The chip equipment makers supply their manufacturing products to foundries such as TSMC or IDMs such as Intel. This has benefited equipment makers such as Applied Materials, ASML, KLA, Lam Research and Teradyne which are among the largest chip equipment makers in the world. Demand for their products is currently in high demand due to the shortage of chip manufacturing capacity. The chip equipment makers are the ones who provide the equipment for chip manufacturing by the foundries to take place. Foundries and integrated device manufacturer (IDM).They include microprocessors (CPUs), Graphics processing units (GPUs) often used for gaming, field-programmable gate arrays (FPGAs) and Application-specific integrated circuits for artificial intelligence (AI ASICs) where the likes of your Google, Tesla and Intel are the dominant players in this field.īeyond the technicalities associated with semiconductor companies, with many new investors finding it difficult to differentiate between the thousands of semiconductor companies in the world, they can be broadly categorized into three main groups: Logic chips perform calculations on digital data (zeros and ones) to produce outputs. The logic chip market is a fast-growing market that currently has an estimated market size of $173bn in 2019.
South Korea, US and Taiwan are the market leaders in the supply of memory chips while China is looking to play catch-up in this arena. By contrast, NAND flash memory stores data permanently.īoth these chips comprise 98% of the memory chip market which is estimated to have a $106bn market size in 2019. A popular memory chip acronym is DRAM (Dynamic Random Access Memory) as well as the term NAND that is often associated with flash drives.ĭRAM provides storage of data while a computer operates but loses it when the computer powers down.
These chips are essential components in computers and electronic devices in which memory storage plays a key role. Memory chips store the digital data on which logic devices perform calculations. Semiconductors fall into 2 main product categories, memory chips and logic chips although there are other categories such as Analog chips, Optoelectronics, Discretes and sensors. They also underpin massive emerging trends such as cloud computing, 5G wireless networks and artificial intelligence. Semiconductors are so important because they are a requirement in products that we use every day such as our smartphones and laptops, electrical appliances, gaming hardware and medical equipment, etc. Silicon is the most common semiconductor material used. So, it conducts electricity better than an insulator such as glass, but less well than a pure conductor such as copper. Semiconductors are substances with properties between that of a conductor (conducts electricity) and an insulator (does not conduct electricity). What are semiconductors and why are they so important? What has been the critical factor(s) that drove their share price performance this year and can that outperformance continue into 2021? In this article, I will give a quick description of the semiconductor industry and identify 5 small-cap semiconductor stocks that have significantly outperformed the market in 2021. This typically leads to over-investment in capital expenditure which will ultimately translate to supply exceeding demand and the resultant fall in chip prices and a scale-back in manufacturing and CAPEX. When conditions are favorable, chipmakers have trouble keeping up with demand. The semiconductor industry has always been a cyclical industry with its fair share of ups and downs. Please do your own due diligence before committing to any trade/investment. This article is for education purposes only, and not to be taken as advice to buy/sell.
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