Semiconductor stocks are a varied bunch. Among the 10 largest chip stocks, counting by market cap alone, you'll find a mix of rock-solid dividend and value plays, volatile high-growth stocks, and downright risky lottery tickets.
Let me show you what I mean. Here are the largest semiconductor stocks in the world today:
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Data source: FinViz.
Many of these names should be familiar already. Others spend less time in the limelight. Don't worry, I'll help you out.
From a product perspective, these stocks fall into three broad categories.
ARM Holdings is the only pure play on chip technology licenses. Taiwan Semi, ASML, and Applied Materials work on the manufacturing and factory equipment side of things. The other six design the semiconductors we use every day, in everything from smartphones and supercomputers to industrial systems and car engine controllers.
Picking the right market and business model is half the battle.
Intel dominates the traditional computing scene, leaving just table scraps for other central processor designers in desktops, notebooks, workstations, and supercomputers.
The one-two punch of ARM's technology platforms and Qualcomm's refined execution dominates the mobile computing field. Most of today's mobile flagship products are built around an ARM-based chip. With one important exception, Qualcomm executed the final design for most of these top-shelf smartphone and tablet drivers.
To understand the mobile chip space, it's a very good idea to start with these two companies. They have been successful enough to keep even mighty Intel at bay.
Qualcomm is also a major player in mobile radio chips, giving the company a second attack vector into the mobile space and the Internet of Things. Here, Intel fights back by acquisition and heavy research investments. This is also where Broadcom puts up its dukes, challenging the industry's biggest heavyweights for every communications chip slot worth mentioning.
Given the size of the rising Internet of Things market and the central role of wireless networking in that space, this heated rivalry makes perfect sense. Better to carve out a slice of that pie now than to be left flat-footed and disappointed when the market truly takes off.
Investor appeal Most of these major semiconductor stocks are a great fit for your dividend portfolio. In particular, Intel recently raised its payout for the first time in three years -- and offers a mouthwatering 3.1% dividend yield as a result.
Here's how reinvested dividends have boosted the value of Intel shares over the last decade. Those total returns more than doubled Intel's straight-up share price increases:
But Intel's tendency to pump the brakes on dividend increases is a turn-off for many income investors, no matter what the size of the total return.
For a more dependable dividend growth idea, Texas Instruments has increased its payouts without interruption for the last 11 years, and Qualcomm's streak currently stands at 12 years. These increases haven't been half-hearted, either:
Semiconductor investors may also be on the hunt for strong stock returns. Memory chip specialist Micron Technology is the poster boy for this category, having quadrupled in price since the start of 2013:
The scary and/or exciting bit about Micron, depending on your point of view, is that Mr. Market still seems unsure about the company's future prospects. Even after the tremendous two-year growth spurt seen above, Micron shares still trade at bargain-basement prices.
The stock can be had for 8.3 times trailing free cash flows, or 9.1 times adjusted earnings. For highly respected value stocks like Apple and Intel, these ratios sit more than 50% higher than Micron's.
You might think we were talking about risk discounts for a small, unstable company. But Micron is indeed among the 10 largest semiconductor companies in the world, and it is one of the three names that still matter in its chosen memory chip niche. In short, I believe Micron actually deserves another steep lift to its market value. Do your homework and decide for yourself, while I continue to sit on my personal Micron holdings.
Final words There's something for every kind of investor in the semiconductor sector. These are just the 10 largest market caps on the table. Below that rarefied air, you'll find much more from which to learn and earn.
The article 10 Largest Companies by Market Cap in Semiconductors originally appeared on Fool.com.
Anders Bylund owns shares of Intel and Micron Technology, The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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