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Monday, August 4, 2008

Semiconductor rankings out - roadmap to investment opportunities?

"We're all pilgrims on the same journey-but some pilgrims have better road maps."
- Nelson DeMille
We write here on a fairly regular basis about semiconductor companies. IC Insights just came out with their Semiconductor Supplier Ranking for the first half of 2008. They provide two charts, one based on sales and one based on growth rate.

There are some interesting aspects to the rankings that are worth reviewing.

Qualcomm (QCOM) is a company that we previously held in our trading portfolio. It recently saw its stock jump based on the ending of litigation but it was a big gainer in the rankings due to exceptional sales growth. QCOM moved up four spots and is now considered the 10th largest semiconductor manufacturer based on sales and is the number two stock based on growth rate.

Taiwan Semiconductor (TSM), a company we recently wrote about (read the post here), made gains in both rankings as well. The company moved from sixth to fifth place based on sales and is the top stock based on growth rate.

Another stock we have written about here, SanDisk (SNDK), did not make the top 20 on either list.

The continuing malaise in the DRAM sector is well illustrated by Qimonda which dropped 12 positions from being ranked 18th overall in 2007 to 30th in 1H08.

We have written about the trend toward "fabless" semiconductor companies and discussed why Taiwan Semiconductor would benefit. Two companies that made good gains in the rankings happen to be fabless: Qualcomm, discussed above, and Broadcom which jumped three positions and is now ranked number 20 based on sales and number 6 based on growth rate.

AMD, despite being left for dead by the financial media, actually registered a 9% growth rate y-o-y and, though it dropped four positions, managed to hang in at number 15 in the rankings based on sales.

As can be seen, there are companies that have managed to shine in spite of a slowing global economy that is impacting semiconductor sales. Unfortunately, it seems that the stock price doesn't always track the rankings and some of the top ranked stocks are in nasty down-trends. Values or value traps? The fact that IC Insights provides a list of biggest by sales and best by growth rate allows an investor to cross reference between the two lists to find solid companies with critical mass and an aggressive growth rate.

An investor could do worse than to pick their semiconductor stocks from the top 20 lists provided by IC Insights. I would encourage readers to read the report at IC Insights to review the lists and draw their own conclusions.

Disclosure: none

Sources: Shakeups Rock 1H08 Top 20 Semiconductor Supplier Ranking

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