Two semiconductor giants kicked off the sector's earnings season with some good news in the COVID-19 era. Both Texas Instruments (TXN 1.44%) and STMicroelectronics (STM 0.27%) presented solid first-quarter reports, and each management team also provided some soothing analysis of current market conditions in the semiconductor industry.

By the numbers

Pan-European microchip veteran ST saw first-quarter net revenues land at $2.23 billion, 7.5% above the year-ago reading. Earnings rose from $0.20 to $0.21 per share. The analyst consensus pointed to earnings near $0.23 per share on sales in the neighborhood of $2.31 billion. While these results fell below the current Street view, they weren't the complete meltdown that many investors had expected.

Texas Instruments' revenues fell 7% year over year to $3.33 billion and earnings dropped from $1.26 to $1.24 per share. Here, your average analyst would have settled for earnings of roughly $1.00 per share on top-line sales near $3.17 billion. That's a clear-cut surprise across the board.

In front of an uncut sheet of semiconductor silicon, one hand gives a thumbs-up sign while another offers a thumbs-down.

Image source: Getty Images.

Executive commentary

ST's management said that the coronavirus pandemic complicated the company's manufacturing and logistics operations in the first quarter, and the same challenges remain as the second quarter rolls along. In particular, the company sees low order volumes from the automotive sector due to halted manufacturing lines and low consumer-level demand.

Management expects the second quarter to mark the bottom of the coronavirus downturn.

"We have a sales and operational plan for this challenging year, targeting growth in the second half over the first half," said CEO Jean-Marc Chery on ST's first-quarter earnings call. "We will maintain our financial strength. We will also continue to advance our long-term strategy and objectives together with our employees for the benefits of our customers, partners, communities, and for our shareholders."

TI is running its chip manufacturing lines as close to full speed as possible throughout this crisis. The company is happy to build up inventories with lots of finished product in anticipation of strong demand once the COVID-19 market restrictions go away.

"The beauty about where we are today, as [CFO Rafael Lizardi] pointed out, is that high percentage of the portfolio is a long-lived product," said CEO Rich Templeton on TI's earnings call. "We've got our R&D and our resources well deployed in the areas that we want to be long term."

The upshot: The chip industry will survive COVID-19

In other words, TI and ST agree that the near future holds serious coronavirus challenges but their long-term business prospects are still exciting. The upcoming second-quarter slowdown should resolve in the second half, as governments start to lift COVID-19 restrictions and end-market demand comes trickling back into the industrial and automotive computing markets.

This is not the end of the line for mature semiconductor titans with stable balance sheets and positive cash flows. Investors should think of the virus slowdown as more of a speed bump, altering the market in the short run but leaving the long-term value picture largely intact.

Chip-market investors heard that message loud and clear. ST's shares rose more than 9% on Wednesday morning and TI booked a 4% gain in the morning session. Fellow embedded chip specialist NXP Semiconductors (NXPI 2.40%), which competes head-to-head with both of these companies in many of its most important target markets, also notched a 9% intraday gain. Sector giant Intel (INTC 1.53%) posted a 5.7% gain, combining these reassuring earnings reports with a bullish analyst note of its own.

In short, the chip sector appears to be poised for a strong bounce over the next couple of quarters. The virus crisis has not destroyed the long-term strength of this increasingly important industry, and investors should not be afraid of buying the top stocks in this sector on the inevitable dips along the way.