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NEW YORK ( TheStreet) -- For all the talk about the seemingly depressed nature of the semiconductor space, where companies like Broadcom(BRCM) are fighting to maintain lofty growth expectations, Avago Technologies(AVGO - Get Report), coming off two consecutive beat-and-raise quarters, remains one of the best-kept growth secrets on the market.
Perhaps "secret" is not the proper term to use given that the stock is up 25% for the year to date.
Qualcomm(QCOM), and to a lesser extent
Texas Instruments(TXN), Avago has had little media coverage.
Here's the thing: As with Qualcomm and Broadcom, Avago enjoys excellent exposure in the wireless handset market. The company is prominently featured in the products of both
So when average selling price (ASP) of high-end mobile devices began to come down, which incited fear of saturation and margin pressure for the likes of Broadcom, Avago was still able to grow market share. I'm not going to tell you that Avago has surpassed Qualcomm or that it's even close to launching a threat to Qualcomm's
50% share of the wireless market. But what I do know is Avago has been using its next-generation FBAR system, or Film Bulk Acoustic Resonator, to enable multi-band phones. These are the types of phones that are able to operate in multiple regions of the world.
Essentially, Avago's FBAR system can allow device manufactures like Apple and Samsung to design one phone that can operate on virtually any network. Band fragmentation (among other things) has been one of the biggest headaches for hardware companies since they increase production costs. With Avago's FBAR system, Apple and Sumsung won't have to build various versions of their devices just to support multiple carrier frequencies.
There's no question that margins have become a significant issue in this industry, especially given the recent worries about high-end device saturation. For investors to make money, cutting costs is the name of the game. If Apple wants to preserve margins, especially on its "budget iPhone," there are likely very few alternatives to Avago.
In effect, while the Street insists on focusing on the device battle between Apple and Samsung, Avago is poised to outperform regardless of the outcome. Given that Avago is coming off a quarter where revenue soared 15% sequentially, it should also matter very little to investors which of the two companies (Apple or Samsung) win. Either way, Avago should grow commensurately.