Things could finally turnaround for the entire semiconductor space going into 2016. As many of you know, the semiconductor space was awful for many as various headwinds have made it more difficult to identify favorable company-specific fundamentals given the slowing pace of handsets and declining tablet sales. The PC market should have had a better year given the launch of Windows 10, but as we all know, the channel was stuffed with Windows 8 PCs running on Intel Haswell series. We’ve now transitioned to a more compelling product mix within the PC ecosystem, which should benefit companies like Intel, AMD, Nvidia. However, back-end datacenter infrastructure needs are set to increase, which makes Intel the most interesting data-centric play among the semiconductors. However, the release of VR (more on that in another article) creates opportunities for Nvidia to sell higher-end GPUs. Finally, the mobile space has died down which has negative implications for companies like Qualcomm, Avago, Broadcom (which have merged). Then there’s the smaller players that are heavily dependent Apple iPhone 6S/6S+ like Cirrus Logic and Qorvo, which will struggle. Some of the MEMs supplier have favorable dynamics due to their exposure to incremental opportunities like Synaptics and Amabarella. But again, we have to be very selective here as semiconductors struggled when compared to the S&P 500 this year. Source: Freestockcharts It pays to be pretty selective, but at the same time we know the entire sector is better positioned to grow. Prices for memory and storage are expected to stabilize, which implies margin recovery and patterns of sales growth. Chances are OEMs will probably move up the pricing stack, and wafer yields will improve once production starts to ramp for various 16nm or 14nm fabs. The names to keep in mind are Micron, Sandisk, and Samsung. Credit Suisse shared some positive insights on the entire industry:We would highlight the following fundamental views for 2016: (1) We expect 2.8% y/y Semi Rev growth, an increase from 0.5% in 2015 but well below our 6-9% LT CAGR target – Street currently embeds Rev growth of 3-4% y/y. (2) Semi y/y Rev growth troughed in C3Q15 at down 2.8% and CY16 Rev growth will accelerate from -1.6% y/y in C1Q to +6.9% y/y in C4Q16; the cycle, while less pronounced, is improving. The thing to keep in mind: things are getting better for semiconductors. But you still have to be careful about the investment angle you take here. In the end, the opportunity has to be compelling enough to withstand industry volatility, and narrow enough to define. Off the top of my head I think the conventional PC plays will froth upwards whereas mobile-centric plays will struggle with the exception of firms who have won incremental silicon opportunities in upcoming or recent flagships. Storage, but more specifically flash storage is starting to heat up, as PC OEMs have transitioned more product SKUs to faster solutions.