As the world undergoes a rapid digital transformation, the demand for semiconductors is increasing because they are now an integral component in almost all electronic devices. We believe that this, coupled with rising prices of semiconductor chips due to a global shortage and increasing demand from EV manufacturers, should result in solid gains for Intel (INTC), ASE Technology (ASX), Amkor Technology (NASDAQ:), and ChipMOS Technologies (IMOS). These names are currently trading at relatively undervalued levels. Read on.The remote working and shopping trend is expected to continue even in the post-pandemic environment due to the convenience and efficiency the activity affords. The demand for semiconductors is here to stay because these chips are the backbone of most of the advanced technology devices. While supply constraints are impacting the industry, strong demand is allowing companies to raise prices for their chips and generate substantial profit. Investors’ increasing interest in the industry is evidenced by SPDR S&P Semiconductor ETF’s (XSD) 100.6% returns over the past year versus the SPDR S&P 500 ETF’s (SPY) 49.3% gains over this period.
Continued advancements in computing, artificial intelligence (AI), Internet of Things (IoT), 5G, and driverless cars are expected to keep driving the demand in the semiconductor space. According to WBOC, the worldwide market for semiconductor equipment is expected to grow at a CAGR of 6.9% over the next five years.
Against this backdrop, we think it is wise to bet on established semiconductor players Intel Corporation (NASDAQ:), ASE Technology Holding Co., Ltd. (NYSE:), Amkor Technology, Inc. (AMKR), and ChipMOS Technologies Inc. (IMOS) that are still trading at reasonable valuations and hold immense growth potential.
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