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The Current State of Semiconductors

The semiconductor industry has grown into a $4.67 trillion aggregate containing an extensive group of companies at the crux of modern technology. Semiconductors are at the foundation of modern life, as they are materials with conductive properties used to manufacture various kinds of electronic devices across all industries. They are the foundation of modern life, as they enable everything from cars to medical devices to appliances.

Over the past 30 years, the industry has experienced rapid growth in response to the various technological advancements during this time period. Techn0logical evolutions of PCs in the 1990s, internet services during the 2000s, and smartphones during the 2010s would not have been possible without advanced chip performance from semiconductors. An estimated $3 trillion in global GDP between 1995 to 2015 has been directly attributed to semiconductor innovation.

Current events are also shaping the industry. Semiconductor firms have been booming recently due to their help in fighting COVID-19, as the technology is a part of a variety of needs such as temperature screenings, vaccine development, medical devices, and virtual office and schools setting. With new variants developing and global supply chains becoming manageable by these firms, it seems as if covid will never truly go away, allowing for the growth of the industry as well as the industry's chief company, Nvidia ($NVDA).

However, a significant consequence of the pandemic has been the global chip shortage, which interrupted semiconductor supply that could not catch up to chip demand as a result of remote healthcare, work-from-home, and other features of the time.

Semiconductors are also seen as a solution for climate change, which has become a major issue for world governments and firms alike to attempt to solve. According to the World Economic Forum, semiconductor-enabled technology can reduce greenhouse gas emissions by as much as 15% percent, which is almost 1/3 of the required reduction by 2030.

During the 3rd Quarter of 2021, worldwide sales of semiconductors totaled $144.8 billion, which was an increase of 27.6% YoY from 2020 and 7.4% more from Q2 of 2021.

Besides strong revenue figures and a favorable future economy for semiconductors, quality numbers in regards to research and development (R&D) are fundamental to long-term growth within the context of technological innovation. As we can see below, research and development spending in the American semiconductor industry has been growing at an annual rate of 7.2% since 2000, indicating the importance of re-investing back into companies that are passionate and driven about their technology.

Nvidia (NVDA) is the leading manufacturer of graphics processing units that are able to enhance the visual experience on a variety of computing platforms. The company's chips are used across the board in PC gaming, automotive systems, and data analytics. NVDA possesses the largest market capitalization within the semiconductor industry on the back of high future expected growth as well as its chip processing.

We believe that the semiconductor industry, on the backs of giants such as Nvidia and Qualcomm, will continue to flourish into the next decade because of its versatile ability to be fundamental in a variety of industries.

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