Chip companies are moving manufacturing home amid Covid disruption, and these stocks could benefit

Published Fri, Mar 26 202112:21 PM EDT

U.S. semiconductor companies are rushing to bring manufacturing home after the Covid-19 pandemic caused unprecedented supply-chain disruption, and the reshoring activity could boost a slew of industrial stocks, according to UBS. "Recent announcements of new plant investments by semiconductor companies in the US could begin to have a beneficial impact on industrial equipment companies in the US," Adam Scheiner, industrial and materials analyst at UBS, said in a note. The reshoring cycle has been gaining steam since the shortage of semiconductor supply has intensified in recent years due to the pandemic as well as the U.S.-China trade war. The supply concerned only increased amid the recent congestion at the blockage in the Suez Canal. As companies build more plants at home, it could start moving the needle on capital spending for companies in automation, robotics, and overall plant construction, UBS said. "We believe that COVID-19 caused a sea change in how companies will view supply chains going forward," Scheiner said. "Over the past year, around USD 50 billion in new US semiconductor plant investments have been announced, a significant amount relative to the current rate of spending." The Wall Street firm highlighted a handful of stocks best positioned to benefit from this big shift. Specifically, because the new plants are expected to have a higher level of automation due to a decreased desire for labor, companies that are focused on automated manufacturing will be big winners. Rockwell Automation would be a beneficiary from reshoring due to its high exposure to factory automation, UBS said. The bank added that its recent acquisitions related to remote monitoring made the company more appealing. Honeywell has also increased its automation exposure through the acquisition of Intelligrated, a warehouse software and automation company, UBS said. Emerson is another big player on the automation front, the bank noted. Meanwhile, overall new spending on manufacturing and factory floor could boost sales of many other industrials, and UBS's favorites in the space are Parker Hannifin and Fortive.

The Honeywell International sign sits outside of the company's former global headquarters in Morristown, New Jersey.

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