Investing in the 5G Industry
5G on your mind? Quite like how 4G opened up a world of tech investing opportunities, the 5G wireless standard also promises new investment opportunities for the coming decade. 5G opens up new capabilities for AR and VR applications, which have significant potential for various industries.
Etch and Deposition Sub-segment of 5G Chip Making
Motley Fool analyst Billy Duberstein looks at the 5G industry plus a few 5G stocks.
One of the key elements of 5G technology is etched and deposition equipment for semiconductors:
- Companies in this field make tools for stripping away stuff on imprinted wafers.
- They also manufacture tools for laying down the required conductive materials for manufacturing advanced chips.
- Applied Materials manufactures not just etch and deposition equipment, but also inspection and metrology tools as well as OLED display tools.
- Lam Research focuses on the industry, specializing in NAND memory 3D stacking.
- The products of Lam Research, as well as Applied Materials, serve semiconductor foundries along with DRAM and NAND.
Applied Materials has overtaken the S&P 500 by nearly 600%.
- Lam Research stock saw a massive jump during the beginning of 2021 Quarter 1
- The S&P 500’s Q1 metrics from 2017 to 2019 consistently increased. But saw a massive increase from Jan 2020 to Jan 2021 currently.
- Lam Research enjoyed an operating margin of 28.7% while it has a massive 60% return on equity.
Ichor Holdings ($ICHR)
Image description: Blue represents Ichor Holdings stock, while black represents the S&P 500. It has been a rough ride for the stock, only managing to rise beyond the index in the middle of January before dropping again by 10% and then rising again.
Lam Research and Applied Materials are both dependent on gas and fluid delivery subsystems supplied by Ichor Holdings.
- Applied Materials makes up 33% of the sales of Ichor’s products while Lam makes up 51%.
- The company’s earnings per share were reported at $0.51 with 29% growth that is significantly ahead of estimates.
Other 5G Chip Stocks
Image description: Blue depicts Qualcomm stock while black depicts the S&P 500. The stock outperformed the index, at one point by more than 60%.
- Qualcomm designs chips and software for wireless equipment.
- Must experience in licensing technologies related to 4G and 3G
Image description: Blue depicts Skyworks while black represents the S&P 500. As you can see, Skyworks outperformed the S&P 500 as they both rose from bear territory.
- Developed 5G standards by collaborating with 3GPP all the way back from 2015
- Manufactures RF components such as switches, amplifiers, filters, and tuners
- Launched Sky5 solutions suite for 5G revolution
Smartphone manufacturers and telecom service providers are the beneficiaries of the 5G spectrum. Let’s look at Apple ($AAPL):
Analysts have reported a high opinion of Apple. China experienced the strongest demand for the new 5G iPhones. China and South Korea lead the way in coverage for the 5G network.
Image description: As the chart above shows, following the initial months of the pandemic in 2020, the stock tasted impressive growth
T-Mobile US ($TMUS) leads the US wireless carriers deploying the technology for 5G wireless services. T-Mobile uses the mid-band radio spectrum known for its high performance.
Image description: The wireless carrier did struggle during the pandemic’s initial months, quite like Apple, but more than made up for it in later months.
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