In this article, we will take a look at the 10 cheap semiconductor stocks to buy now.
Semiconductors form the basis of every modern-day computing device. Since the invention of the modern-day metal–oxide–semiconductor field-effect transistor in 1959, the industry has grown at a remarkable pace. The original transistor, which measured 20 µm, has now been reduced to nanometers, with billions of the tiny circuits present on chips powering smartphones, notebooks, and personal computers.
The semiconductor industry’s importance to the modern world came to light during the ongoing pandemic as populations moved indoors for their work and entertainment needs. This placed an unprecedented demand on the world’s leading foundries, especially the Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), which is the largest contract chip manufacturer in the world, responsible for providing semiconductors to companies such as Apple Inc. (NASDAQ: AAPL) and Advanced Micro Devices, Inc. (NASDAQ: AMD).
Despite the rapid advances in chip manufacturing and design over the past 60 years, multiple research entities believe that the best is yet to come for the semiconductor sector. According to Fortune Business Insights, the sector was worth $425.96 billion in 2020, and between 2021 and 2028, it is expected to grow from $452.25 billion to $803.15 billion with a compound annual growth rate (CAGR) of 8.6%.
The CAGR provided by Fortune Business Insights is striking when compared to historic growth levels for the sector. According to the Semiconductor Industry Association (SIA), which is a consortium of the leading chip manufacturers and designers in the United States, the semiconductor sector grew with a CAGR of 5.1% between 1999 and 2019.
According to research from IC Insights, total semiconductor shipments in 2021 are expected to touch 1.135 trillion units marking a 13% increase from 2020 to set a new all-time high record. This growth is fueled by the ongoing pandemic and growing sectors such as artificial intelligence, data centers, and fifth-generation (5G) cellular networks.
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Our Methodology
We picked relatively cheap semiconductor stocks with strong long-term growth catalysts for this list. We also took into account hedge fund sentiment while choosing these stocks.
Why pay attention to hedge fund sentiment while choosing stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
10 Cheap Semiconductor Stocks to Buy Now
10. Teradyne, Inc. (NASDAQ:TER)
Share price as of Monday, September 20, 2021: $ 116.48
Number of Hedge Fund Holders: 44
Teradyne, Inc. (NASDAQ: TER) is a company involved in the early stages of semiconductor manufacturing. It is a test equipment designer that sells this equipment to companies to enable them to validate their semiconductor designs during the manufacturing process and after it as well.
After their designs have been printed on a wafer, Teradyne, Inc. (NASDAQ: TER) ‘s equipment lets the chip companies test the wafers to confirm that the implementation is accurate. Once fabrication is complete, and the wafers are cut into individual pieces and packaged in enclosures, this equipment lets the companies test the chips again to ensure that they are free from any defects.
In addition to enabling chip companies to test their products, Teradyne, Inc. (NASDAQ: TER)’s machines also help printed circuit board (PCB) makers test their products after manufacturing is finished.
Like Intel Corporation (NASDAQ: INTC), Micron Technology, Inc. (NASDAQ: MU), Marvell Technology, Inc. (NASDAQ: MRVL) and Advanced Micro Devices, Inc. (NASDAQ: AMD), Teradyne, Inc. (NASDAQ: TER) is a notable semiconductor stock to buy today.
9. Entegris, Inc. (NASDAQ:ENTG)
Share price as of Monday, September 20, 2021: $128.76
Number of Hedge Fund Holders: 25
Similar to II-VI Incorporated (NASDAQ: IIVI), Entegris, Inc. (NASDAQ: ENTG) also manufactures and sells products that are used inside machines used to fabricate and print semiconductors. Semiconductors are manufactured by machines that use light rays to print nanometer-sized circuits on a silicon wafer. During this process, the wafer needs to be kept clear of any outside contaminants and the chemicals used for printing the circuits are also removed once the required patterns have been created on the wafer.
Entegris, Inc. (NASDAQ: ENTG) products help the chip manufacturers during this process, as it provides filtration products, materials that protect the wafer during the process, and coating that streamline the production process. Entegris, Inc. (NASDAQ: ENTG) is also one of the oldest semiconductor companies out there, as it was founded 55 years ago and is currently headquartered in Billerica, Massachusetts.
