How investors can benefit from the lack of chips

The ups and downs in the semiconductor industry are not for investors with the faint of heart. But analysts are convinced: the trend is clearly pointing in one direction.

Employees of the unlisted chip manufacturer Globalfoundries show wafers from which chips are made.

Dhe world longs for chips. The auto industry has to take production breaks and short-time work because the chips that are so important for modern cars are missing. At the largest German semiconductor manufacturer, Infineon, production is now in full swing. During the pandemic, the demand for semiconductors exploded and the industry, which is used to “pig cycles” with ups and downs, has since experienced a strong upswing. According to figures from the industry association World Semiconductor Trade Statistics, sales in the semiconductor industry rose 6.8 percent to $ 440 billion last year. The association expects growth to accelerate further this year and total sales to rise by eleven percent to $ 488 billion. This creates promising opportunities for investors: whether in the form of shares in individual companies or as semiconductor ETFs.

“For everyone involved in the semiconductor business, these cycles are ‘business-as-usual’. Only in this cycle did a few unique factors come together that triggered the chip shortage, ”says Marc Hesselink, technology analyst for Equity Research at ING. On average, a “pig cycle” in the semiconductor industry lasts three years: two years of upswing and about one year of downward trend. In the chip industry, there are always times when capacities are expanded and times when they are processed, says the analyst. Every new chip size needs its own production facilities, and the costs for new factories run into the billions. Accordingly, it often takes years to adjust production capacities.