A global shortage of semiconductors means the industry could potentially make more money than ever . Investment bank Credit Suisse has named five stocks in Asia that can benefit from that supply constraint. Memory chips are important components for a wide range of goods including smartphones, cars and gaming consoles. Solid demand for those chips and a relatively constrained supply — that is not expected to ease until 2023 — are set to keep semiconductor prices firm in the near future, Credit Suisse said in a report last week. A rebound in smartphone purchases, continued 5G rollouts and growth in the automotive sector are some factors driving demand, according to the bank. It added that Covid-19 lockdowns disrupted already tight tech supply chains. Tight capacity has led some foundries, companies contracted to manufacture chips, to hike prices, Credit Suisse said. That trend resulted in Taiwan Semiconductor Manufacturing Company, the world's biggest foundry by market share and revenue, to cancel discounts and selectively lift prices for some products and expedited orders , the bank noted. "The Asian semiconductor outlook for companies remains positive into results for the 2H21 outlook and at this stage favourable supply-demand carrying into 2021, driven by continued strong tech demand and tight semiconductor supply driving up pricing," Credit Suisse analysts wrote in the report. Semiconductor stock picks The Swiss bank said it expects its top semiconductor stock picks in Asia to be "well positioned" to benefit both from nearer-term supply constraints and from medium-term structural demand drivers. Credit Suisse has an outperform rating on MediaTek and a price target of 1,250 New Taiwan dollars ($44.51) per share — that represents a near 34% upside from Friday's close. The bank prefers the Taiwanese chip designer because of its "competitive 5G" chips and gains in market share due to factors including better cost structures and early rollout of its so-called 5G system on chips. SOC is a type of semiconductor that contains many components required for a device to work on a single chip, such as a processor, and are a critical part for smartphones. Credit Suisse also has an outperform rating on TSMC with a price target of NT$675. It said it expects "structural growth" from chips manufactured for 5G, high-performance computing, computers and automated driving. "TSMC's position remains healthy for its market share," the Credit Suisse analysts wrote, adding that high-performance computing will be "the main business driver" through 2025. Samsung is another pick with an outperform rating. The investment bank has a price target of 126,000 Korean won ($109.29) — representing over 58% upside. "We think Samsung is well positioned for both memory and OLED cycle strength," the analysts said. OLED offers sharper display of images and videos in smartphones compared with LCD. Samsung is a major supplier of OLED screens for Apple's iPhones. All of Novatek 's business segments are expected to "remain on the growth trajectory in the next 12 months and its long-term margin/(return on equity) will be above previous cycles," the analysts said, adding they prefer the company "given its scale and wide product portfolio for bundle selling." For Shanghai-listed Will Semi, a wider chip portfolio is set to drive "multi-year growth," the bank said. The stock has a price target of 377 yuan ($58.16) per share and a predicted earnings growth of 79.3% in 2021 and 30.6% in 2022. Asia tech earnings growth Credit Suisse said demand for most major technology products such as laptops is tracking better than what was expected at the start of the year, with demand for automotive technologies further adding to the strength. "Current tech chain inventory remains reasonable, with the dominant theme across several components still being one of shortage rather than one of hoarding," the analysts said. The bank predicted that Asia ex-Japan technology earnings will grow at a compound annual growth rate of 30% over the next two years.
A man walks past TSMC's logo at the company's headquarters in Hsinchu, Taiwan.
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