After a short period of post-election uncertainty, the technology sector rebounded with a strong fourth quarter earnings season. Within this broad sector, the semiconductor industry has been one of the best performers this year, and it is clear that demand for chips is high in a variety of different areas.

While we are seeing strength throughout the semiconductor industry, it has been the traditional giants that have really impressed investors recently. Companies like Skyworks Solutions (SWKS Quick QuoteSWKS - Free Report) have garnered impressive momentum, while behemoths like Texas Instruments (TXN Quick QuoteTXN - Free Report) look poised to continue growing thanks to changing consumer behavior.

By taking a look at what is driving the semiconductor industry right now and familiarizing ourselves with the recent performance of these stocks, we can make a more educated decision on whether Texas Instruments or Skyworks is the better fit for your portfolio.

The State of Semiconductors

It is always important to consider the impact that mobile phones have on the semiconductor industry, as some companies—such as Skyworks—depend on supplying companies like Apple (AAPL Quick QuoteAAPL - Free Report) for a solid chunk of their revenue.

However, newer demands like the Internet of Things (IoT) and driverless vehicles have opened up growth areas for these semiconductor giants. Our world is becoming increasingly connected and semiconductor companies stand to benefit.

IoT technology promises to connect our household and commercial items to a wireless network in order to make our lives easier. This could mean the remote operation of a house’s security system, or it could mean manufacturers instantly tracking the performance of their machines. Either way, semiconductor companies are the ones making the electronic and sensor technologies (also read: How to Invest in the "Internet of Things").

We are also seeing a similar situation play out within the car. Sure, fully autonomous cars are still a few years away from being commercially available, but the new “connected car” is very much a modern-day reality. Over the past few years, driving has evolved into an experience that now incorporates several new technologies to promote better comfort and safety. This has been another key growth area for semiconductors.

Right now, the Semiconductor-General industry sits in the Top 6% of the Zacks Industry Rank, which really highlights the strength of this business.

TXN vs. SWKS

As we jump into the head-to-head comparison between Texas Instruments and Skyworks, let’s check out a few key stats from both companies:

Texas Instruments is also displaying some strong metrics. The company has seen a flurry of positive estimate revisions following its most recent earnings report and guidance. It’s also impressive to see a company that was founded in the 50s still able to grow earnings at nearly a double-digit rate. Of course, Texas Instruments also has a bit of an edge as it currently sits at a Zacks Rank #1 (Strong Buy), just edging out Skyworks’ Zacks Rank #2 (Buy).

What’s Working

The reason why both of these companies are positioned so strongly right now is that they have both been targeting these previously discussed high-growth areas.

While Apple still accounts for about 40% of Skyworks’ quarterly revenue, the company has actively targeted the IoT market. During the most recent quarter, Skyworks won contracts from multiple Tier 1 original equipment manufacturers, and the company has been open about its belief that IoT, connected cars, and 5G will be significant growth drivers.

Texas Instruments has a similar perspective, and the company seems to have an even further focus on cars. “Revenue increased 7 percent from the same quarter a year ago, as demand for our products remained strong in the automotive market,” noted CEO Rich Templeton, before stating that personal electronics demand was down slightly.

Times are very much changing, and the consumer electronics market is quite different than it was just a few years ago. But that doesn’t mean semiconductor makers are struggling. In fact, the companies that have successfully adapted to these changes are thriving.

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