NEW YORK ( TheStreet) -- As per U.S-based Semiconductor Industry Association (SIA), global chip sales in January rose 14% to $25.5 billion from a year ago. The growth, which was recorded the highest U.S. with sales growth of 25% year-over-year, was mainly led by the high usage of chips in a wide range of products.

The SIA expects single-digit growth for the industry in 2011. However, the U.S. is expected to track double-digit growth on SIA's continuous efforts to increase chip production in the country, as these chips is a critical element of the overall technology industry.

The industry is trading at a price-to-earnings (P/E) ratio of 18.8 with a return-on-equity (ROE) of 14.8%, and a dividend yield of 2.73%. In 2010, year-over-year sales grew 50% and 44% to the industrial and automotive sectors, respectively.

Analysts expect these nine semiconductor stocks to generate lucrative returns for investors over the next 12 months. These stocks have 14% to 74% upside with strong buy, hold ratings.
9. KLA-Tencor ( KLAC) designs, manufactures, supplies and markets process control and yield management solutions for the semiconductor and related nano-electronics industries. The company's products find application in high-brightness light-emitting diodes (HBLED), data storage and photovoltaic industries, as well as general materials research.

Of the 16 analysts covering the stock, 44% rated a buy while 50% advised a hold. Analysts polled by Bloomberg expect the stock to gain an average 12.4% to $50.7 in the upcoming 12 months.

For the second quarter ending Dec. 31, 2010, the company reported revenue increase of 74.1% to $766 million from the year-ago quarter. Net income multiplied to $185 million, or $1.09 per share, compared to $22 million, or 13 cents, in the year-ago quarter. In February, the company's board of directors authorized the repurchase of an additional 10 million shares of its outstanding common stock. In March, KLA-Tencor paid a quarterly cash dividend of 25 cents per share.

For third quarter of 2011, the company estimates revenue in the range of $780 to $830 million while non-GAAP earnings per share are expected between $1.15 and $1.30, beating analysts' expectations.

8. ASML Holding ( ASML), operating through its subsidiaries, provides advanced technology systems for the semiconductor industry. The company offers an integrated portfolio of lithography systems for fabricating integrated circuits (ICs) and manufacturing semiconductors throughout Asia, the U.S. and Europe.

The stock received 50% buy ratings from analysts with the remaining rating it hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average 12.4% to $46.1 in the upcoming 12 months.

For the latest fourth quarter, the company reported 161.8% increase in total sales to $2.15 billion from a year ago. Meanwhile, net income multiplied to $575.2 million, or $1.3, from $70.7 million in the year-ago quarter. At the end of the quarter, backlog stood at $5,449.5 million, with 57% carrying shipment dates in the next six months.

For first quarter of 2011, net sales are pegged at around $2 billion with gross margin ranging between 44% and 45%. The company estimates to incur $204.9 million in research and development expenses. Meanwhile, based on the current backlog and estimated first-quarter bookings, net sales for 2011 would exceed $7.1 5 billion.

Industry analyst Ben Pang of Caris estimates spending on lithography tools to surpass 23% in 2011 and ASML, being a global leader for the same, will benefit from this forecast. Meanwhile, Gartner projected ASML's lithography market share at 51% in 2009, while a few estimates reckon the share of the 193-nanometer immersion market at 80%.

7. FEI Company ( FEIC) supplies instruments for nanoscale imaging, analysis and prototyping to enable research, development and manufacturing activities across a range of industrial, academic and research institutions. The company's sales and service operations are present throughout the U.S. and 50 other countries worldwide.

Of the 8 analysts covering the stock, 75% recommend a buy while the remaining suggest a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average 12.9% to $36.6 in the upcoming 12 months.

For the latest fourth quarter, the company reported 20% increase in revenue to $186.1 million compared to the year-ago quarter. Net income tripled to $21.3 million, or 52 cents per share, from $6.6 million, or 17 cents per share, from a year ago. Bookings during the quarter soared 34% to $218.4 million. For full-year 2010, revenue, net income and bookings were up 10%, 136% and 25% from 2009 levels, respectively.

For first quarter of 2011, the company expects revenue in the range of $180 to $190 million, while bookings are seen between $175 and $195 million. Earnings per share for the quarter are forecast between 43 cents to 59 cents. FEI believes that its backlog provides attractive visibility levels for first half of 2011.

6. MEMC Electronic Materials ( WFR) develops, manufactures, and markets silicon wafers. The company operates across three business segments: Semiconductor Materials, Solar Materials, and Solar Energy.

Of the 26 analysts covering the stock, 38% recommend a buy whereas 46% rate a hold. Analysts polled by Bloomberg expect the stock to gain an average 15.1% to $14.2 in the upcoming 12 months.

Barclays analysts believe that damages related to the recent earthquake and tsunami in Japan could stress global supply chains and push silicon wafer prices higher. However, these price burdens could pressure companies to revise their prices to sustain profitability. Therefore, on such excessive speculation, MEMC believes that supply disruptions may result in a demand boost for its products.

Through its Singapore subsidiary, MEMC recently signed a joint venture agreement with JA Solar Holdings ( JASO) to build and operate a solar cell production facility in China. Commercialization of Phase 1 of the facility will begin in the second half of 2011.

For full-year 2011, the company estimates non-GAAP sales in the range of $3.4 to $3.7 billion, while earnings per share are seen between $1.0 and $1.30. GAAP estimates for sales are pegged between $2.8 to $3.1 billion with earnings per share between 25 cents and 55 cents.

5. Veeco Instruments ( VECO) designs, manufactures, markets and services enabling solutions for customers in the high-brightness light-emitting diode (HB LED), solar, data storage, scientific research, semiconductor and industrial markets. With China and Korea accounting for more than half of its business, strong demand from China and 70% Chinese subsidies that underpin demand will sustain Veeco's growth in 2011.

