U.S. Telecom Stocks and Taiwan Telecom Stocks: Leading Communication Industry Players to Watch in 2023

The network communication industry is迎來 a new wave of growth opportunities. As global broadband infrastructure accelerates, the Biden administration has投入 $42 billion to promote high-speed internet coverage in the United States, and the seven major industrial countries in the EU are also預計投入 $600 billion to achieve the goal of widespread high-speed internet by 2030. Driven by policy dividends and technological upgrades, 2023’s network communication concept stocks performed remarkably, with an increase of over 35% since the beginning of the year, far outperforming the market.

Core Composition of the Network Communication Industry

Network communication encompasses all hardware devices and technical fields related to internet connectivity. Common network communication devices include routers, switches, base stations, etc. Network communication concept stocks refer to the stocks of listed companies involved in the network communication field.

The industry chain structure is complete and multi-layered: upstream includes communication terminal component suppliers (microprocessors, network ICs, memory, etc.), midstream consists of network equipment manufacturers (switches, routers, optical communication equipment), and downstream includes various communication application and service providers (wireless communication equipment, wired communication equipment, telecom service providers, etc.).

According to Dell’Oro data, the global communication equipment market has grown for five consecutive years, reaching nearly $102 billion in 2022. It is expected that by 2025, the market size will exceed $120 billion, with steady compound annual growth. With the rise of 5G and the Internet of Things industry, the network communication industry is entering an accelerated development period.

Major Investment Targets in US Network Communication Stocks

US network communication stocks have shown divergence in recent years, but the overall trend remains upward. Here are some US network communication stocks worth关注:

Cisco Systems (CSCO)

A globally renowned network equipment manufacturer, mainly engaged in the sales of network software and hardware, including core products like switches and routers. The Q2 2023 financial report shows revenue of $15.2 billion, up 16% year-over-year, with profits also surpassing market expectations.

As AI orders continue to grow, market evaluations of Cisco’s development potential in AI have increased, with stock price rising over 16% since the beginning of the year. Its leading position in network equipment provides solid fundamental support.

Arista Networks (ANET)

Mainly engaged in the sales of multi-layer network switches and software, with clients including global tech giants. In Q2 2023, revenue reached $1.46 billion, with EPS of $1.58, both exceeding market expectations.

Nearly half of the company’s revenue comes from Microsoft and Meta, directly benefiting from the AI infrastructure boom. Future sales are expected to continue rising. This stock has been one of the top performers this year, with a surge of over 50%.

T-Mobile (TMUS)

The third-largest telecom operator in the US, mainly providing communication services and mobile phone sales. The latest financial report shows that in Q2, 760,000 new voice users were added, surpassing market expectations and outperforming competitors AT&T and Verizon.

Since 2023, the stock price has entered a震盪 zone, but solid fundamentals and user growth momentum suggest potential for further upward movement, making it suitable for medium- to long-term investors.

Broadcom (AVGO)

A global leader in communication chips, dominating fields such as Ethernet switches and Wi-Fi chips. According to Linley data, in 2021, Broadcom held a 70% market share in Ethernet switch chips.

Benefiting from the AI boom, Broadcom’s revenue has continued to grow, with Q2 and Q3 2023 expected to surpass expectations. Since the beginning of the year, the stock price has skyrocketed over 55%.

Qualcomm (QCOM)

A leading manufacturer in mobile communication, focusing on designing and producing chips for smartphones, tablets, and other terminals. Despite performance pressures this year, the stock price has been consolidating, but the company remains technically ahead in 5G.

Qualcomm is collaborating with Meta to promote generative AI applications on mobile phones in 2024, which could become a new growth engine, with potential for future stock price rebound.

