Micron Technology, Inc. (MU), Intel Corporation (INTC) & NXP Semiconductors NV (NXPI): Not the Best Play in the Semiconductor Industry

Alternative Plays

My favorite play on Flash technology is with the aforementioned Intel, which offers the stability that comes with being the undisputed world leader in CPU’s and the world’s largest overall chipmaker. Intel Corporation (NASDAQ:INTC) trades at a very low 12.1 times TTM earnings, and what the company lacks in growth potential, it makes up for with value and stability. Intel pays an excellent dividend yield of over 3.7%, which has been raised like clockwork over the years, including during the crisis years. Additionally, Intel has about $5 billion in net cash (cash minus debt) on its balance sheet, in contrast to Micron Technology, Inc. (NASDAQ:MU).

If you insist on a smaller semiconductor company with growth potential, take a look at NXP Semiconductors NV (NASDAQ:NXPI), a Netherlands-based manufacturer of high performance mixed signal products that are used in a variety of electronic devices. Unlike Micron, NXP Semiconductors NV (NASDAQ:NXPI) has a good track record of producing profits for their shareholders, and is projected to grow its earnings nicely over the next few years. NXP Semiconductors NV (NASDAQ:NXPI) earned $1.70 per share in 2012, and this is projected to reach $3.92 by 2015, which would mean even better growth at that point than Micron Technology, Inc. (NASDAQ:MU).

Conclusion

The semiconductor industry is a challenging one to invest in, due to its cyclicality and the constant pricing pressures put on the companies as new technologies hit the market. As far as Micron Technology, Inc. (NASDAQ:MU) goes, I would not become a buyer until at least some of the gains of the past year are reversed. In the meantime, either of the other two companies mentioned here would make a good alternative, and which one is right for you depends on your particular risk tolerance and yield expectations.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Intel Corporation (NASDAQ:INTC) and NXP Semiconductors NV (NASDAQ:NXPI). The Motley Fool owns shares of Intel.

The article Not the Best Play in the Semiconductor Industry originally appeared on Fool.com.

Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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