Editor’s note: This column is part of InvestorPlace.com’s Best Stocks for 2021 contest. Louis Navellier’s pick for the contest is Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) stock.
Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) may seem like an odd pick to be one of the best stocks for 2022. Primarily, that would be because few people have heard of the Singapore-based company. However, there are compelling reasons to get to know Kulicke & Soffa.
The company is classed as a semiconductor stock because it specializes in the equipment and tools needed to manufacture chips and assemble semiconductor devices. Like many semiconductor stocks, KLIC is seeing impressive growth momentum: 18% in 2020, and 79% so far in 2021.
However, the reason I’m really excited about Kulicke & Soffa’s growth potential in 2022 and beyond isn’t just momentum. It’s not just the chip shortage that has been shining a light on all semiconductor stocks. Instead, the reason is my new Apple (NASDAQ:AAPL) MacBook Pro. More specifically, this laptop’s stunning Liquid Retina XDR display. That display uses mini LED technology, and guess who’s on the leading edge of mini LED display assembly equipment? Kulicke & Soffa.
Therefore, here’s why I think mini-LED and then micro-LED demand is going to make KLIC stock one of the best stocks available in 2022.
Mini LED Displays Are Wowing Customers
Last November, I wrote about the M1 processor, the custom silicon that Apple began to roll out in its MacBooks. M1 was a game changer, blowing past the performance of Windows-based laptops that cost far more. Moreover, Apple upped the ante this fall with the M1 Max and M1 Pro chips in all-new MacBook Pro models. I bought one of these and the performance is astounding.
But the killer feature? It may just be the new Liquid Retina XDR display.
This is a feature the new MacBook Pros share with the latest 12.9-inch iPad Pro. What makes Apple’s Liquid Retina XDR display so special? It is a high-resolution panel with eye-popping color and high contrast that’s capable of reaching an incredible 1,600 nits of brightness. In contrast, the latest MacBook Air — which is considered to be a premium laptop in its own right — maxes out at 400 Nits. The Liquid Retina XDR display also features an ultra-fast 120Hz refresh rate that makes scrolling on other displays look choppy.
When you see the people clustered around the new MacBook Pro models and the 12.9-inch iPad Pro at Apple stores, they’re not being wowed by fast video encodes and long battery life. They’re drawn to those Liquid Retina XDR displays like moths to a flame.
Furthermore, Apple’s Liquid Retina XDR display is so special because it employs mini LED technology. This packs around five mini LEDs in the area that a single regular LED takes up, giving far more precise display control and accuracy. It also uses less battery power than OLED displays, which is important in a mobile device.
Mini LED Displays Are Huge for TV Makers
Additionally, we are seeing the micro-LED effect in TV manufacturing as well.
Even premium TVs equipped with standard LED displays feature a few dozen local dimming zones (where the screen can brighten and dim independently) at best. Manufacturers have introduced micro LED TVs that have as many as 3,000 local dimming zones. This delivers performance that rivals expensive OLED TVs at a much more affordable price. TCL (the world’s third-largest TV maker and a company known for its affordable pricing) now offers micro LED TVs. That’s a strong sign that technology is going mainstream.
Mini LED Is Just the Start, Wait for Micro LED
While mini LED technology is a game changer, micro LED will be disruptive. It’s still costly at this point, but micro LED panels — with millions of microscopic LEDs — are matching OLED’s deep black levels, while outperforming OLED on color reproduction and brightness. They also lack the risk of screen burn-in, which remains a challenge for OLED.
Moreover, the potential for micro LED isn’t just in high-end TVs and laptops. Virtually every modern smartphone sold today, including the base model iPhone 13, is equipped with an OLED display. So, imagine the size of the addressable market if (more likely when) micro LED supplants OLED.
Where am I going with all this mini LED and micro LED info? The new display panels are going to soar in popularity, but they are a challenge to manufacture. Mini LEDs are tiny; micro LEDs are worse.
In turn, Kulicke & Soffa sells a system called Luminex. It is a laser-based die transfer system designed for mini and micro LEDs, and display manufacturers use Luminex as part of their assembly process. An industry report from September says Luminex can currently shoot 1,000 micro LEDs per second onto a substrate. The company is working on enhancing the technology with the goal of reaching 10,000 placements per second. Kulicke & Soffa already has big customers buying Luminex machines — a client list that reportedly includes Samsung.
Overall, when you look at what’s happening with mini LED display technology and what is going to be happening with micro LED, you’ll understand why I’m looking at KLIC stock as one of the best stocks for 2022.
Why KLIC Is One of the Best Stocks for 2022
Does Kulicke & Soffa deserve a spot in your growth portfolio? This Portfolio Grader “B” rated stock would be a pick for many investors based solely on its performance in 2020 and 2021.
I’ve focused on mini LED and micro-LED technology, and Kulicke & Soffa’s Luminex solution for display manufacturers. But the company also has equipment being snapped up by semiconductor manufacturers servicing other high-growth markets like electric vehicles (EVs).
The company’s CEO summed up the potential for 2022 in his fourth-quarter earnings release comments. The company’s revenue for that quarter was up 173% year-over-year (YOY), by the way. Another positive sign for KLIC stock.
Here is what Fusen Chen, Kulicke & Soffa’s President and CEO, said about the results:
“Throughout fiscal 2022, we anticipate ongoing industry expansion and also rapid growth of our emerging portfolio of solutions which directly addresses semiconductor, electric vehicle, and advanced LED assembly challenges.”
So, with Apple and TV makers leading the charge to mini LED display adoption — and micro LED around the corner to supplant OLED — KLIC stock is a strong play to reap the rewards as the technology goes mainstream.
On the date of publication, Louis Navellier had a long position in KLIC. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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