Analog Devices is a semiconductor stock that has a dominant position in the data converter segment where chips are used to convert analog signals to digital signals and vice versa. Analog Devices is the world’s largest analog chip makers supplying key components to wireless networking equipment, industrial facilities, medical device companies, and automobile manufacturing companies. Besides its design and manufacturing expertise, Analog Devices also benefits from high switching costs that customers face when they attempt to replace analog chips with comparable chips from competitors.
Other semiconductor stocks to buy now
Besides Analog Devices, companies like Xilinx, Texas Instruments, and Taiwan Semiconductor Manufacturing Company are top semiconductor companies. Analog Devices is up 40.51% since the March market crash but down 4.06% for the year 2020. Xilinx is up 50.68% since the March market fall and up 2.25% year-to-date. Taiwan Semiconductor Manufacturing Company’s ADR is up 74% since March 25th and up 42.5% for the year 2020. So, semiconductor stocks have done well in the last 6 to 7 months.
On a longer-term basis, Analog Devices is up 2.03X in the past 5 years, Xilinx is up 2.31X in a 5-year period, while Taiwan Semiconductor Manufacturing Company is up 3.65X during the same period. So, the top semiconductor stocks seem to have grown at healthy annual average rates of 15% to 29% while paying a dividend as well.
The semiconductor sector and its growth
Some of the trends that are driving the growth of semiconductor products is increasing automation, the deployment of 5G, concepts like the Internet of Things, and increasing digitization of various aspects of our lives. Semiconductor chips are now the US’s fourth-largest export item. Globally, about $419 billion was spent on semiconductor products as of 2019. The US accounted for half of that total spending. These trends indicate that now may be a good time to buy semiconductor stocks.