Actions that benefit from the relocation of semiconductor production by the United States

The global chip shortage, caused by growing demand from the consumer electronics industry and disruptions on the supply side, has impacted the production of a range of products from cars to computers to in recent quarters. Investors can benefit from the trend, with our indicative theme on Stocks that profit from the semiconductor shortage – which includes companies that produce machines and tools for chip manufacturing and semiconductor players with their own manufacturing capacity. The theme has outperformed this year, returning 23% year-to-date, compared to an 11% return for the S&P 500.

Now, while the worst of the semiconductor crisis appears to be over for the auto industry – which has suffered the brunt of the disruption, we believe the theme will continue to outperform in the medium to long term as demand for semiconductor -conductors are expected to exceed supply. . In addition, the demand for semiconductor manufacturing equipment is also expected to increase, as the US government has taken steps to protect its chip supply by inducing domestic production as a result of the current supply crunch, as well. than events such as Covid-19 and the trade war. with China. As a perspective, the US share of semiconductor production has fallen to just 12% from around 37% in 1990 and lawmakers are seeking to reverse this trend. Last week, lawmakers introduced a bipartisan bill providing a 25% tax credit for investments in semiconductor manufacturing equipment and facilities to encourage semiconductor companies to invest in the American production. It comes less than a week after the Senate approved approximately $ 52 billion in funding for the semiconductor industry, to help the United States better take on China.

Within our theme, Applied Materials – a provider of equipment, services, and software used in the production of semiconductor and display products – performed the best, with price up 52% ​​since the beginning of the year. On the other hand, memory company Micron Technology was the worst performer, with its inventory only increasing by about 2%.

[6/7/2021] Flea shortage stocks

Our theme on Stocks that profit from the semiconductor shortage – which includes chip companies with their own manufacturing capability and companies that produce machines and tools for chipmaking – outperformed this year, returning 30% year-to-date, compared to a 13% return for the S&P 500. With some signs that the shortage is easing a bit for the auto sector, as automakers restart some production lines they had previously unused, it is safe to assume that demand for chips will continue to exceed supply across the board over the medium term. For example, Intel CEO Pat Gelsinger expects the shortage to last another two years. There are other trends that might help our theme’s actions. Western countries are looking to become more self-reliant when it comes to semiconductor production, which is currently dominated by China and other countries in Asia, which could boost demand for chip-making equipment. President Joe Biden’s infrastructure plan also includes $ 50 billion in subsidies for the semiconductor industry, which could also help boost demand for manufacturing equipment.

Within our theme, Applied Materials – a provider of equipment, services, and software used in the production of semiconductor and display products – performed the best, with price up 62% since the beginning of the year. On the other hand, memory company Micron Technology was the worst performer, increasing its inventory by around 11%.

[5/12/2021]

Our theme on Stocks that profit from the semiconductor shortage has returned 28% year-to-date, compared with a 13% return for the S&P 500. The current chip shortage has worsened in recent weeks, spanning the auto industry that relies typically on traditional low margin chips, to more advanced chips used in areas such as consumer electronics. For example, Apple recently hinted that sales of some of its iPads and Macs could be affected in the coming quarters by the chip shortage, while Samsung says the supply crunch is impacting its production of televisions and appliances.

Under our theme, the companies that provide tools and machines for chip making have achieved the best results this year. Investors expect the current chip shortage and the growing push by the United States and the European Union to become more self-reliant with semiconductor production (which is currently dominated by China) to boost the market. demand for chip manufacturing equipment. For example, Applied Materials, Brooks Automation and LAM Research recorded cumulative returns of 53%, 35% and 30% respectively. Semiconductor companies with their own manufacturing capacity – which are also part of our theme – also did quite well with Micron Technology’s stock up 20%, Intel up 18% and Skyworks Solutions up. 15% increase. These companies are expected to benefit to some extent from the strong demand and price dynamics in the current market, while being somewhat insulated from the constraints on the supply side.

[4/29/2021] Stocks that profit from the semiconductor crisis

The semiconductor industry has been facing a severe supply crunch, driven by growing demand from the consumer electronics industry through Covid-19 and supply side disruptions including a fire at a manufacturing facility in Japan, freezing weather in the southern United States, and drought in Taiwan. The auto industry is paying the price for the shortfall, with OEMs like Toyota, Volkswagen and GM having to cut production due to a shortage of chips, and consumer electronics majors like Apple are also starting to feel the pain. effects. That said, there is a set of companies that should profit from the current deficit in chip production. For example, semiconductor players that have their own manufacturing capability stand to gain, as they could see higher prices without seeing their costs rise. In addition, companies that produce tools and machines for chipmaking should also benefit, as chipmakers increase their budgets in order to increase their production capacity. For example, Taiwanese company TSMC said it will spend around $ 100 billion over the next three years to increase capacity, while Samsung Electronics plans to invest $ 116 billion in increasing production of here 2030. Our theme on Stocks that profit from the semiconductor shortage has returned 32% year-to-date, compared to a 12% return for the S&P 500. Below is a bit more information about some of the stocks in our theme and how they performed this year .

Applied Materials provides equipment, services and software used in the production of semiconductors and display products. The stock was the best performing of our theme, with an increase of around 56% since the start of the year, driven by strong demand for semiconductor equipment and the increasing complexity of production in the industry. .

Brooks Automation provides automation, vacuum and instrumentation equipment for markets such as the semiconductor industry and life sciences. Inventory is up about 46% year-to-date as the company experiences increased demand for its semiconductor products driven by trends such as the Internet of Things, wireless technology 5G wire and machine learning.

KLA Tencor is another provider of the semiconductor production space, focused on process control and performance management solutions. The stock is up about 25% year-to-date, amid the current chip shortage and calls from the US government to bolster the US semiconductor manufacturing industry.

Intel, one of the largest manufacturers of microprocessors, is also expected to benefit from the current supply crunch as it operates its own factories, unlike competitors such as AMD and Qualcomm which depend on third parties. The company also recently indicated that it is in talks with companies that design chips for automakers to produce their chips at Intel foundries. The stock is up 18% this year.

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