Like Intel Corporation (NASDAQ: INTC), Micron Technology, Inc. (NASDAQ: MU), Marvell Technology, Inc. (NASDAQ: MRVL) and Advanced Micro Devices, Inc. (NASDAQ: AMD), Entegris, Inc. (NASDAQ: ENTG) is gaining the attention of hedge funds today.
In the Q2 2021 investor letter of Artisan Partners, the fund mentioned Entegris, Inc. (NASDAQ: ENTG). Here is what the fund said:
“Entegris is one of the largest suppliers of advanced materials (high purity gases/chemicals) and filtration systems used in semiconductor manufacturing. The industry’s incredibly complex production environment is getting increasingly onerous—more process steps, greater purity requirements—which is driving higher demand for Entegris’ products and systems. Furthermore, rising chip content across a broad swath of industries (industrial, auto, communications, consumer) to enable new technological advances (5G, AI/ML, cloud, EV’s, autonomous vehicles) has driven semiconductor wafer production growth to ~6% annually. Given this backdrop, we believe the company is well-positioned for a solid profit cycle ahead.”
8. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Share price as of Monday, September 20, 2021: $101.55
Number of Hedge Fund Holders: 63
Advanced Micro Devices, Inc. (NASDAQ: AMD) is one of the two companies in the world that are licensed to sell microprocessors manufactured using the x86 microarchitecture. Its partnership with the Taiwan Semiconductor Manufacturing Company (TSMC) coupled with revolutionary semiconductor designs has brought Advanced Micro Devices, Inc. (NASDAQ: AMD) to prominence, with an astounding share price growth of 1,763% over the past five years.
Advanced Micro Devices, Inc. (NASDAQ: AMD) focuses its attention on the consumer central processing unit (CPU), graphics processing unit (GPU), custom GPU, and enterprise CPU segments. It is also in the process of acquiring field-programmable gate array manufacturer Xilinx, as it hopes to expand its presence in the growing artificial intelligence, machine learning, and 5G segments and better compete with the larger rival Intel Corporation (NASDAQ: INTC) who is the other x86 licensee.
Like Intel Corporation (NASDAQ: INTC), Micron Technology, Inc. (NASDAQ: MU) and Marvell Technology, Inc. (NASDAQ: MRVL), Advanced Micro Devices, Inc. (NASDAQ: AMD) is one of the affordable semiconductor stocks to buy now.
7. Micron Technology, Inc. (NASDAQ:MU)
Share price as of Monday, September 20, 2021: $72.37
Number of Hedge Fund Holders: 87
Micron Technology, Inc. (NASDAQ: MU) is one of the oldest semiconductor companies in the world, with 42 years having been passed since it was founded in Boise, Idaho. Micron Technology, Inc. (NASDAQ: MU) is also one of the most well-known companies in the segment, rivaling chip giant Intel Corporation in the area. Micron Technology, Inc. (NASDAQ: MU) focuses its attention and products in the computer memory segment, providing the semiconductors for use in both personal and enterprise computing products.
Micron Technology, Inc. (NASDAQ: MU) sells Dynamic Random Access Memory (DRAM) modules, high bandwidth solutions for a variety of products such as graphics processing units (GPUs) from Nvidia Corporation, NOT-AND (NAND) memory modules ad NAND devices such as Solid State Storage (SSD) devices and NOR flash memories. Micron Technology, Inc. (NASDAQ: MU) is one of the most well-known memory companies out there and competes globally with firms such as Samsung Group’s memory division.
