Backed by government funding and corporate investment, the semiconductor chip industry is making a comeback. Analysts expect accelerated capacity additions should ease the shortage in the coming months. And we think the industry’s growth potential, and the sky-high demand, should allow well-established chip makers STMicroelectronics (STM) and United Microelectronics (UMC) to achieve significant growth in the near term. So, these stocks could be solid bets now. Read on.After a prolonged shortage of semiconductor chips, which has created supply chain disruptions across several tech-dependent industries, studies show front-end manufacturing has finally started to meet demand. However, deficiencies in back-end manufacturing and materials persist. But capacity additions facilitated by hefty investments by governments and industry giants are expected to ease the chip shortage by year’s end.
According to the International Data Corporation (IDC), the industry should stabilize by the middle of 2022, with a potential for overcapacity in 2023 because larger-scale capacity expansions are expected to begin toward the end of 2022. Furthermore, IDC expects the semiconductor market to grow by 17.3% in 2021, versus 10.8% in 2020.
Because the industry is making a comeback, we think prominent industry players STMicroelectronics N.V. (STM) and United Microelectronics Corporation (UMC) should be quality additions to one’s portfolio now.