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What is a Semiconductor?
In short, a semiconductor is a material that has electrical conductivity due to flowing electrons. Typically, silicon serves as the chief component for commercially produced semiconductors, although a range of other materials, such as germanium, gallium arsenide, and silicon carbide can be utilized as well. A pure semiconductor is often called an “intrinsic” semiconductor and it is not uncommon for these two terms to be used interchangeably. The electronic properties and the conductivity of a semiconductor can be changed in a controlled manner by adding very small quantities of other elements, called “dopants”, to the intrinsic material. For example, with crystalline silicon this is achieved by adding impurities of boron or phosphorus to the melt and then allowing the melt to solidify into the crystal. This process is referred to as "doping". The various scientific methods used allow these compounds to serve a vast array of end markets, since making even the slightest change to these chemical compounds may drastically affect its commercial purpose.
Devices made from semiconductor materials are the foundation for most modern electronics, which includes radios, computers, telephones, and other various forms of electronic equipment. These products consist of the different forms of transistors, solar cells, diodes, including the light-emitting diode, silicon controlled rectifiers, and digital and analog integrated circuits. Similarly, semiconductor solar photovoltaic panels directly convert light energy into electrical energy and have become a key focus for many companies, as renewable green energy sources now have been thrust into the spotlight. This is because of government mandates requiring lower levels of greenhouse gas emissions. In turn, many semiconductor companies have shifted focus toward energy-efficient eco-friendly products to drive the top line. However, developing such technology is capital- and labor-intensive and the failure rate for new concept products is alarmingly high. Most problems that arise stem from the integration of new products with older platforms, which has also caused troubles for technicians in charge of installation.
The semiconductor industry is the aggregate collection of companies engaged in the design and fabrication of semiconductor devices. This sector came into existence around 1960, once the fabrication of semiconductors became a viable business and has since blossomed into a market worth more than $250 billion. The global semiconductor industry is dominated by the European Union, Japan, South Korea, and the United States. However, the domestic marketplace faces challenges to development by some forms of government regulation, since it regulates exports and certain uses of some types of semiconductors due to their potential dual use in military applications. That said, the key role for the semiconductor industry is to serve as chief technology enabler. It is widely recognized as a core economic driver due to its crucial role in the electronics development value chain and represents about 10% of the global gross domestic product.
A semiconductor company can either manufacture silicon wafers or be a fabless semiconductor entity that designs chips manufactured by various companies. Although many different semiconductor producers exist, there are select businesses that have helped pave the way for new-frontier technology. Advanced Semiconductor Engineering Inc. (ASX) is the world’s largest provider of independent semiconductor packaging and testing services, and competes directly with other diverse companies, such as Fairchild Semiconductor (FCS), Intel Corporation (INTC - Free Analyst Report), NXP Semiconductors (NXPI), and STMicroelectronics (STM). On the electronics front, household names Fujitsu, Panasonic (PC), Samsung, Sharp Corporation, Sony (SNE), Toshiba, and Texas Instruments (TXN) have established groundbreaking innovations in flash drive technology, LCD screening, digital signal processors, digital light processing, calculators, clocks, and other various types of circuit electronics.
Not all companies in the semiconductor universe are as well established as some of those listed above; however, as access to materials has been improving and end market demand is up of late, the potential exists for some of these upstarts to increase their influence in the semiconductor industry. As a result, there is some upside here for investors looking for capital appreciation. In addition, this industry tends to be one of the least leveraged around, since many companies boast very little debt and loads of cash on the balance sheet. Although dividend payouts are a relatively new phenomenon for this sector, more businesses have initiated dividend payments and make steady payment increases as the industry has matured. Well-positioned semiconductor securities may just be the right fit for accounts seeking long-term growth and income, while not being afraid to take a little risk.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.