Here's why ASX semiconductor stocks say their markets are primed to explode

Investors in ASX semiconductor stock haven’t had the best run but companies say a bounce is imminent.

Much of the industry was hit by US-China trade tensions, and that was before COVID-19 hit.

But ASX semiconductor stocks are reminding investors that the technologies their industry supports aren’t going anywhere.

“This industry gives you the iPad, smartphone, smart cars, the internet and advanced medicine – to some degree,” declared Pivotal Systems (ASX:PVS) CEO John Hoffman at the Stocks Down Under Semiconductor Conference yesterday.

Hoffman also said the industry is expecting 8 per cent growth in 2021 and 15 per cent in 2021.

Many ASX semiconductor stocks are at an earlier stage compared to their larger peers on the US market. Additionally, they tend to be specialists on individual products that are just one part of semiconductor manufacturing.

Arguably this shortcoming was best summed up by former Revasum (ASX:RVS) CEO Jerry Cutini at last year’s Pitt Street Semiconductor conference. He told the audience it was “my customers’ customers” that were the important industry players.

Arguably this is why many ASX semiconductor stocks have lagged, even pre-COVID 19. But they are hopeful of capturing more of the market’s growth than they have in the past.

Wanting a bigger piece of the pie

Pivotal is one of the more advanced ASX semiconductor stocks, and is now at the stage of selling its product.

Its product is a gas flow monitoring and control technology platform which helps chip makers manufacture faster.

Pivotal claims it is superior to its peers. One metric is that the platform can respond in 10 milliseconds while competitors take between 500 and 1000 milliseconds.

The flow control market is worth half a billion dollars and is primarily driven by process equipment companies.

“We see Pivotal as a great tech company in terms of our products and innovation,” Hoffman said.

“But most importantly, even though we’ve been growing at a substantial rate, we still only have about 3.2 per cent of the overall market at the end of 2019.”

“We expect that to improve dramatically based on our results for 2020, but the company still has plenty of headroom.”

‘Growing and evolving rapidly’

Another ASX semiconductor stock presenting yesterday was BluGlass (ASX:BLG).

It also has a unique semiconductor manufacturing process which it calls the remote plasma chemical vapour deposition (RPCVD) system.

Like Pivotal it claims it causes devices to perform better and cost less to manufacture.

In recent months BluGlass has pounced on another opportunity in entering the laser diode market. Laser diodes work similar to LED lights in industrial cutting and welding but have faster response times and can focus radiation to very small areas.

It differs from Pivotal in being based in Australia but is seeking to grow its presence globally and claims to have made progress in 2020 including opening a test facility in the US back in June.

BluGlass CEO Giles Bourne said GaN laser diodes market will reach $600 million by 2025, over triple its present size.

“We see the growth coming pretty rapidly and it’s been driven by the industrial market and life sciences – we do see opportunity there,” he said.

“This market in laser diodes is growing really rapidly and evolving very rapidly so we’re not stagnating with just one product.”

Bourne’s said his company has at least half a dozen products scheduled to come out over the next two years. The products will have different power and wavelengths to meet different market opportunities.

“The entry level is in calendar year 2021, so we can go in with a high degree of confidence of building up that revenue from there,” he said.