Maxim Integrated Products Inc. (MXIM), Spreadtrum Communications, Inc (ADR) (SPRD): Semiconductor Stocks Ready to Bounce

The company, like Semtech, is an analog and mixed-signal semiconductor maker, though it operates at significantly lower gross profitability. It, too, is guiding for considerable top-line gains in the June quarter. Its largest business segment, Semiconductor Manufacturing Services, is growing nicely. MagnaChip also sells into the display solutions market, such as mobile LCD screens, and the power solutions sector. Furthermore, I like that two of its primary product development markets are green energy and automotive, where semiconductor adoption is apt to increase.

MagnaChip shares have gained ground, more than doubling since bottoming last July, and up 18% just this year. Still, as another company at the forefront of the smartphone market, where it is diverting resources, it may well have above-average capital gains potential.

Summary

Semiconductor companies are highlighted by companies jostling for position in high-growth product markets such as mobile computing, often to mitigate sluggishness in antiquated businesses, like traditional computing. Their proprietary product designs can net wide product margins. Accordingly, the shares of these companies can offer significant price gains. Pitfalls of the industry, such as inventory gluts and reduced capacity utilization can spur selloffs. The best companies to look for are those with top-notch customer contingencies and leading-edge development pipelines. Of those discussed above, at this juncture, I like Maxim the most, followed by Spreadtrum Communications, Inc (NASDAQ:SPRD) and MagnaChip. 

Damon Churchwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Semiconductor Stocks Ready to Bounce originally appeared on Fool.com and is written by Damon Churchwell.

Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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