Key Data Comparison of US Network Communication Stocks

Investment Opportunities in Taiwan Network Communication Stocks

Taiwan’s Communication Network Index has risen over 35% this year, leading among peers. In Taiwan’s network communication industry, the following companies are worth重点关注:

Chunghwa Telecom (2412)

Taiwan’s largest telecom company, covering fixed-line communication, mobile communication, and broadband services. In the first half of 2023, EPS was NT$2.52, a near 6-year high, and has continuously paid dividends for 26 years. At the end of June, it announced a cash dividend of NT$4.7, regarded as a “fixed deposit stock” by investors due to stable dividends.

Delta Electronics (2308)

Taiwan’s leading power supply manufacturer, with business including power supplies, automation, and communication infrastructure. Also an AI concept stock and electric vehicle concept stock, with clear advantages in diversification.

In Q2 2023, revenue exceeded NT$100 billion, up 11.7% year-over-year, with net profit after tax of NT$15.056 billion, up 10%. Management expects Q3 operations to be stable and growing compared to Q2, with continued good fundamentals. Since the beginning of the year, the stock has surged over 20%.

FarEasTone Telecommunications (4904)

One of Taiwan’s three major telecoms, mainly engaged in telephone services, wireless communication equipment, and parts sales. In Q2 2023, benefiting from 5G user upgrades, revenue reached NT$21.7 billion, up 4.7%; net profit after tax NT$2.8 billion, up 19.7%.

It has paid dividends for 24 consecutive years, with a dividend of NT$3.25 per share in July. Since the beginning of the year, the stock price has increased over 7%.

Chicony Electronics (2345)

A major network switch manufacturer, with about 70% of its business from switch product sales, mainly serving large international clients. In Q2, revenue and profits both grew, with EPS reaching NT$7.67, a record high.

As shipments of 400G switches increase, market expectations suggest its performance will remain high. The stock has experienced the most惊人涨幅 this year, soaring 93%.

Qisda Corporation (6285)

A major satellite communication and network communication company, with business covering network communication, automotive modules, and antenna solutions. The US market accounts for 66%, directly benefiting from US network infrastructure themes.

Q2 revenue was NT$26.63 billion, up 31.98%, a record high. Since the beginning of the year, the stock has surged over 60%. With increasing demand from Europe and the US telecom sectors, revenue is expected to further grow.

Key Data Comparison of Taiwan Network Communication Stocks

Advantages and Risks of Investing in Network Communication Concept Stocks

Investment Advantages

Strong policy support: Major countries and regions worldwide prioritize broadband infrastructure as a national policy, with increasing policy support, providing long-term certainty for industry development.

Stable operation of traditional giants: Leading companies in the network communication industry are less affected by economic cycles, with high revenue stability and steady dividend payments, attracting long-term value investors.

Multiple concept overlay effect: Many network communication stocks are combined with 5G, IoT, and even AI concepts. When related industries take off, these stocks often benefit from multiple themes resonating.

Investment Risks

Limited growth space: Most developed countries have完善 their network communication infrastructure, with slower new construction, and industry growth rates are not as high as emerging tech industries.

Intensifying industry competition: Lower entry barriers lead to many market participants, and companies often lower prices to争取 orders, putting pressure on profit margins.

Practical Advice for Investing in Network Communication Stocks

Prioritize multiple concept overlays: Choose network communication stocks with multiple concepts like 5G and AI, which tend to perform better than single-concept stocks.

Diversify risk with ETFs: Unlike concentrated single-stock investments, investing in related ETFs or funds can effectively diversify risk. Examples include Global Future Communications ETF and iShares US Telecom ETF.

Be cautious with volatile trading: While leverage tools can amplify gains, risks are also magnified. Use risk management tools like stop-loss and take-profit orders.

Summary

Network communication concept stocks include Taiwan’s Chunghwa Telecom, Chicony, and industry leaders like Cisco and Arista in the US. As 5G and IoT industries accelerate, coupled with global government investments in broadband infrastructure, the outlook for the network communication industry is promising. Investors can, according to their risk tolerance, appropriately allocate in US and Taiwan network communication stocks to seize industry upgrade investment opportunities.