The charts below present companies classified within the Semiconductor Industry Group according to the Global Industry Classification Standard (GICS). This group spans semiconductor materials and equipment manufacturers, chip producers, and related testing and packaging service providers, covering the full semiconductor value chain from production inputs to finished devices. Across the four figures, each company is positioned based on its Quality score and a corresponding valuation metric, providing a structured view of fundamental strength and relative pricing within the industry.

The Quality metric captures how fundamentally strong a company is based on characteristics that investors should be willing to pay a higher price for. Following the framework of Asness, Frazzini, and Pedersen (2019), quality is defined along three key dimensions: profitability, growth, and safety. Profitability reflects how efficiently a firm generates earnings from its assets and equity. Growth measures the sustainability of this profitability over time, focusing on long-term improvements rather than short-term fluctuations. Safety captures the stability of the firm, accounting for financial leverage, earnings volatility, and overall risk. These dimensions are combined into a single standardized Quality score, allowing firms to be compared consistently within and across industries. It is important to note that Quality scores are not meaningful in absolute terms. As they are based on standardized (z-score) values, they should be interpreted as indicating a firm’s relative position within its industry rather than as standalone measures.

The valuation metrics represent some of the most commonly used indicators for assessing the relative cheapness or expensiveness of a stock (see, for example, J. D. Schwager (2012) Hedge Fund Market Wizards: How Winning Traders Win). By jointly considering these two dimensions – quality and valuation – companies are positioned in a two-dimensional space, enabling the identification of high-quality but relatively inexpensive firms, as well as low-quality and relatively expensive ones.

In each figure, the best and worst 10% and 20% of observations are highlighted along both dimensions. The dashed lines define four corner regions corresponding to the top and bottom 20% based on quality and valuation. Within these regions, the dark grey areas indicate the most extreme 10% outcomes. The bottom-right quadrant represents companies with high quality and relatively low valuations. The top-right quadrant includes high-quality firms that are also priced expensively. The bottom-left quadrant contains low-quality, low-priced firms, while the top-left quadrant reflects low-quality companies with relatively high valuations.

It is important to emphasize that a company may appear relatively cheap or expensive for a variety of reasons. In some cases, a firm may persistently remain in the bottom-right quadrant – high quality but relatively low valuation – if the two dimensions shown do not fully capture the factors that the market considers relevant for pricing.

Nevertheless, we hope that the comparisons presented below serve as a useful starting point for identifying potentially attractive investment opportunities.