The U.S. has some of the largest semiconductor companies in the world, though the largest company is in Taiwan. Japan and China have their fair share of semiconductor companies, and so does Europe. The highlight of the European semiconductor industry is ASML, which develops some of the most advanced semiconductor manufacturing technologies.
Canada has a few semiconductor companies, but they are relatively smaller players on a global scale. Most of them don’t even fall into the small-cap stocks category and are mostly micro and nano-caps. If you are looking for the safest picks from this market segment, there are two companies that you should look into.
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A novelty semiconductor company
POET Technologies (TSXV: PTK) is a bit different from most semiconductor chip manufacturers thanks to its focus on photonics, which is the study of using light (photons) to transmit signals. Photonics is the branch of electronics behind fibre optics, and POET Technologies is leveraging it for communication at the chip level.
This focus makes POET Technologies unique. Its trademarked POET Optical Interposer offers a low-cost, more efficient, viable alternative to certain existing technologies. This differentiating/defining characteristic comes with both advantages and disadvantages.
The main advantage is being a strong player in a market segment with much untapped potential. The disadvantage is that the company has yet to achieve large-scale penetration for this technology to become mainstream.
So far, the performance of POET Technologies stock has been cyclical, and since it’s currently going through a bearish phase, buying now may give you an opportunity to cash out at the next peak. So far, the peaks have not been more than three years apart, so the holding period may also be relatively healthy.
A specialty semiconductors company
5N Plus (TSX: VNP) develops specialty semiconductors for various industries, but it’s not the company’s sole focus. Its product range also includes chemicals and active pharmaceutical ingredients. This gives it more range than pure semiconductor chip companies and a stronger buffer against industrial headwinds.
As for semiconductors, the company processes three semiconductor compounds on a small range of purities and develops two kinds of semiconductor wafers: Germanium and Indium Antimonide. The compounds and wafers have a range of industrial uses, including solar cells and LEDs.
Following the bullish phase of tech stocks, the stock has been going up for the past 12 months, though its progress has been much better than most stocks. The company has grown its value by about 200% in just one year, and it’s still going up at a powerful pace.
Foolish takeaway
The two stocks are among the safest the Canadian semiconductor industry has to offer to investors. They have their own characteristic strengths and are also benefiting from a bullish tech sector that is attracting a lot of investors’ attention.
