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

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

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!