6. Lattice Semiconductor Corporation (NASDAQ:LSCC)
Share price as of Monday, September 20, 2021: $64.09
Number of Hedge Fund Holders: 24
Lattice Semiconductor Corporation (NASDAQ: LSCC) focuses its attention on a narrower set of semiconductors than most of the companies that we have included in this list. Lattice Semiconductor Corporation (NASDAQ: LSCC) primarily manufactures and sells field-programmable gate arrays (FPGAs) and other semiconductor devices that can be programmed based on a company’s needs. These devices are different than the chips used inside computers and smartphones, which have a fixed function that can not be altered by their user
Lattice Semiconductor Corporation (NASDAQ: LSCC)’s FPGAs are used for general and specific applications, with the latter involving video processing and device securities. These products are also used in a variety of products such as televisions, notebooks, and medical equipment. Lattice Semiconductor Corporation (NASDAQ: LSCC)’s semiconductor products differ from their competitors in the power consumption area, with the company generally targeting low power products especially as it looks to target the emerging fifth-generation (5G) cellular connectivity market.
Artisan Global Discovery Fund, in its Q4 2020 investor letter, mentioned Lattice Semiconductor Corporation (NASDAQ: LSCC). Here is what the fund said:
“Lattice Semiconductor is a vendor of field programmable gate array (FPGA) chips used in personal computers, 5G infrastructure, routers and switches, and servers, to name a few. The company now has a new board and management team—the current CEO joined from leading microprocessor provider Advanced Micro Devices in late 2018—which have embarked on a product-transformation journey. The company has refreshed its FPGA products in the small/low power segment of the market—making it more focused on addressing high return-on-investment use cases centered around power-efficient applications—carving itself a niche behind the two market leaders focused on high-end, Xilinx and Intel Corporation. In addition to providing FPGA chips to data centers and new 5G infrastructure— particularly compelling opportunities given these end markets are and will likely continue benefiting from strong secular tailwinds—we believe the company is well positioned to tap into lowpower/reprogrammable chips as well as industrial and automotive end markets.”
5. Marvell Technology, Inc. (NASDAQ:MRVL)
Share price as of Monday, September 20, 2021: $60.68
Number of Hedge Fund Holders: 51
Marvell Technology, Inc. (NASDAQ: MRVL) is headquartered in Santa Clara, California and it targets a variety of enterprise semiconductor segments. Marvell Technology, Inc. (NASDAQ: MRVL) is also famous for having supplied the first WiFi chip for Apple’s original iPhone launched in 2007 and the first in-car mobile WiFi connectivity platform in the Audi A8. However, as mentioned above, its primary markets are the enterprise sectors, where it works with the likes of Microsoft Corporation and Nokia.
Marvell Technology, Inc. (NASDAQ: MRVL) not only offers off the shelf data processing units (DPUs), but it also allows its customers to design their own integrated circuits, which are then made a part of the company’s product packages. It has also partnered with Huawei, Nokia, Samsung, ZTE, and Ericsson for providing processors for the companies’ fifth generation (5G) telecommunications products aimed towards telecommunication carriers. It also provides products to the aerospace and defense industries.
ClearBridge Investments, in its Q1 2021 investor letter, mentioned Marvell Technology, Inc. (NASDAQ: MRVL). Here is what the fund said:
“We also purchased Marvell Technology Group, in the IT sector, a semiconductor maker with exposure to the fast growing 5G and data center markets whose shares sold off in the latest rotation out of growth stocks. Marvell just acquired data center supplier Inphi, a name we have held in other ClearBridge portfolios, which should increase the chipmaker’s cross-selling opportunities in a strong demand environment for chips.”
4. II-VI Incorporated (NASDAQ:IIVI)
Share price as of Monday, September 20, 2021: $59.29
Number of Hedge Fund Holders: 29
II-VI Incorporated (NASDAQ: IIVI) is another American chip manufacturer headquartered in Saxonburg, Pennsylvania. As opposed to other semiconductor firms that sell chips, the company also sells machines that are responsible for manufacturing and selling semiconductor laser machines which enables its customers to process materials for a wide variety of products.
II-VI Incorporated (NASDAQ: IIVI) also supplies lasers that enable the manufacturing of vertical cavity surface emitting lasers (VCSELs). VCSELs are products that have grown alongside the communication boom ushered in by fourth generation (4G) cellular networks and the datacenter markets as they enable faster communications.
