As we begin to hear more and more companies reporting manufacturing being slowed because of shortages in their semiconductor supply chain is it time to rethink where we invest in the semiconductor space?
Historically most of the attention has been on the marquee names within the semiconductor space – AMD, QCOM, SkyWorks and the like. We are entering a supply constrained market based on the the capacity limits of existing facilities to build enough chips for cars phones and block chain.
Are the manufacturers of the equipment to set up these vastly expensive Fabs (fabrication sites) a solid investment .
Amongst the goliaths in this space live ASML and Applied Materials and others – these are companies where revenue cycles are incredibly long, and investment can be measured in the hundreds of millions of dollars and years to deploy.
Now while these stocks have risen recently it’s possible to think given this security off orderbook based on the length of time to deploy these facilities that we can see continued positive movement even while the end chip prices have only modest gains due to extreme competitiveness of industries like the memory chip business.
I would like to think that these companies look more and more like tech utility suppliers where capital equipment and follow-on service revenue will hold up well and grow considerably.
Lam Research (LRCX) trades at a pe of 30 as does AMAT
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