Lack of "chips" makes the semiconductor equipment industry a new gold mine

According to Jiwei.com, American technology giants are seeking large amounts of funds to stimulate the semiconductor manufacturing industry. In this regard, Bank of America said that the shortage and the resulting new wafer fabs make it optimistic about the semiconductor equipment industry. The bank believes that the forward price-to-earnings ratio of the semiconductor equipment industry is about 20-21 times, which is lower than the broader market, and the earnings per share/free cash flow growth momentum is strong.

As the chip industry tries to alleviate the chip shortage caused by the incremental demand in the computer and automobile markets, the new wafer fabs required by manufacturing giants to increase supply will bring long-term profit opportunities to the field. At the same time, the rising cost, complexity and capital intensity of advanced chip manufacturing will bring structural benefits.

The report pointed out that the chip shortage has brought a painful impact on the automotive industry. In the next century, chip self-sufficiency will be as important to each country as steel and energy in the past. The European Union is considering building advanced wafer factories to reduce its dependence on other places. Japan is seeking greater insourcing measures. China may continue to invest more than $10 billion in wafer equipment.

Bank of America said that in the long run, the benefits of insourcing will be more obvious. Such long-term investment logic may help the semiconductor equipment industry's price-to-earnings ratio catch up with the broader market, which is 23-25 ​​times. Applied Materials (AMAT.US) is the first choice in the industry, followed by KLAC (KLAC.US), Lam Research (LRCX.US) and Teradyne (TER.US).