Advanced Semiconductor Engineering (NYSE:ASX) builds and distributes integrated circuits and other electronics. While at $6 billion in market capitalization it’s not quite the scale of an Intel (NASDAQ:INTC), Advanced Semiconductor does a brisk business providing chips for cellphones, household appliances, automobile components, personal computers and HD televisions among other products. The company is based in Taiwan, close to many Asian electronics manufacturers.
Year-to-date, ASX has been under pressure like many PC-related enterprises. Shares are off about 5% while the S&P 500 has rallied nicely. However, the diverse business of Advanced Semiconductor makes it a bit more stable in the long haul than a company very reliant on laptops and desktops. Furthermore, ASX is not a chip designer and simply a foundry — meaning unlike Arm Holdings (NASDAQ:ARMH) or Intel, it doesn’t have to fund costly research departments to keep up with the latest specs. It simply makes the semiconductors to order.
There may not be breakneck growth here without a secular recovery in consumer spending, but brighter days seem to be ahead in 2013 and 2014 — and that could boost ASX as electronics sales pick up in the next year or so. Furthermore, the reliable revenue from the ASX foundry biz throws off a 2.4% dividend yield as a bit of a hedge.
The company is profitable and the dividend payout ratio is a comfortable 25%, so don’t worry about this company going bankrupt if a recovery in electronics sales doesn’t happen overnight.