carriers China Mobile Ltd. (ADR) (NYSE:CHL), China Unicom (Hong Kong) Limited (NYSE:CHU), and China Telecom Corporation Limited (ADR) (NYSE:CHA) combined reported an addition of 16.5 million 3G subscribers in May 2013. Currently, 3G represent 26.6% of China’s total market.

Looking at subscriber growth in China, QUALCOMM, Inc. (NASDAQ:QCOM) should increase its TD-SCDMA subscriber share with its QUALCOMM, Inc. (NASDAQ:QCOM) Reference Design, or QRD program. TD-SCDMA is a 3G standard for mobile telecommunication in China. The company will benefit from strong growth trends of 3G in China through increased royalties and licensing revenue. The licensing and royalty revenue are expected to rise $7.78 billion this year and $8.60 billion next year, compared with $6.65 billion last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!