The increasing adoption of the 5G network standard and rising demand from consumer electronics and electric vehicles industries have generated a substantial increase in demand for semiconductors. However, a pandemic-induced interruption in production and other recent headwinds have made it difficult for chipmakers to meet the demand. Increased government and private investments are helping these companies gradually increase their production, however. So, we think the rising demand and their ability to gradually increase their supply positions NXP Semiconductors (NASDAQ:NXPI), Rohm (ROHCY), Kulicke and Soffa Industries (KLIC), and HIMAX Technologies (HMIX) nicely for solid growth. Let’s discuss.The semiconductor industry is expected to continue seeing rising demand this year and beyond with the increasing adoption of cloud technologies, 5G solutions, and rising demand from the booming electric vehicles (EV) industry. While the global chip shortage is expected to persist for some time because of lean inventory resulting from plant shutdowns and slowdowns amid the COVID-19 pandemic, and recent production delays caused by a fire at Japan’s Renesas Electronics plant, government initiatives worldwide to create a more secure supply chain bodes well for the industry going forward. In fact, the global semiconductor manufacturing market is expected to reach $95.9 billion by 2025, representing a 9% CAGR during the period.
With chip manufacturers intensifying investments and aggressively adding capacity to meet the growing demand from electronics, automotive, and other sectors, the industry is expected to witness significant growth in the coming months. Consequently, the industry has been enjoying favorable investor sentiment, as evidenced by the VanEck Vectors Semiconductor ETF’s (SMH) 68% returns over the past year compared to SPDR S&P 500 ETF Trust’s 34.4% gains over this period.
Given the rising demand for semiconductors from various industries, chip stocks such as NXP Semiconductors N.V. (NXPI), Rohm Co Ltd (ROHCY), Kulicke and Soffa Industries, Inc. (KLIC), and Himax Technologies Inc. ADR (NASDAQ:HIMX) are expected to generate substantial growth in their earnings and revenues in the coming months. So, we think it could be wise to bet on these stocks now.