Over the past ten years, the semiconductor sector has undergone a significant evolution, marked by technological advances, production challenges and growing demand.
The industry has continued to follow Moore’s Law, which predicts that the number of transistors on a semiconductor chip will double approximately every two years. This has led to smaller, faster and more energy-efficient chips. What’s more, the adoption of new architectures, such as 3D semiconductors, has further enhanced performance.
The growing complexity of semiconductor manufacturing has led to challenges in terms of cost and production capacity. This was particularly evident during the global semiconductor shortage that began in 2020, exacerbated by the COVID-19 pandemic and rising demand in sectors such as automotive and consumer electronics.
The rise of digital technologies, such as the Internet of Things (IoT), artificial intelligence (AI), cloud computing and electric vehicles, has led to unprecedented demand for semiconductors. This has stimulated industry growth, but has also highlighted the need for increased production capacity.
The semiconductor sector has become a major strategic issue, with growing tensions between the USA and China over technology and intellectual property. This has led to a reassessment of the global supply chain and efforts to increase local semiconductor production in several regions.
All in all, the semiconductor industry has seen a decade of progress and challenges. As demand continues to grow, the industry faces the need to continue innovating while overcoming production hurdles and navigating a complex geopolitical landscape.
Infographic
Discover an infographic featuring 60 semiconductor companies that have increased their EPS at a CAGR of more than 15% over the past decade.
Source : Quartr
Criteria used: Annualized EPS (earnings per share) growth in excess of 15% per annum over the decade (2013-2023) among market capitalizations in excess of $1 billion as at November 15, 2023.
Brief presentation of a few stocks:
ASML Holding is a Dutch company specializing in the manufacture of lithography equipment for the semiconductor industry. It is one of the world’s leading suppliers of immersion lithography systems and extreme ultraviolet (EUV) lithography systems, which are essential for the production of integrated circuits or chips. ASML builds machines the size of double-decker buses and weighing over 200 tons, in its quest to produce focused beams of light that create the microscopic circuits of computer chips used in everything from phones and laptops to cars and artificial intelligence. The company has enjoyed a banner decade, with its shares jumping 1,000% to a value of over 200 billion euros, as it has captured most of the world’s markets for these lithography systems.
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Founded in 1993 by Jensen Huang, Chris Malachowsky and Curtis Priem, the company is best known for its graphics processing units (GPUs), which are widely used in video games, digital content creation and scientific research. Nvidia ‘s core business is based on chip research and design, not manufacturing, and it outsources almost all its chip production to TSMC. These GPUs are specially designed to accelerate graphics calculations, making them ideal for 3D computer graphics and video rendering. Nvidia first enjoyed success with the GeForce series of GPUs for the gaming market, but they later expanded their operations to include products for graphics computing professionals (Quadro series) and high-performance computing and artificial intelligence (Tesla series). In addition to its GPUs, Nvidia also worked on artificial intelligence, deep learning and autonomous automobiles with its AI system-on-a-chip, DRIVE. They also developed the ARM-based Tegra processor for mobile devices and supercomputers. Before it became a thriving company with a presence in many industries, Nvidia was more of a niche player. Its well-placed bets on video games and crypto-currencies caused the revenue growth rate to rise from 7-8% to 27% per year between 2016-2020, and this growth has continued over the last three years (2021-2023).
KLA Corporation is a leading global semiconductor company, providing process control and management solutions for the semiconductor and nanotechnology industries. Founded in 1975 and headquartered in Milpitas, California, KLA develops products that help improve productivity and product quality in semiconductor manufacturing plants. KLA’s product range includes process inspection systems, metrology systems, process control systems, yield management solutions and related services. These products are used to analyze and control the various stages of the semiconductor manufacturing process, from research and development to volume production.
Lattice Semiconductor is an American technology company that designs and manufactures high-performance programmable integrated circuits. Founded in 1983, the company is based in Portland, Oregon. Lattice is recognized for its expertise in semiconductor technologies, including Field Programmable Gate Arrays (FPGAs), Complex Programmable Logic Devices (CPLDs) and Application Specific Integrated Circuits (ASICs). Lattice products are used in a variety of industries, including automotive, communications, consumer electronics, industrial, computing, medical and defense. They are essential for the design of advanced electronic systems. Lattice FPGAs are particularly popular for their flexibility and performance. They enable designers to program specific functionality into hardware, which can dramatically accelerate performance compared to software-based solutions. Lattice CPLDs, meanwhile, are smaller, more energy-efficient devices, ideal for low-cost, low-power applications. In addition, Lattice also offers a range of products for power management, interface and connectivity, and signal processing. These products are designed to help customers solve complex design challenges and accelerate time-to-market.
