The Zacks Semiconductors – Radio Frequency Industry comprises an array of companies with diversified end-markets.
The solutions provided by the key industry players apart from Radio Frequency (RF) solutions comprise Front-end Modules (FEMs), low-noise amplifiers, diodes, multi-chip modules (MMICs), optical components, surface acoustic wave (SAW) and bulk acoustic wave (BAW) filters, to mention a few.
These solutions find application in markets like aerospace and defense, 5G equipment, optical networks, cellular base stations, automotive and smart home applications.
The industry players utilize robust wafer fabrication technologies to gain a competitive edge over peers. The companies also leverage ZigBee,Bluetooth Low Energy (BLE), Thread, silicon germanium, Gallium Nitride (GaN) technologies across their portfolio to get ahead of the curve.
However, a saturated consumer electronic market, particularly the smartphone market which is sluggish and anticipated to decline this year, is likely to hinder growth prospects of the industry.
Moreover, increasing U.S. protectionism is hurting growth prospects of the industry. Lack of skilled workers particularly from STEM (Science, Technology, Engineering and Mathematics) fields in the United States has been bothering industry participants for quite some time.
Further, the ongoing trade war between the United States and China has created a volatile environment that is not conducive for investments.The recently announced fresh tariffs of 10% on an additional $200 billion worth of Chinese goods only aggravates the matter.
Notably, the industry participants generate a significant portion of their revenues from China. As the direct revenue sources are now under the radar of plausible tariffs, the concern over the prospects of the industry has increased in recent times.
Additionally, volatility in foreign exchange primarily due to current macro-economic scenario and headwinds in the emerging markets does not bode well for the Zacks Semiconductors – RF Industry.
Industry Lags on Shareholder Returns
Looking at shareholder returns over the past year, it appears that the ongoing tariff war between the United States and China, and growing U.S. protectionism has been dampening investor sentiment toward the Semiconductors – RF industry.
The Zacks Semiconductors – Radio Frequency Industry, which falls within the broader Zacks Computer And Technology Sector, has witnessed an unimpressive performance against both the S&P 500 and its own sector over the past year.
While the stocks in this industry have collectively shed 11% of their value, the Zacks S&P 500 Composite and Zacks Computer And Technology Sector have rallied 18.8% and 19.5%, respectively.