Strategy Analytics estimates that 5G smartphone shipments could reach 624 million units this year, compared to just 269 million in 2020. According to the research firm, nearly 136 million 5G smartphones were delivered in the first quarter of 2021, and the sales are expected to increase as the year progresses.

Better yet, the 5G smartphone juggernaut will continue to roll for a long time, as annual shipments are expected to reach 1.5 billion units by 2025, according to third-party estimates. As such, now is the time to stock up on the main beneficiaries of the growth of 5G smartphones.

Micronic Technology (NASDAQ: MU) and Broadcom (NASDAQ: AVGO) are two actions that should be on your radar to take advantage of the 5G revolution. Let’s see why.

Image source: Getty Images.

1. Micron technology

Micron technology manufactures dynamic random access memory (DRAM) and NAND flash memory chips that fit into a wide range of devices such as personal computers, servers, graphics cards and smartphones. The 5G era has supercharged Micron’s mobile business unit, as smartphones based on the latest wireless technology standard come with more memory.

For example, Counterpoint Research estimates that mobile devices will consume three times as much NAND flash in 2025 compared to 2021 levels. Unsurprisingly, Micron enjoys a mix of higher shipping volumes and higher revenue per smartphone at the era of 5G. This is reflected in the tremendous growth of its mobile revenues in the last quarter.

Micron’s mobile business unit grew 31% year-on-year to $ 2 billion in the third quarter of fiscal 2021, accounting for 27% of its revenue. Micron management thanked the strong demand for 5G handsets for this impressive growth and indicated that the solid momentum in the segment is here to stay on the company’s latest earnings call:

Mobile unit sales are expected to show healthy growth this year, with some variability by region, driven by an expected doubling of 5G units during CY21 to over 500 million units. These 5G phones also feature rich content requiring significantly higher DRAM and NAND. We’re also encouraged to see bold OEM innovation in new devices like gaming smartphones with 18GB DRAM.

Micron is said to control a quarter of the DRAM market and just over 11% of the NAND flash market, meaning it is well positioned to take advantage of the age-old growth in the 5G smartphone memory market. And with stocks trading at just 7.6 times forward earnings compared to the multiple of last year’s average forward price-to-earnings (P / E) ratio, Micron is a solid bet for investors seeking to add a 5G share to their portfolio.

2. Broadcom

Broadcom provides a wide range of connectivity chips to smartphone manufacturers, including radio frequency (RF) front-end modules, Bluetooth, Wi-Fi and navigation modules. More importantly, the chipmaker has an illustrious mobile customer base that includes Apple (NASDAQ: AAPL) and Samsung, two companies that are winning big in the 5G mobile market.

Samsung, for example, is one of the world’s fastest growing 5G smartphone vendors, with shipments growing 79% quarter-over-quarter in the first quarter of 2021, according to Strategy Analytics. The company shipped 17 million 5G handsets in the quarter and had a 12.5% ​​market share. Apple, on the other hand, was the top seller of 5G smartphones in the quarter with 40.4 million shipments and 29.8% market share.

These relationships point to a bright future for Broadcom’s wireless business, which experienced impressive growth in the last quarter. The wireless segment grew 48% year-over-year in the second quarter driven by higher content and strong demand that led to better than expected shipments. Broadcom expects wireless revenue to grow more than 30% year-over-year this quarter, but it will not be surprising to see activity pick up as the end of the year approaches.

Apple, which is one of Broadcom’s main customers, has already started production of this year’s iPhone models, according to renowned analyst Ming-Chi Kuo (via MacRumors). It’s also worth noting that Apple is expected to manufacture between 90 million and 100 million units of the new iPhone models this year, according to Dan Ives of Wedbush Securities. Apple reportedly built 80 million initial units of the iPhone 12 models last year, indicating that major supply chain partners such as Broadcom could experience stronger sales growth in 2021.

In January 2020, Broadcom struck a deal with Apple to sell $ 15 billion worth of wireless components over a three-and-a-half-year period. The iPhone maker accounted for 15% of Broadcom’s total revenue in the prior year, so Apple’s boom in the 5G market bodes well for the chipmaker.

Finally, Broadcom’s valuation makes it a tempting bet, especially since it is recording solid double-digit percentage growth that appears sustainable. Its revenue increased 15% year-over-year in the second quarter to $ 6.6 billion, while adjusted net profit jumped 28% to $ 2.98 billion.

The stock is trading at 43 times rolling earnings, which is a significant discount from its five-year average earnings multiple of 113. A forward price / earnings ratio of just 15.7 points towards earnings growth net, making Broadcom an attractive growth stock to buy right now given its impressive growth rate and promising outlook.

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Harsh Chauhan has no position in the mentioned stocks. The Motley Fool owns shares and recommends Apple. The Motley Fool recommends Broadcom Ltd and the following options: March 2023 long calls at $ 120 on Apple and March 2023 short calls at $ 130 on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.