Companies in the semiconductor industry are in a constant race to build smaller, faster and cheaper chips. The industry, which began in 1960 when fabricating semiconductors became feasible, grew from a $1 billion industry in 1964 to a $412 billion industry by the end of 2014. The semiconductor industry is dominated by some very large players with distinct niches and advantages.
Advanced Micro Devices Inc. (NASDAQ: AMD) has historically been one of the significant players in the semiconductor industry. The company has seen its market capitalization decline precipitously from the highs it reached during the dot-com bubble in the late 1990s and again in 2005, when analysts and market participants perceived the company as an innovator in the industry. AMD generated net income of $43 million in 2017 after posting net losses in the previous four years.
Intel Corporation (NASDAQ: INTC) is the largest pure-play competitor to AMD. The company creates, produces and sells integrated digital technology platforms all over the world. As the largest player in the space, the company has historically invested heavily in research and development (R&D). For the fiscal year ending in December 2017, the company had $62.76 billion in annual revenue and gross margins of 63% in the last fiscal quarter. The company generated earnings before interest, tax and depreciation (EBITD) of $26.46 billion annually and operating margins of -4% in the last fiscal quarter. Intel earned $1.92 per share for the previous year. As of April 25, 2018, the company had a market cap of $240.7 billion and a price-to-earnings (P/E) ratio of 25.96.
International Business Machines Corporation (NYSE: IBM) is a diversified technology products and services company, and semiconductors represents one piece of the company’s overall business. On July 1, 2015, the company sold its global semiconductor technology business to GlobalFoundries, making the latter the exclusive semiconductor technology provider to IBM. However, IBM is a global leader in technology R&D, and it continues to invest a substantial amount of money in chip technology. IBM had $79.14 billion in revenue for the fiscal year that ended in December 2017, and gross margins of 43.24% for the last fiscal quarter. The company had earnings before interest, taxes, depreciation and amortization (EBITDA) of $14.77 billion in the last fiscal year and operating margins of 8.99% for the last fiscal quarter. IBM generated earnings per share (EPS) of $6.07 for the fiscal year. As of April 25, 2018, the company had a market cap of $134.09 billion and a P/E ratio of 23.78.
NVIDIA Corporation (NASDAQ: NVDA) is a semiconductor company specializing in chips used primarily in graphics and gaming. Its Tegra division produces chips that integrate a computer’s circuitry onto a single chip. For the fiscal year 2017, the company had $9.71 billion in revenues and gross margins of 61.87%. The company generated EBITDA of $3.42 billion and had operating margins of 36.86%. As of April 25, 2016, the company had a market cap of $131.49 billion and a P/E ratio of 44.94, which is one of the highest in the large-cap semiconductor space.
Analog Devices Inc. (NASDAQ: ADI) is a semiconductor company that creates, produces and sells a suite of products that use analog, digital and mixed-signal processing technology to manufacture integrated circuits and other solutions for industries and consumers. The company serves niche markets in the automotive and communications industries and sells its products worldwide. For the fiscal year 2017, the company had $5.2 billion in revenue and gross margins of 70%. The company generated EBITDA of $1.76 billion and had operating margins of 22.93%. As of April 25, 2018, the company had a market cap of $32.7 billion and a P/E ratio of 41.73.