Photo by Slejven Djurakovic on Unsplash

News that Intel Corp. (INTC) is investing $20 billion in new U.S. chip production couldn’t come at a better time.

After all, federal officials have warned that a growing chip shortage is leaving U.S. companies dangerously low.

According to a dire survey made by the Department of Commerce, firms that in 2019 on average had a 40-day stockpile of chips they need for production today have only 5 days’ worth.

Given the continuing shortage in chip production, as well as the shipping crisis, this low inventory means a single issue at an overseas chip factory or a cargo ship could send waves of factory shutdowns rippling across the country. This, along with headlines from the Wall Street Journal and other mainstream news outlets, doesn’t help manufacturers that reuire chips.

In addition to Intel’s big investment in U.S.-based chip production, other firms are investing in global plants for a sector worth roughly $600 billion.

And I have found the perfect supply firm for cashing in on this expansion.

Wall Street might see it as nothing more than a play on flat panel displays.

But if you drill down deeper, you will see it’s actually a great play on chip-making…

T his $20 billion investment, which could eventually grow into eight separate factories, is just one slice of the over $100 billion in investment pledges to increase chip production that Intel has made over the past year.

Later this year, Ohio plants are set to begin construction , and they will start producing chips sometime in 2025. Intel has even set aside $100 million to support regional universities and research programs to make sure there’s enough talent to man these plants.

It’s because Intel sees the global semiconductor industry doubling by 2030, and the company wants to take advantage and grow its market share.

Of course, while demand is skyrocketing, the concern in Washington is that chip production and the supply chain haven’t kept up.

The Wall Street Journal quotes the Biden White House as saying that the chip industry has responded with $80 billion in new investment into expanding U.S.-based semiconductor production. That’s all set to come online, with Intel’s two factories, by 202 5.

And that’s why a company known for its flat panel displays like those used in LCD TVs, smartphone displays, car infotainment systems, and more could play a pivotal role.

Don’t get me wrong. I’m not saying flat panels are a dead business. Far from it.

Allied Market Research estimates that the global market for flat panel displays was worth $116.80 billion in 2018 and is set to grow by 6.10% a year until it hits $189.60 billion by 2026.

Not bad at all.

But as great as the business is, this flat-panel leader also stands to profit handsomely from the growing chip production, making this a great “twofer” investment.

That’s because there are actually many similarities between the technologies for making flat-panel displays and making semiconductor chips.

Both involve researching and then creating very particular and precise blends of materials .

So, it’s no wonder this company is seeing huge growth in the semiconductor chip industry under Wall Street’s radar.

I’m talking about none other than Applied Materials Inc. (AMAT).

Applied Materials has a whole suite of machines and tools to also shape chips and accurately cut parts out, to modify and treat chips and parts of chips once they’re done to protect them or make them work better, and finally to inspect the chips to make sure they’ll work as advertised.

This is a huge growth market. As the company points out, the average amount of semiconductors in smartphones went up from $100 in 2015 to $170 in 2020 and is set to hit $275 in 2025.

For cars, that number is soaring from $310 in 2015 to $690 in 2025. Even that’s nothing compared to datacenter servers, where a single one has gone from having $1,620 worth of chips in 2015 to $2,810 two years ago, the last period for full data.

Come 2025, that number will reach $5,600. And that’s per server. With increased demand for cloud services, the number of servers is set to skyrocket, too.

So you can see why Washington is concerned about securing the supply of semiconductor chips – and why Applied Materials, with its specialized chip manufacturing equipment, is such a good play on that.

It doesn’t hurt that Applied Materials has had great earnings, either, with three of its 2021 quarterly reports beating expectations.

In the most recent quarter, per-share earnings grew by 55%. Even half that rate would still give us a double in just over 2.5 years.

This is a great stock to hold for the long haul.