The Global Chip Shortage is Boosting This 5G Chip Stock

NXP Semiconductors (NXPI) is a Dutch semiconductor manufacturer located in Eindhoven, Netherlands. Unlike other 5G chip stocks, NXPI specializes in semiconductors for the automotive industry.

However, the company has recently begun to expand its offerings. While its 5G technologies are being used for the automotive sector, it has also made 5G-capable multi-chip modules for mobile networks, infrastructure, and equipment.

This expansion, combined with increasing demand among NXPI’s major end markets, have benefited the chipmaker over the past several months. 

In NXPI’s second quarter, the company reported operating income of $830 million. That’s greater than Wall Street’s estimated $801.3 million. 

Meanwhile, the chipmaker noted that revenue was $2.6 billion, beating the expected revenue of $2.58 billion. 

In the company’s upcoming third quarter, NXPI forecasts operating income in the range of $900 million to $982 million. Revenue is projected to be around $2.78 billion to $2.93 billion. 

But this momentum should continue well beyond NXPI’s third quarter as well.

With the ongoing global chip shortage, the overall semiconductor supply remains low. This means that even though companies like NXPI are selling fewer chips, higher costs are helping to prop up profits and margins. 

Given the sector anticipates the shortage will continue through 2022, it suggests this supply and demand dynamic will continue for quite some time – potentially boosting shares along the way.

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