Driven by lucrative government investments and rapid technological advancements, the chip industry is soaring and is anticipated to remain buoyed in the foreseeable future.
Given this backdrop, investors could consider investing in quality chip stocks Amkor Technology, Inc. (AMKR), United Microelectronics Corporation (UMC), and Infineon Technologies AG (IFNNY) now. These stocks are rated B (Buy) in our proprietary POWR Ratings system.
The semiconductor industry showcased commendable resilience last year. According to Gartner, Inc., worldwide semiconductor revenue in 2023 totaled $533 billion and is projected to reach $624 billion in 2024, indicating the industry’s robust outlook this year.
Moreover, the chip industry is poised to thrive amid the integration of AI, IoT, and 5G technologies and escalating chip requirements in electric vehicles and renewable energy systems. Innovations such as nanotechnology, the introduction of new materials, and advanced manufacturing techniques are facilitating the creation of more potent and energy-conserving chips, meeting the ever-evolving demands of the industry.
Furthermore, the Biden administration is undertaking momentous initiatives to ensure that the U.S. remains competitive in the global semiconductor industry. It has recently announced subsidies for top semiconductor companies to bolster advanced chip manufacturing in the U.S.
The global semiconductor chip market is anticipated to reach $1.12 trillion by 2032, growing at a CAGR of 7.1%.
Considering these conducive trends, let's look at the fundamentals of the three Semiconductor & Wireless Chip stocks, starting with number 3.
Stock #3: Amkor Technology, Inc. (AMKR)
AMKR provides outsourced semiconductor packaging and test services. It offers turnkey packaging and test services, including semiconductor wafer bump, wafer probe, wafer back-grind, package design, packaging, system-level and final test, and drop shipment services.
On January 16, AMKR partnered with GlobalFoundries (GF), one of the world’s leading semiconductor manufacturers, to redefine the semiconductor manufacturing landscape by enabling the first comprehensive EU supply chain from semiconductor wafer production at GF to OSAT services at AMKR.
To facilitate this collaboration, GF transferred its 300 mm Bump (12-inch bump, CuP and plated bump) and Sort lines from its Dresden site to AMKR’s IATF 16949 certified Porto plant to establish the first at-scale back-end facility in Europe. This partnership signals AMKR's goal to stabilize a robust and resilient European automotive supply chain.
On December 26, 2023, AMKR paid to stockholders a quarterly cash dividend of $0.08 per share on the company’s common stock. Its annualized dividend of $0.32 per share translates to a dividend yield of 0.99% on the current share price. Its four-year average yield is 0.64%. AMKR’s dividend payments have grown at a 96.6% CAGR over the past three years.
AMKR’s trailing-12-month cash from operations of $1.25 billion is significantly higher than the industry average of $76.89 million. Its trailing-12-month EBITDA and net income margins of 17.51% and 6.11% are 96.3% and 195.6% higher than the industry averages of 8.92% and 2.07%, respectively.
For the fiscal third quarter that ended September 30, 2023, AMKR’s net sales and gross profit stood at $1.82 billion and $282.75 million, respectively. Moreover, its non-GAAP EBITDA stood at $333 million.
For the same quarter, net income attributable to AMKR and net income attributable to AMKR per common share stood at $132.61 million and $0.54, respectively. As of September 30, 2023, AMKR’s long-term debt came at $947.23 million, compared to $1.09 billion as of December 31, 2022.
Street expects AMKR’s revenue and EPS for the fiscal first quarter of 2024 (ending March 2024) to increase 2.5% and 45.5% year-over-year to $1.51 billion and $0.26, respectively. The company surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 45.2% over the past three months to close the last trading session at $31.95. Over the past nine months, it has gained 42.8%.
AMKR’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Momentum and a B for Value and Sentiment. It is ranked #15 out of 91 stocks within the Semiconductor & Wireless Chip industry.
Click here for the additional POWR Ratings for AMKR (Growth, Stability, and Quality).
Stock #2: United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC provides integrated circuit (IC) production for applications spanning every sector of the electronics industry. The company operates through two segments: Wafer Fabrication; and New Business.
