Declining PC sales in recent years have spurred a long-drawn semiconductor slump, but analysts are now turning positive on the industry amid a pickup in other segments.
"We're seeing strong end-markets in automotive, strong end-markets in things like robotics and industrial automation and we're seeing particularly strong markets in communications. There's the 4G buildout in China, for example," said Clay Carter, head of international equities at Perennial Investment Partners, which has around $18 billion under management.
"Both the DRAM and NAND makers haven't ramped out capacity, so there's a nice supply and demand balance there and decent pricing," he told CNBC. He said companies he likes include some U.S., Japan and Asia plays, as well as Avago in Singapore.
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The semiconductor industry has been hit hard as the demand shift away from PCs toward smartphones and tablets. According to Nomura analyst C.W. Chung, PCs accounted for more than 80 percent of DRAM demand four years ago.
But since then, the industry has cut capital spending significantly and restructured, with the bankruptcy of Japan's computer-memory chip maker Elpida and its subsequent acquisition by U.S.-based Micron last year offering a high-profile example, Chung said.
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In a recent report, Chung said he expected memory chips to recover through 2014, supported by smartphone and tablet demand as well as disciplined capex. DRAM is seeing better demand from China and slower supply growth should extend a bull market into 2014, the report said.
In the NAND segment, he expects 44-51 percent demand growth over 2013-14, with product differentiation between companies increasing. He has buy calls on SK Hynix, Samsung and Toshiba.
Credit Suisse also expects firm demand and higher prices for NAND amid advance production for leading global smartphone makers in the fourth quarter and a new model cycle at China's low-end smartphone companies.
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Among semiconductor-equipment makers, Credit Suisse likes Tokyo Electron, Dainippon Screen Manufacturing and Hitachi Kokusai Electric and among chip companies, it remains bullish on Toshiba.