The recent price dip in semiconductor industry company shares is expected to reverse soon, owing to the tremendous growth prospects of semiconductor companies with funding support from governments and corporations worldwide. Thus, we think the recent price dips have created a perfect opportunity to invest in fundamentally sound semiconductor companies Broadcom (NASDAQ:AVGO), United Microelectronics (UMC), Semtech (NASDAQ:SMTC (NASDAQ:SMTX)), and ChipMOS TECHNOLOGIES (IMOS). So, let’s pore over these names.The demand for semiconductors has increased substantially over the past year due to the increasing use of electronic devices, the sharpening focus on the electrification of vehicles, and growing tech integration in virtually every industry. However, with production slowing during the initial days of the pandemic, the whole world has been facing an acute shortage of semiconductors.
Governments worldwide and industry titans have been taking steps to accelerate the supply. President Biden’s $50 billion investment plan to boost the U.S semiconductor industry, along with the initiatives by other leading semiconductor producing countries, should be able to ramp up the supply to meet the increasing demand. Also, South Korea recently announced its plan to invest $452 billion in the industry over the next nine years. And Taiwan Semiconductor Manufacturing Company (TSM), the world’s largest semiconductor manufacturer, has responded to the shortage by increasing its capital spending budget to $28 billion in 2021. These investments and robust market demand should drive the semiconductor industry’s growth. The industry is expected to grow at a 6% CAGR over the next five years.
We think this sector's growth potential should allow stocks Broadcom Inc. (AVGO), United Microelectronics Corporation (UMC), Semtech Corporation (SMTC), and ChipMOS TECHNOLOGIES INC. (IMOS) to rebound in the near term and continue rallying thereafter.