On January 25, UMC collaborated with Intel Corp. (INTC) on the development of a 12-nanometer semiconductor process platform to address high-growth markets such as mobile, communication infrastructure and networking.
The long-term agreement brings together INTC’s at-scale U.S. manufacturing capacity and UMC’s extensive foundry experience on mature nodes to enable an expanded process portfolio. It also offers global customers greater choice in their sourcing decisions with access to a more geographically diversified and resilient supply chain.
This strategic collaboration would broaden UMC's addressable market and significantly accelerate its development roadmap, leveraging the complementary strengths of both companies.
UMC pays an annual dividend of $0.58 per share, which translates to a dividend yield of 7.49% on the current share price. Its four-year average yield is 4.58%. UMC’s dividend payments have grown at CAGRs of 61.6% and 37.7% over the past three and five years, respectively.
UMC’s trailing-12-month cash from operations of $2.80 billion is significantly higher than the industry average of $76.89 million, while its trailing-12-month ROTA of 10.91% is significantly higher than the industry average of 0.43%.
For the fiscal fourth quarter that ended December 31, 2023, UMC’s operating revenues and gross profit stood at $1.79 billion and $580 million, respectively. For the same quarter, net income attributable to shareholders of the parent and earnings per ADS stood at $430 million and $0.17, respectively.
As of December 31, 2023, UMC’s total current liabilities stood at $3.22 billion, compared to $3.54 billion as of December 31, 2022.
Street expects UMC’s revenue and EPS for the fiscal year ending December 2024 to increase 6.8% year-over-year to $7.67 billion. Its EPS is expected to be $0.61 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters.
The stock has gained 5.6% over the past three months to close the last trading session at $7.69. Over the past six months, it has gained 3.5%.
UMC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
UMC has an A grade for Momentum and a B for Value and Quality. Within the same industry, it is ranked #13.
Beyond what we’ve stated above, we have also rated the stock for Growth, Stability, and Sentiment. Get all ratings of UMC here.
Stock #1: Infineon Technologies AG (IFNNY)
Headquartered in Neubiberg, Germany, IFNNY designs, develops, manufactures, and markets semiconductors and related system solutions worldwide. It operates through four segments: Automotive; Green Industrial Power; Power & Sensor Systems; and Connected Secure Systems.
On February 1, IFNNY and Honda Motor Co., Ltd. signed a Memorandum of Understanding (MoU) to build a strategic collaboration. Honda selected IFNNY as semiconductor partner to align future product and technology roadmaps.
The two companies also agreed to continue discussions on supply stability, as well as to encourage transferring mutual knowledge and collaborate on projects aimed at accelerating the time to market of technologies. IFNNY will support Honda with technologies to enable competitive and advanced vehicles.
IFNNY pays an annual dividend of $0.38 per share translates to a dividend yield of 1.04% on the current share price. Its four-year average yield is 0.96%. IFNNY’s dividend payments have grown at CAGRs of 5.2% and 2.3% over the past three and five years, respectively.
IFNNY’s trailing-12-month cash from operations of $4.19 billion is significantly higher than the industry average of $76.89 million, while its trailing-12-month ROTA of 11.03% is significantly higher than the industry average of 0.43%.
For the fiscal fourth quarter that ended September 30, 2023, IFNNY’s revenue increased marginally year-over-year to €4.15 billion ($4.49 billion), while gross profit stood at €1.81 billion ($1.96 billion). Moreover, its free cash flow stood at €614 million ($664.76 million).
For the same quarter, adjusted profit for the period from continuing operations attributable to shareholders of IFNNY and adjusted earnings per share stood at €846 million ($915.94 million) and €0.65, up 3.5% and 3.2% from the prior-year quarter, respectively.
Street expects IFNNY’s revenue for the fiscal year ending September 2024 to increase 2.3% year-over-year to $18.10 billion. Its EPS is expected to be $2.55 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters.
The stock has gained 24.1% over the past three months to close the last trading session at $36.57.
IFNNY’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
IFNNY has a B grade for Value and Stability. Within the same industry, it is ranked #6.
To see additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for IFNNY, click here.
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IFNNY shares were unchanged in premarket trading Friday. Year-to-date, IFNNY has declined -12.62%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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