An Introduction

The semiconductor category reacted extremely negatively today to the suggestion from the Biden administration that they may impose even stricter controls on sales of semiconductors and related equipment to China (see here) and Trump's negative comments (see here) that about Taiwan, the semiconductor manufacturing capital of the world, were he to become president again. That being said, we think the market is grossly overreacting given the expected continued strong quarterly earnings (see here) over the next few months as a result of the ongoing AI momentum and, as such, we think the semiconductor value chain of stocks should bounce back strongly. That being the case, we think that now could be the time to back up the truck while these stocks are on sale. We hope this insightful article will be of considerable help in deciding which stocks, in which segments, warrant your consideration. 

What Is the Semiconductor Value Chain?

The semiconductor value chain refers to the various stages involved in the production and distribution of semiconductor devices such as microprocessors, memory chips, and sensors which are used in a wide range of electronic devices, including smartphones, computers, and automobiles.

The semiconductor value chain is a complex and dynamic process that involves multiple companies, each with their own specialized roles and its 6 segments are presented below, in descending order, along with the symbols of the constituents in each Portfolio with those with returns this week of +5% or more and -5% or more  highlighted with their return for the week and any pertinent news, analyses and commentary.

1. Largest Integrated Semiconductor Manufacturers (IDM) Portfolio: down 4.8% this week
   • Segment Focus:  designs, manufactures, and sells its own semiconductor products to allow them to control the entire production process, from design to fabrication, resulting in greater efficiency and quality control.
   • Constituents: MU (-14.4%); IFNNY (-8.0); STM (-6.4%); INTC;  MCHP; ADI; TXN; NXPI
   • Pertinent news, analyses and commentary:
     • Why ASML Holdings, Micron Technology, and Advanced Micro Devices Fell This Week
     • Infineon and Amkor Sign Memorandum of Understanding To Stimulate Sustainable Action Across the Supply Chain
2. Pure-Play Assembly, Test and Packaging Companies Portfolio: down 6.0% this week
   • Segment Focus: assembles chips into finished semiconductor components and tests for defects
   • Constituents: ASX (-7.4%); AMKR (-5.6%)
   • Pertinent news, analyses and commentary:
     • Infineon and Amkor Sign Memorandum of Understanding To Stimulate Sustainable Action Across the Supply Chain
3. Pure-Play Semiconductor Foundries Portfolio: down 7.6% this week
   • Segment Focus: concentrates all its efforts in the manufacturing of chips based on designs provided by other semiconductor companies which allows it to specialize in manufacturing processes and technologies
   • Constituents: TSM (-11.5%); UMC (-6.0%); TSEM; GFS (+1.9%) 
   • Pertinent news, analyses and commentary:
     • TSM Profit Soars. Is Now a Great Time to Buy the Stock?
     • Are Investors Undervaluing United Microelectronics (UMC) Right Now?
     • Is Now The Time To Look At Buying GFC?
4. Pure-Play Fabless Semiconductor Companies Portfolio: down 7.6% this week
   • Segment Focus: designs and sells hardware devices and semiconductor chips while outsourcing their fabrication (or fab) to a specialized manufacturer
   • Constituents: AMD (-16.5%); MRVL (-9.6%); NVDA (-8.8%); QCOM (-8.0%); AVGO (-7.5%); MPWR (-5.5%)
   • Pertinent news, analyses and commentary:
     • Do More U.S. Restrictions on China Make AMD a Risky Bet?
     • Nvidia, AMD are among the chip stocks falling on China fears. Here’s why you shouldn’t panic
     • Should You Consider Adding Marvell Technology (MRVL) to Your Portfolio?
     • Nvidia and Broadcom (AVGO) Complete 10-for-1 Stock Splits. History Says They Will Do This Next
5. Pure-Play EDA Custom Design Software Stocks Portfolio: down x% this week
   • Segment Focus: uses electronic design automation (EDA) software to assist engineers in the custom design and development of complex chips
   • Constituents: CDNS (-11.3%); SNPS (-8.3%)
   • Pertinent news, analyses and commentary:
     • Cadence Design Systems (CDNS) Insiders Sold US$4.8m Of Shares Suggesting Hesitancy
     • Here's Why We Think Synopsys Is Well Worth Watching
6. Pure-Play Semiconductor Equipment and Material Suppliers Portfolio: down 14.4% this week
   • Segment Focus: provides essential equipment for manufacturing semiconductors such as lithography machines, etching, test and packaging equipment, automation and inspection systems and production materials such as chemicals, gases, wafers and packaging
   • Constituents: KLAC (-11.1%); ENTG (-11.9%); AMAT (-13.6%); LRCX (-14.3%); ASML (-17.5%)
   • Pertinent news, analyses and commentary:
     • Why KLAC Shares Are Getting Obliterated Today
     • Entegris Celebrates $75 Million CHIPS Act Funding Announcement
     • Wall Street Analysts Think ASML Is a Good Investment: Is It?
     • Is Applied Materials Worth Betting on Now?
     • Is Lam Research (LRCX) a Buy?

Summary

On average, the above 6 segments fell 10.5% this week and are now down 6.6% MTD but remain up 24.2% YTD.

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