Semiconductors are the key components for electric vehicles (EVs). The aggregate value of semiconductors used in EVs is twice the value of chips in any internal combustion engine. Therefore, the expected surge in demand for EVs should drive the demand for semiconductors.
And while the global semiconductor chip shortage has marred the EV industry’s growth this year, government initiatives to transition to a zero-emission environment, and an increased focus on ramping up semiconductor production, should drive the industry's growth next year. By 2025, global electric vehicle production is expected to rise four-fold to more than 11.6 million units.
Therefore, we think prominent EV chip makers QUALCOMM Incorporated (QCOM) and Microchip Technology Incorporated (MCHP), and ON Semiconductor (ON) should benefit.
Click here to checkout our Semiconductor Industry Report
QUALCOMM Incorporated (QCOM)
QCOM in San Diego, Calif., is a wireless technology innovator that includes processors, modems, platforms, RF systems, and connectivity products. The company also offers a wide range of purpose-built, pre-packaged software, hardware, and tools in addition to products based on the end-use application of designs.
QCOM is about to supply the key computing chip for the digital dashboard in a new Renault SA electric vehicle.
This month, QCOM planned to achieve net-zero global emissions for Scopes 1,2, and 3 by 2040. The company aims to reduce absolute Scope 1 and Scope 2 greenhouse gas emissions by 50% by 2030 from 2020.
QCOM's revenues increased 43.4% year-over-year to $9.32 billion in its fiscal fourth quarter, ended September 26, 2021. Its net income grew 74.7% from its year-ago value to $2.92 billion. And its EPS rose 75.9% from the prior-year quarter to $2.55.
Analysts expect QCOM's revenue for its fiscal year 2022 to be $39.57 billion, representing 18.2% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 25.5% in the current year. Its stock’s price has increased 37.1% over the past nine months.
QCOM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Momentum and a B grade for Value and Quality. We have also graded QCOM for Sentiment, Stability, and Growth. Click here to access all QCOM's ratings. QCOM is ranked #12 of 99 stocks in the A-rated Semiconductor & Wireless Chip industry.
Microchip Technology Incorporated (MCHP)
Incorporated in 1989, MCHP in Chandler, Ariz., provides semiconductor products for connected and secured embedded control solutions. The company offers 8-bit, 16-bit, and 32-bit microcontrollers, 32-bit embedded microprocessors markets, and specialized microcontrollers. MCHP operates through two segments: semiconductor products and technology licensing.
This month, MCHP collaborated with Mersen, a global provider of power management solutions, to secure aid from Mersen's 150 kilovolt-ampere (kVA) three-phase silicon carbide Power Stack Reference Design. MCHP believes that its customers will benefit from this collaboration because Mersen should provide silicon carbide MOSFETs and digital gate driver solutions.
During its fiscal second quarter, ended September 30, 2021, MCHP's net sales increased 26% year-over-year to $1.65 billion. The company's gross profit grew 32.2% from its year-ago value to $1.07 billion. Its operating income rose 84% from the prior-year quarter to $416.3 million. Also, the company's net income increased 228.8% year-over-year to $242 million.
MCHP's revenue is expected to increase 24% year-over-year to $6.74 billion in its fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to increase 34.7% in the current year. Furthermore, the stock has gained 23.7% in price over the past year and 23.6% year-to-date.
MCHP's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Momentum and a B grade for Growth.
In addition to the POWR Rating grades I've just highlighted, one can see MCHP's ratings for Value, Stability, Quality, and Sentiment here. The stock is ranked #32 in the Semiconductor & Wireless Chip industry.
ON Semiconductor Corporation (ON)
ON offers a portfolio of sensors, power management, connectivity, custom and system on chip (SoC), analog, logic, timing, and discrete devices. The Phoenix, Ariz., company operates in three segments: Power Solutions Group (PSG); Advanced Solutions Group (ASG); and Intelligent Sensing Group (ISG). ON serves original equipment manufacturers, distributors, and electronic manufacturing service providers.
In November, ON and SensiML Corporation, a developer of AI tools for building intelligent Internet of Things (IoT) endpoints, partnered to deliver a complete machine learning solution for autonomous sensor data processing and predictive modeling. This model should provide users with advanced performance.
ON's revenue for its third quarter, ended October 1, 2021, increased 32.2% year-over-year to $1.74 million. The company's gross profit grew 12.6% from its year-ago value to $720.8 million. Its operating income rose 235.5% from the prior-year quarter to $399.2 million, and the company's net income increased 92.6% year-over-year to $310.4 million.
ON's revenue for its fiscal year 2021 is expected to be $6.68 billion, representing 27.2% year-over-year growth. The company has surpassed the consensus EPS in each of the trailing four quarters. Its EPS is expected to increase at the rate of 229.4% in the current year. The stock has surged 61.6% in price over the past nine months and 105.2% over the past year.
It is no surprise that ON has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Growth and Momentum and a B grade for Value.
Click here to see the additional POWR Ratings for ON (Sentiment, Stability, and Quality). ON is ranked #37 in the Semiconductor & Wireless Chip industry.
Click here to checkout our Electric Vehicle Industry Report
QCOM shares were trading at $180.19 per share on Wednesday afternoon, up $0.61 (+0.34%). Year-to-date, QCOM has gained 20.46%, versus a 26.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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