Of the 19 analysts covering the stock, 58% recommend a buy while 37% rate a hold. Analysts polled by Bloomberg foresee the stock gaining an average 15.8% to $56.5 in the upcoming 12 months.

For the latest fourth quarter, the company reported record revenue growth of 152% to $41.9 million from the year-ago quarter. For full-year 2010, which the company regards as its best year, revenues soared 230% to $933 million from 2009 levels. Meanwhile, earnings per share stood at $4.42, up 21 cents from the previous year. The company recently received $4.8 million in funding from the U.S. Energy Department, as part of a national initiative designed to reduce production costs of photovoltaic cells by 75%.

For first quarter of 2011, the company anticipates revenue in the range of $215 to $265 million with earnings per share ranging between 94 cents and $1.31. For full-year 2011, Veeco estimates revenue to be greater than $1 billion with non-GAAP earnings per share of more than $5. The company is targeting to supply at least half of the total global LED tool market in 2011.

4. Fairchild Semiconductor International ( FCS) develops, manufactures and markets power analog, power discrete and certain non-power semiconductor solutions panning a range of end-market customers. The company's products are organized into three business segments: Mobile, Computing, Consumer and Communication (MCCC); Power Conversion, Industrial and Automotive (PCIA); and Standard Discrete and Standard Linear (SDT).

Of the 15 analysts covering the stock, 60% recommend a buy while 27% suggest a hold. Analysts polled by Bloomberg expect the stock to gain an average 21.6% to $20.6 in the upcoming 12 months.

For the latest fourth quarter, net income stood at $51 million, or 40 cents per share, as compared to $13.1 million, or 10 cents per share, in the year-ago quarter. For 2010, sales were up 35% to $1.6 billion and the company reported free cash flow of $175 million and narrowed its debt by more than half to record lows of $152 million.

Heading into first quarter of 2011, the company estimates sales to range between $405 and $420 million, outstripping analysts' consensus estimates. The company believes that with the current backlog, it can achieve the set target range. Meanwhile, as it plans to boost investment in new products development, FCS expects to incur research and development, selling, general and administrative expenses of $94-$96 million.

3. Taiwan Semiconductor Manufacturing ( TSM) develops, manufactures and distributes integrated circuit (IC) related products. TSM operates its business through wafer manufacture, mask production, wafer testing and packaging components.

Of the seven analysts covering the stock, 43% recommend a buy while the remaining rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts forecasting the stock gaining 32.4% to $15.4 in the upcoming 12 months.

The company recently said that its revenue target for 2011 will not be affected by the devastating earthquake in Japan. Further, TSMC reaffirms its sales growth target at 20% and added that it has sufficient inventory and second sources of raw materials outside Japan. For February 2011, the company reported 8.5% increase in net sales from a year ago. Meanwhile, Apple and TSMC have reportedly entered into an expanded chip manufacturing agreement to provide chips for Apple's iPhone 5 and iPad 2.

Looking ahead, the company expects first quarter 2011 sales to range between $3.5 and $3.6 billion. A recent Morgan Stanley study estimates chip production at TSM, especially the ones used in smart phones, to increase rapidly and also its thin-film solar energy products are seen recording significant growth. The acceleration in smartphones usage may result in the company's manufacturing revenue from the smartphone segment to range between 20% and 25%, compared to 4% from tablets.

2. Amtech Systems ( ASYS), operating through its wholly owned subsidiaries, engages in supplying horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. The company sells its products and services to the solar and semiconductor industries under the brand names Tempress Systems and Bruce Technologies.

Of the five analysts covering the stock, 80% recommend a buy while the remaining rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts forecasting the stock gaining 45.6% to $31.9 in the upcoming 12 months.

For the recent first quarter, the company's net revenue soared 248% to $53.7 million. Earnings per share stood at 52 cents, ahead of the consensus estimates of 1 cent in the year-ago quarter. The company recently said that its full-year 2011 year-to-date solar orders stand at $182 million, topping $162 million booked in 2010. The company believes that it booked record total orders during the first five months of its financial year (starting October 2010).

Amtech's solar segment has been generating strong results with first-quarter revenue at $45.9 million, up 19% quarter-on-quarter. Also, total backlog at the end of the quarter stood at $173 million with solar at $162 million, compared to $85 million in the previous quarter.

The company recently reaffirmed its guidance for second-quarter and full-year 2011 and estimates 2011 revenue to exceed $230 million, an increase of 92% from 2010 levels. Meanwhile, for the second quarter it sees revenue in the range of $55 to $60 million and an active and healthy pipeline of orders for 2011.

1. Axcelis Technologies ( ACLS) designs, manufactures and services ion implantation, dry strip and other processing equipment used in the fabrication of semiconductor chips. The company also provides aftermarket service and support.

Of the three analysts covering the stock, 33% recommend a buy while 33% rate a hold. Data from Bloomberg has analysts forecasting the stock gaining 81% to $4.0 in the upcoming 12 months.

For fourth quarter of 2010, Axcelis recorded revenue of $93.4 million, an increase of 141.1% from $38.7 million recorded in the year-ago quarter. Net income for the quarter stood at $4.3 million, or 4 cents per share, reversing from a net loss of $10.0 million, or 10 cents per share, in the year-ago quarter. For full-year 2010, the company's revenues were up 106.9% to $275.2 million and net loss narrowed 77.3% to $17.6 million, or 17 cents per share.

The company estimates earnings per share at 2 cents for first quarter 2011. Meanwhile, Axcellis believes that it returned to profitability in its latest quarter on strong revenue growth and significant demand for its products. Therefore, it expects to perform strongly in 2011.

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