Depending on if you're a doom and gloom kind of investor, the conflicting opinion over the growth and direction of the semiconductor industry could mean it's either time to cash in your chips, or time to go looking for ripe opportunities.

As fellow Fool Tim Beyers pointed out the other day, market researcher Gartner (NYSE:IT) says 2008 will be when the chip cycle begins to turns south again, while the Semiconductor Industry Association expects sales to grow between 10% and 14% over the next few years. And while increasing chip sales don't always lead to increased profits for everyone -- particularly if the scorched-earth price war between Intel (NASDAQ:INTC) and Advanced Micro Devices (NYSE:AMD) materializes -- it certainly doesn't appear we're on the precipice of another industry recession.

But, much like the tubeworms that sprout and grow in environments too harsh for other creatures, some companies actually thrive in the turmoil of their industry. My favorite to take advantage of the chip industry tumult is a company I recommended to subscribers of Motley Fool Hidden Gems two years ago. Since then, tiny chip-tester FormFactor (NASDAQ:FORM) has increased sales by 33%, grown profits by 20%, and its share price is up more than 73% over the same time frame.

FormFactor grows when the industry is in turmoil because the chip makers still need to produce and improve their product. That means even if Dell (NASDAQ:DELL) starts using AMD chips in its desktops instead of Intel chips, the latter cannot stand idly by. Intel needs to continue to improve its designs and continue testing them. FormFactor makes wafer probe cards which test and analyze every chip a manufacturer makes to ensure it functions properly. In 2005, Intel accounted for more than 11% of FormFactor's revenues, and while significant, that's down from the 30% the chip-making titan had represented just three years ago.

One of the driving forces in FormFactor's growth has been the shrinking size of chips. Older testing platforms simply can't handle today's tiny chips, and the prospects for further shrinkage continue to multiply. The sub-90 nanometer chip size, coalescing around 65 nanometers, has been the standard for a while now, and some wondered whether the limits had been reached. But Intel has announced it will introduce chip redesigns every two years now and expects to produce a 32 nanometer chip by 2009. AMD has similar plans and expects to be able to produce a 22 nanometer chip by 2010.

Each of these design changes requires the manufacturer to order new wafer test probe cards, since each one is individually designed to test that particular chip. FormFactor depends on dynamic random access memory (DRAM) for the vast bulk of its revenues, more than 80% in the last quarter, and it just inked a deal with Korean chip maker Hynix Semiconductor to provide wafer probe cards to a new facility that at least one analyst believes can provide $30 million in incremental sales. Still, other forms of memory like flash and logic -- used in everything from Apple's (NASDAQ:AAPL) iPods to cell phones to digital cameras and other multimedia electronic devices -- are growing in importance and will likely become an important source of revenues in the near future.

Sure there are cataclysms that are bound to shape the semiconductor industry over the next few years, and some of the players will fall by the wayside, but FormFactor is one of those I expect to see thrive in this harsh environment.

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FormFactor is a recommendation of Motley Fool Hidden Gems. Dell is a recommendation of Motley Fool Stock Advisor and Motley Fool Inside Value, which also recommended Intel. Whatever your investing style, the Fool hasa newsletter for you.

Fool contributor Rich Duprey owns shares of FormFactor but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.