Demand for consumer technology such as tablets and smartphones has focused the spotlight on Apple (NASDAQ:AAPL). But that company isn’t the only winner.
After recession bottomed out their product prices in 2009, flash-memory chipmakers are also enjoying a resurgence in demand and profits as consumer technology demand grows. According to Gartner, worldwide chip sales increased by nearly one-third to $299.4 billion last year.
The party is set to continue this year. According to IHS iSuppli, NAND flash memory consumption (the memory chip used in smartphones and tablets) is expected to nearly quadruple this year. Similarly, smart phones (again, major consumers of memory chips) are expected to top $1 billion in sales this year.
Given their explosive growth, memory chip makers are good investment bets. Here are some chip makers that have a great opportunity to ride the crest of this boom:
1. Micron Tech (NASDAQ:MU): A major player in the flash memory industry, the company went through a rough patch recently when prices for its two main revenue sources – DRAM and NAND Flash memory chips — fell last year. This year has been a different story.
Micron has ramped up production by opening up a $3 billion facility in Singapore with Intel (NASDAQ:INTC). It’ recent acquisition of Numonyx — a major player in the NOR flash memory space – should further consolidate its position in the flash memory industry. What’s more, the company has had relatively healthy operating margins of 8% despite the takeover.
2. Spansion (NASDAQ:CODE): Once the world’s largest NOR flash supplier, Spansion saw some bad times recently when it had to file for bankruptcy in 2009. But the company has rebounded smartly since then: after listing in May last year, the company reached a total market cap of $1.13 billion in less than a year. It has a trailing P/E ratio of 6.65, which is pretty good in an industry which has an average P/E ratio of 18.80. A slew of new products, increased margins and lower operating costs should propel Spansion’s comeback story to further heights.
3. Sandisk (NASDAQ:SNDK): A member of the S&P 500, Sandisk is a veteran and, possibly, one of the strongest players in this sector. After peaking at $67.36 in March 2006, the company’s stock price spent most of the recession languishing at single-digit figures. However, consumer demand for mobile handheld devices has helped stock prices zoom back to double digits in recent years. Revenue has increased by 48% to $4.83 billion. Add first-mover advantage, sophisticated technology that enables the firm to pack more transistors into a single chip (and cut manufacturing cost), and expected future demand for solid state devices to the mix and you have a winner.