The company also provides high quality wafers to semiconductor foundries. These wafers are then printed with the billions of tiny transistors by chipmakers such as Intel Corporation and the cut up into individual chips for further processing. II-VI Incorporated (NASDAQ: IIVI) also supplies materials used to manufacture chipmaking machines.
Carillon Eagle Small Cap Growth Fund, in its Q4 2020 investor letter, mentioned II-VI Incorporated (NASDAQ: IIVI). Here is what the fund said:
“II-VI, otherwise known as “Two-Six,” is a diversified technology company with significant exposure to optical components for telecommunications infrastructure products used in data centers and next-generation 5G networks. The company provided forward revenue guidance that was better than expected, and investors are excited about a laser component that is used in mobile phones to enable 3D sensing functionality, providing the camera with depth perception.”
3. Intel Corporation (NASDAQ:INTC)
Share price as of Monday, September 20, 2021: $52.98
Number of Hedge Fund Holders: 78
Intel Corporation (NASDAQ: INTC), which is one of the, if not the most well-known semiconductor company in the world might seem a surprising addition to this list. However, Intel Corporation (NASDAQ: INTC)’s share price is lower when compared to its smaller peers such as Advanced Micro Devices, Inc and NVIDIA Corporation, due to the fact that the company has a significantly higher number of shares outstanding. According to Yahoo Finance, Intel Corporation (NASDAQ: INTC) has 4.06 billion shares outstanding, while NVIDIA and AMD, which have higher share prices, have 2.49 billion and 1.21 billion shares, respectively.
While Intel Corporation (NASDAQ: INTC) has struggled with pushing out semiconductors manufactured on the leading-edge manufacturing processes, the company under the leadership of its new chief executive officer Mr. Patrick Gelsinger is looking to make a comeback. As an established player, Intel Corporation (NASDAQ: INTC) has several agreements with U.S. government agencies and it commands a dominating market share in the x86 microprocessor market, with its only competitor being AMD.
2. Infineon Technologies AG (OTC:IFNNY)
Share price as of Monday, September 20, 2021: $41.82
Number of Hedge Fund Holders: 1
Infineon Technologies AG (IFNNY) is a German semiconductor manufacturing company that was originally part of the Siemens AG business group. While the term semiconductors generally bring computer and smartphone chips to mind, the market is more diverse than this as it includes other smaller segments such as power management integrated circuits and automotive processors. The company targets the automotive chip sector, the industrial sector which includes power generation companies, sensors that are located inside a plethora of devices such as computers, notebooks, gaming consoles, and datacenters and chips present inside Subscriber Identification Modules (SIM) for phones, credit and debit cards, passports and other products which require secure processing.
Infineon Technologies AG (IFNNY) was also at the center of the recent automobile chip shortage which resulted in several automakers such as Ford shutting down their production lines. However, as foundries ramp up production, the automotive sector is also expected to experience significant growth. This growth is evident in an analysis by PricewaterCoopers, one of the world’s largest accounting firms, who forecasts that by 2022 end, the automotive subsector of the semiconductor industry will have grown by 11.9%.
1. ON Semiconductor Corporation (NASDAQ:ON)
Share price as of Monday, September 20, 2021: $47.67
Number of Hedge Fund Holders: 44
ON Semiconductor Corporation (NASDAQ: ON) is an American semiconductor supplier which was formed in 1999. It is headquartered in Phoenix, Arizona, and is responsible for catering to several subsectors within the semiconductor industry. The company also has its own manufacturing facilities inside the United States, and through these, it manufactures and sells custom chips as required by its customers. ON Semiconductor Corporation (NASDAQ: ON) also supplies image sensors and memory devices, which when combined with its custom chips, make up for the company’s customized semiconductor segment.
In addition to this segment, the company also sells products under the discrete, power management and signal management categories. The discrete segment caters to high power devices, the power management sector supplies chips installed in products such as voltage regulators and the signal management sector covers technology products such as amplifiers and radiofrequency devices.
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Disclosure: None. 10 Cheap Semiconductor Stocks to Buy Now is originally published on Insider Monkey.
