An interesting way to try to play the chip market is to avoid investing in individual chip makers themselves and to instead bet on the companies that build the equipment that chip manufacturers (and, by extension, the companies that design and sell chips) rely on. 

One of the top chip equipment makers is Applied Materials (NASDAQ:AMAT). The company's share price has taken a beating over the last year as the semiconductor industry -- both logic and memory -- seems to be suffering from a correction.

Applied Materials manufacturing equipment

Image source: Applied Materials.

With that said, if you think a semiconductor rebound is set to come sooner rather than later, Applied Materials could be a good way to participate in that rebound. Here's why.

A structurally improved industry

The semiconductor industry is cyclical in nature -- there are periods of relative feast and, correspondingly, relative famine. However, on Applied Materials' Nov. 15 earnings conference call, CFO Dan Durn explained how the semiconductor industry and Applied Materials itself have seen structural improvements over the years. 

"Over the past six years, Applied has built a bigger, more diverse, more resilient business," Durn explained. "In fact, in both 2017 and 2018, we delivered more than twice the operating profit of any other year in the past decade."

The executive also said that the company's customers are telling Applied Materials that overall semiconductor demand is set to improve in the second half of 2019, and that "[we] believe we will generate higher earnings this fiscal year than in 2017." 

Check out the latest Applied Materials earnings call transcript

The stock looks cheap

There's no way around it -- analysts expect Applied Materials to post year-over-year declines in both revenue and earnings per share (EPS) in 2019. Indeed, sales are expected to drop 11.5% to $15.27 billion, and EPS looks on track to drop 23.4% over that same period, to $3.41. 

What's worth pointing out, though, is that even at that level of EPS, the stock looks pretty cheap at 11.3 times that figure. 

Buying a stock simply because it's cheap isn't always a good idea, but what has me particularly interested is that analysts forecast both a revenue and EPS rebound in 2020 to $17.05 billion and $4.37, respectively. These still wouldn't be quite equal to the 2018 heights of $17.25 billion and $4.45 billion, but if the company can achieve those numbers and potentially grow them from there, we're talking about a stock trading at less than ten times 2020 earnings with EPS growth potential.

Indeed, Applied Materials could be an interesting value play if that scenario ultimately plays out.

Interesting long-term opportunities

Another potential reason to consider Applied Materials is that there seem to be some really interesting long-term trends that should generally play to the strengths of the semiconductor equipment makers. 

At the company's investor day back in 2017, Applied Materials CEO Gary Dickerson highlighted five long-term growth opportunities for the company: 3D NAND flash, foundry, lithography patterning, display, and China's efforts to build its own semiconductor manufacturing efforts. 

The big-picture idea here is that as demand for semiconductor products and displays grows over the long term, and as those products become increasingly sophisticated, Applied Materials' technology advancements will be needed to bring those products to life. 

Investor takeaway

No investment is without risk, and should the chip industry not recover in the second half of 2019, as many companies are currently expecting, that could lead to a slowdown in chip equipment spending and, ultimately, a decline in Applied Materials' share price. 

However, given that the stock is relatively cheap now (particularly relative to 2020 estimates), and given that the semiconductor industry isn't going anywhere, I think Applied Materials could be a solid way to gain exposure to a large cross-section of the semiconductor industry and, by extension, longer-term semiconductor trends.