Broadcom is a leading semiconductor company, providing a range of products for the wired, wireless and enterprise infrastructure markets. It is known for its innovative, high-quality solutions that power a variety of industries, including telecommunications, networking, storage and data processing. Broadcom, born as Avago in 2005 whose parent company reverted to the Broadcom name after its acquisition in 2016, is one of the biggest players in semiconductors. The company was created in 2005 whenAgilent ‘s semiconductor division was sold to private equity firms KKR and Silver Lake Partners. Shortly afterwards, in early 2006, Hock Tan was appointed CEO. The company went public in 2009, and at the time, its size and scope were much more modest than they are today. To tell you the truth, Broadcom ‘s market capitalization has grown from a midcap of $6.5 billion in 2009 to $200 billion today. The company operates in two segments: semiconductor solutions (75% of sales) and infrastructure software (25%). Their product portfolio serves mission-critical markets including data centers, networks, software, broadband, wireless, storage, cybersecurity and industry. The company now has leading semiconductor franchises in optical components, switching/routing, set-top boxes and modems, ASICs, RF filters, Wi-Fi and Bluetooth receivers, hard disk storage controllers, industrial optical fiber and more.
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Monolithic Power Systems (MPS) is a high-tech company specializing in the design, development and marketing of integrated power solutions. MPS is recognized for its ability to provide high-performance, energy-efficient integrated power solutions. Their cutting-edge technology improves energy efficiency, reduces component size and extends product life. Their product range includes voltage regulators, DC-DC converters, operational amplifiers, load switches, LED drivers, motor drivers, current sensors and other semiconductor components.
TSMC, or Taiwan Semiconductor Manufacturing Company, is the world’s largest independent semiconductor manufacturer. Founded in 1987, the company is based in Hsinchu, Taiwan. TSMC revolutionized the semiconductor industry by adopting a “pure foundry” business model, focusing solely on manufacturing chips for other technology companies, without designing its own products. TSMC manufactures a wide range of semiconductor products, including but not limited to integrated circuits (ICs), microprocessors, memories, system-on-chips (SoCs) and image sensors. These products are used in a variety of applications, from personal computers and servers to smartphones, tablets, Internet of Things (IoT) devices, and more. The company is known for its cutting-edge technology in semiconductor manufacturing processes. TSMC was among the first to produce chips using 7-nanometer (nm) and 5-nanometer (nm) etch processes, and is constantly working to improve its process technologies to produce even smaller and more efficient chips.
Texas Instruments (TI) is an American multinational company that designs and manufactures semiconductors, which it sells to electronics manufacturers worldwide. Founded in 1930, the company is headquartered in Dallas, Texas. TI is a major player in the semiconductor industry, with a significant presence in market segments such as analog and digital integrated circuits, digital signal processors (DSPs), microcontrollers and data converters. TI products are used in a wide range of applications and sectors, including automotive, industrial, consumer electronics, communications and computing. For example, their integrated circuits are used in products ranging from cell phones to calculators, while their DSPs are essential for sound and image processing in products such as televisions and digital cameras.
Infineon Technologies is a leading semiconductor company based in Germany. Founded in 1999, it is renowned for its technological innovations and its commitment to quality and sustainability. Infineon offers a wide range of products, including microcontrollers, power semiconductors, sensors and system security solutions. These products are used in a variety of industries, including automotive, industrial, consumer electronics, telecommunications and renewable energy. In the automotive sector, Infineon is a key supplier of semiconductors for engine management, safety and comfort systems. Infineon products are also used in energy management systems, solar inverters, lighting systems and battery management systems.
Cadence Design Systems and Synopsys are two leading companies in the field of electronic design software. Cadence Design Systems, founded in 1988, is an American company specializing in the design of integrated circuits and electronic systems. Cadence offers a complete range of circuit design products, including tools for IC design, verification, PCB design and System-on-Chip (SoC) design. Their flagship products include OrCAD circuit design software and Virtuoso system-on-chip design software. Synopsys, also based in the USA and founded in 1986, specializes in providing software, systems and services for the design and verification of integrated circuits. Synopsys offers a range of products for semiconductor design, circuit verification, system-on-chip design and software security. Among their best-known products are Design Compiler design synthesis software and Formality formal circuit verification software. Both companies play a crucial role in the semiconductor industry, providing the tools needed for the design and verification of integrated circuits, which form the basis of many modern electronic devices.