“When wireless is perfectly applied the whole earth will be converted into a huge brain, which in fact it is, all things being particles of a real and rhythmic whole. We shall be able to communicate with one another instantly, irrespective of distance. Not only this, but through television and telephony we shall see and hear one another as perfectly as though we were face to face, despite intervening distances of thousands of miles, and the instruments through which we shall be able to do all of this, will fit in our vest pockets.”     -- Nikola Tesla, 1926

The Electronic Components-Semiconductor industry keeps burning red hot.

The Zacks Industry Rank for this sizeable 39-company industry hit #35 out of 265 (that’s the top 13%), and was up +16 spots over the last week alone. Covering analysts for semi companies recently announced 12 positive EPS revisions versus just 3 negative EPS revisions.

What endure as EPS drivers for this industry?

Successful corporate strategies in this space aim at providing efficient and reliable use, while still keeping individual semi chips an economic purchase.

An array of semi chip solutions offer critical micro-technologic capabilities. They enable interconnected electronic communications, personal computers, servers, industrial sensors and touch screens.

The more thickly woven and sophisticated semi chip applications and IT interconnections become -- inside our homes and in business spheres -- the greater the semi chip volume growth.

However, significant risks come with buying shares in a semi chip company at this late stage of an economic cycle.

Briefly, the semi industry is highly cyclical. Adverse global demand conditions can dampen customer confidence and delay IT spending. This can lead to sharply reduced demand for semi products and higher pricing pressures.

Semi chip production is characterized by constant and swift technical change; rapid product obsolescence and price erosion; and evolving standards. That adds up to short product lifecycles. Continuous introduction of new semi products, and integration of outside semi acquisitions, burden semi companies with high operating expenses.

On top of that, semi manufacturing is very capital-intensive. Manufacturing capacities essential to maintaining competitive cost positions require large capital investments. A high percentage of cost in operating each semi lab is fixed.

Therefore, modest increases or decreases in capacity utilization rates have a significant impact on profitability.

Faced with adversity, the semi industry’s downturns have been significant!

Investment risk on semi chip shares can still be worth taking to chase the EPS growth – but only if the price is right on the stock.

Here are 3 of my favorite semi plays—

#1 Infineon Technologies (IFNNY - Analyst Report): This is a Zacks #1 Rank stock, with a Zacks Growth score of A, Value score of B and Momentum score of A.  

• The current price is around $15 a share. It has a $17 billion market cap, making it a large cap stock (and the sole large cap semi I will write about).
• Annual EPS looks to be $0.58 in 2016 rising smartly to $0.91 in 2017.
• The company does pay a $0.19 a share dividend. This amounts to about 1.29% a year.

Headquartered in Germany, Infineon Technologies designs, develops, manufactures and markets semiconductors and complete systems solutions that are used in a variety of microelectronic applications.

Infineon’s primary focus area is the power semiconductors business, which generates most of the revenues.

The company has four segments in Europe. They are:

1. The Automotive (ATV) segment  
2. The Industrial Power Control (IPC) division
3. Power Management & Multimarket (PMM) division
4. The Chip Card & Security (CCS) segment

#2 Integrated Device Technology Inc. (IDTI - Snapshot Report): This is a Zacks #1 Rank stock, with a Zacks Growth score of A, Value score of D and Momentum score of B.  

• The current price is around $27 a share. It has a $4 billion market cap.
• Annual EPS looks to be $1.15 in 2016, rising to $1.40 in 2017.
• The company does not pay a dividend.

Integrated Device Technology, Inc. designs, develops, manufactures and markets a broad range of high-performance semiconductor products and modules.

Applications for the company's products include:

1. Data and telecommunications equipment, such as routers, hubs, switches, cellular base stations and other devices;
2. Personal computers; and
3. Networked peripherals and servers, such as RAID arrays, servers and printers.

#3 Mellanox Technologies (MLNX - Snapshot Report): This is a Zacks #1 Rank stock, with a Zacks Growth score of B, Value score of D, and Momentum score of F.  

• The current price is around $43 a share.It has a $2 billion market cap.
• Annual EPS looks to be $1.75 in 2016, rising to $1.99 in 2017.
• The company does not pay a dividend.

Mellanox Technologies is a leading supplier of semiconductor-based, interconnect products to world-class server, storage, and infrastructure OEMs servicing Fortune 500 data centers, the world's most powerful supercomputers, and mission critical embedded applications.

The company's Virtual Protocol Interconnect (VPI) enables standard communication protocols to operate over any converged network (InfiniBand, Ethernet, Data Center Ethernet) with the same software solution.

Utilizing proven networking, clustering, storage, virtualization and RDMA acceleration engines, VPI optimizes:

1. Application performance
2. Power consumption
3. Workload agility and
4. Total system efficiency, while
5. Future-proofing IT infrastructure (whatever that means!).

Final Thoughts on Buying the Semis

The three Zacks #1 Ranked (Strong Buy) semi companies I discussed in this article hold long-term Zacks Growth Scores of either A or B (Outperform ratings).

However, 2 of 3 hold a Zacks Value score of D (an Underperform rating).

In other words, the Semi Industry EPS growth stories with Ds in Value are well known and already well bought by investors. Semis are not ‘terra incognito’!

In short, the smaller-cap Integrated Device Tech and Mellanox Tech shares look to be expensive trades now. The exception to this overbought scenario looks like the large cap Infineon Tech shares. These hold a Value score of B.

My advice? Wait for a global growth scare in 2016 to hit major ETFs of the semi industry hard. Then, buy these individual names.

Patience with semi trading should shape your route to more successful share buying. Don’t chase EPS growth when it is priced for perfection.