Most investors are aware of the chips that go into everything from personal computers and smartphones to tablets and other tech devices. Many are surprised when they learn of the huge industrial demand for semiconductors. A new report from the chip analysts at Stifel notes that the recent strength in reported data from the Institute for Supply Management (ISM) for manufacturing suggests that the industrial sector is strong, leading to potential upside in the second half of the year for analog, mixed-signal chip manufacturers with relatively higher industrial exposure.

The Stifel report included a list of chip stocks in their coverage universe, with the highest exposure to the industrial sector, and also included companies that are quickly growing their exposure. We screened the list for the larger cap names.

Linear Technology Corp. (NASDAQ: LLTC) is a top name and has a 42% industrial end market exposure as well.  The company produces power management, data conversion, signal conditioning, radio frequency (RF) and interface ICs; module subsystems; and wireless sensor network products. Investors receive a solid 2.3% dividend. The Thomson/First Call consensus price target for the stock is $46.39. Linear closed Monday at $47.04 a share.

Maxim Integrated Products Inc. (NASDAQ: MXIM) has been buying back stock, lots of it, and is consistently raising its dividend. That is a capital return practice that many on Wall Street see continuing into next year as well. The company engages in designing, developing, manufacturing and marketing various linear and mixed-signal integrated circuits worldwide. The Stifel report indicates the company derives about 25% of its business from the industrial arena. Investors receive a solid 2.9% dividend. The consensus price objective is $35.48. Maxim closed Monday at $35.41.

Microsemi Corp. (NASDAQ: MSCC) acquisitions continue to play a key role in shaping the company and its overall product portfolio. This helps to contribute to its 23% exposure to the industrial sector. Its products include RF and power components, analog and RF integrated circuits, standard and customizable system-on-chip solutions, and mixed-signal and radiation-tolerant field programmable gate arrays. The consensus price target stands at $31. The stock closed Monday at $26.45.

Texas Instruments Inc. (NASDAQ: TXN) is an old-school name to make the list of stocks with a significant exposure to the industrial sector. The venerable chip giant has a 24% exposure to the industrial end markets and has paid solid dividends to investors for years. The company recently announced it is shipping in volume production the industry’s smallest, most efficient wireless power receiver to support both the Wireless Power Consortium’s (WPC) Qi 1.1 and Power Matters Alliance (PMA) specifications. Investors are paid a very respectable 2.5% dividend. The consensus price objective is $43.33. Texas Instruments closed Monday at $47.88.

In their report, the Stifel team points out that while demand in the industrial sector is difficult to measure in the ISM data, due to the numerous subsectors in the category, strength in the overall number has usually been a good indicator of demand for analog, mixed-signal semiconductors in the industrial markets. May marked the 12th consecutive month the number came in above 50, and anything over that number indicates expansion in the economy. That is a good sign for the economy and for these top chip companies.

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