77 Billion Reasons You Need to Look at Mobile Component Plays Now

If you haven't caught our Foolish message quite yet, here it is again: the mobile revolution is going to be massive. Just in case you need more proof, IHS iSuppli is coming to the rescue with a recent report that outlines just how quickly media tablets are taking off, naturally led by Apple's (Nasdaq: AAPL  ) iPad.

"Meteoric ascension"
The market researcher believes that media tablets will make up the world's fourth-largest semiconductor market just two years from now, compared with the 35th-largest just two years ago. That would mean that in the span of four years, the tablet semiconductor market would be bumping elbows with LCD TVs and Desktop PCs -- sectors that have been around for decades. It ranked eighth largest in 2011 and this year is expected to reach spot No. 5.

In 2010, tablet-bound semiconductors garnered roughly $2.6 billion in sales, smaller than that of USB flash drives and flat-panel monitors. That figure is expected to reach above $18.4 billion by 2014, representing overall market growth of more than 600% in four years.

In related news, mobile handsets are also set to topple mobile PCs for the first time ever this year as the largest semiconductor market. That's hardly a coincidence, as smartphones and tablets go hand in hand in the mobile revolution. By 2014, the mobile handset semiconductor market is forecasted to reach nearly $58.6 billion, which means that the combined smartphone and tablet semiconductor markets should total $77 billion.

Top 5 Semiconductor Applications in 2014 (Ranked by Revenue in Millions of USD)

Rank

Application

Revenue

1 Mobile Handsets $58,589
2 Mobile PCs $48,239
3 Desktop PCs $19,213
4 Media Tablets $18,447
5 LCD TVs $17,489

Source: IHS iSuppli, March 2012. Emphasis added.

IHS iSuppli analyst Dale Ford said:

The speed of the media tablet's rise from near insignificance to top-tier prominence is unprecedented in the history of the global semiconductor industry. Driven primarily by Apple's iPad, the media tablet in four years is expected to scale semiconductor heights that took more than a decade for other products to attain, such as notebook PCs and cellphones. This meteoric ascension will have major repercussions for the global semiconductor industry, as it realigns to accommodate the fast growth and vast size of the media tablet market.

Source: IHS iSuppli, March 2012.

While Apple may have started the shift, component plays also stand to cash in. The rise will also alter the structure of the semiconductor market and reshape the competitive landscape.

The report notes how previous technological revolutions have created juggernauts like Intel (Nasdaq: INTC  ) in PCs and Qualcomm (Nasdaq: QCOM  ) in cell-phone chipsets, but the rise of tablets will create opportunities for a more diversified base of suppliers than these previous platforms.

The next question is: What are the best ways to play this growth?

Where to start?
Mobile applications processors are now seeing more competition now than PCs did, with ARM Holdings (Nasdaq: ARMH  ) and its legion of licensees powering the vast majority of mobile devices today. NVIDIA is leading the quad-core mobile CPU migration with its Tegra 3, while Qualcomm leads in market share with its Snapdragons and Apple has its evolving A-family chip strategy. Meanwhile, Intel is getting serious about mobile with its Medfield Atom chip.

The important thing is there is more competition now than in the days of Wintel, when Microsoft and Intel rose to the top.

Beyond CPUs, there are baseband and radio frequency chips, an area still led by Qualcomm but including rivals such as Broadcom and Texas Instruments. Onboard mobile storage is primarily NAND flash and DRAM, from the likes of Samsung, Micron, or SanDisk. Image sensors are also now ubiquitous, whether from OmniVision Technologies, Sony, or Aptina.

Displays are shifting to power-efficient LED and OLED technologies, the latter of which should benefit OLED IP supplier Universal Display (Nasdaq: PANL  ) . That company has been gaining momentum with its manufacturing partners LG Display and Samsung through both short-term renewals and long-term contracts.

This is but a taste, and the list continues to grow with things like wireless integrated circuits, power management integrated circuits, power amplification modules, micro-electro-mechanical sensors, and audio codecs, among others.

The mobile revolution will present investors with a plethora of growth opportunities, and sifting through them will be a daunting task.

Three for the road
To make it a little easier to capitalize on this opportunity, The Motley Fool has already released a new special free report that names 3 Hidden Winners of the iPhone, iPad, and Android Revolution, including one company named in this article and two additional plays to consider. Let us do the dirty work for you by sorting through device teardowns and tech specs; all you have to do is get a copy of this free report. Free and easy -- what more could you ask for?

Fool contributor Evan Niu derives guilty pleasure from sorting through device teardowns and tech specs. He has sold bullish put spreads on Qualcomm and Universal Display and owns shares of OmniVision Technologies, Apple, and ARM Holdings, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Apple, Qualcomm, and Intel. Motley Fool newsletter services have recommended buying shares of NVIDIA, Apple, Intel, Universal Display, and Microsoft, writing puts on NVIDIA, and creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 14, 2012, at 6:27 AM, H3D wrote:

    Why do you call tablet PCs "media tablets"?

    Yes, many users use them mainly for consuming media. But others use them as organisational tools, as communication devices, as soft menus, as note books, as musical instruments, as medical or photographic tools.

    We could call desktop PCs "gaming computers" and mobile PCs "word processors", but that would be a slight, designed to give the impression that they are no use for anything else.

    So why do you adopt the slight "media tablets" which was designed to give the impression that this was all they can do.

    These are "tablet computers", "tablet PCs" or just "tablets".

    The reference to media has no place in the context. Unless, of course, you are talking about some other type of tablet which isn't a general purpose computer.

  • Report this Comment On March 14, 2012, at 10:17 AM, TMFNewCow wrote:

    I agree that "media tablets" is a limiting nomenclature, but in this case I'm just referencing iSuppli's categories.

    -- Evan

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