Now could be a good time to invest in semiconductor companies as last year saw global semiconductor sales hit the half-trillion dollar mark for the first time. There was a record-breaking $555.9 billion in sales of semiconductors in 2021 thanks to an increased demand and successes in beating the supply chain crisis.
The report issued by the Semiconductor Industry Association revealed that global semiconductor sales were up over 26% on a year-on-year basis and that demand is expected to significantly rise in the next few years. Much of the demand for semiconductors comes from the global manufacturing hub of China where sales of semiconductors hit $192.5 in 2021. But with an ever growing reliance on the internet and electronic technology, the demand for semiconductors is going to become a real issue.
All of this comes against a backdrop of a chip shortage that has hit semiconductor companies all of the world. With many industries ranging from home computing brands like Apple to electric vehicle manufacturers like Tesla experiencing problems in getting chips, it meant that government intervention was sometimes necessary to source the items. As such, the industry somehow managed to ship 1.15 trillion semiconductor units last year.
Semiconductors are an essential component in all electronic devices and they power everything from consumer electronics to ATMs and even the internet. All of which shows that it’s unlikely that the soaring demand for semiconductors will slow down anytime soon.
Who will benefit from the semiconductor boom?
At the moment, the manufacture of semiconductors is largely focused in countries such as the United States, Taiwan, South Korea, Japan and Netherlands. However, China has recently been making real efforts to boost its chip production within its own borders and avoid remaining so dependent on foreign technologies.
Key amongst the beneficiaries of the demand for semiconductors is Nvidia who recently overtook Facebook to become the seventh biggest company in the US by market cap. Such is the demand for semiconductors that Intel has just announced plans to buy the chip manufacturer Tower Semiconductor for $5.4 billion. This move would increased Intel’s ability to specialize chip production and take advantage of the skyrocketing demand for semiconductors.
However, there are other massive deals going on elsewhere in the world with AMD and Xilinx completing the world’s biggest semiconductor merger earlier this week. This helped to bring the value of semiconductor stocks to record highs, and the willingness of the Chinese authorities to authorize the deal shows just how willing governments are to ensure the supply of the required chip technologies.
Of course, there is every chance that the semiconductor market is overhyped and some analysts have even predicted that a market correction could come as soon as 2024. While this could potentially happen, there is little doubt that semiconductors will remain highly in demand for the foreseeable future.
