* Fund favors chipmakers as industrial demand, China rebound
* Relatively low valuations point to gains
* T. Rowe Price Global Technology Fund buys Apple, LinkedIn
* Fund's net assets $697 mln as of Dec. 31
By Sayantani Ghosh
Feb 14 Chipmakers with exposure to industrial
demand and a rebounding Chinese economy, such as NXP
Semiconductors NV, are the investment of choice for the
manager of the T. Rowe Price Global Technology Fund.
Josh Spencer, who manages slightly over $1 billion, said his
fund had been buying shares in companies like ON Semiconductor
Corp, whose customers include big industrial names such
as General Electric Co and Siemens AG.
Part of the attraction, he said, lay in the low valuations
relative to chipmakers with the majority of their customers in
the smartphone business.
"(They have) a lot of operating leverage and are starting to
benefit as the global economy, and especially China, improve,"
Spencer, who has managed the fund for a year, told Reuters.
The T. Rowe Price Global Technology Fund, one of two
dedicated T. Rowe Price tech funds, had $697 million in net
assets as of Dec. 31 and has outperformed the benchmark MSCI All
Country World Index Information Technology index since its 2009
The fund returned more than 19 percent over the last year,
while the index returned nearly 16 percent.
Netherlands-based NXP, formerly a unit of Philips
Electronics, makes chips used in car radios, vehicle
systems, laptops and access points for computers with wireless
Its shares have climbed 45 percent in the last year, but
trade at about 12 times forward earnings -- a discount to the
sector average of 18.50 times.
"They sell into a broad range of industrial products," said
Spencer, citing safety features in cars such as airbags and side
"(These are) things that seem second nature to us now but
they are now deepening and expanding through the auto industry."
Spencer said NXP had little exposure to personal computer
sales, a market that customers are deserting for mobile devices.
With Chinese data pointing to a pick-up in the world's
second-largest economy, chip suppliers to the smartphone market
were also a good bet, he said.
Spencer has, for example, invested in Diodes Inc, a
maker of chips used in smartphones, gaming consoles, climate
control systems, LCD monitors and networking equipment. China
was the largest contributor to Diodes' revenue in 2012.
APPLE STILL CORE
An avid user of Apple Inc products, Spencer said
the iPhone maker - the top holding in the fund that he manages -
was still a very attractive investment.
When Apple's shares dropped after a holiday quarter that
lacked its usual pizzazz and highlighted strong competition from
Samsung Electronics Co Ltd, Spencer increased his
"I love the dominance they have with the iOS ecosystem and
the fact that their customers are locked in," he said.
Data from market research firm Gartner show smartphone sales
worldwide jumped 38.3 percent to 207.7 million in the fourth
quarter, even as overall sales of mobile phones fell last year
for the first time since 2009.
The rapidly growing smartphone market left plenty of room
for Apple to grow, said Spencer, who predicted the company would
expand its smartphone line with new screen sizes for the iPhone
and a lower cost model to penetrate new markets like China.
"There doesn't have to be only one winner," he said.
Spencer has also been stocking up on LinkedIn Corp,
the social networking website for professionals, and ServiceNow
Inc, a software company focused on IT infrastructure.
LinkedIn reported quarterly results on Feb. 8 that beat
analysts' estimates for the seventh quarter in a row and guided
bullishly for the new year.
The company's earnings quality score on Thomson Reuters
StarMine is 93 out of 100 -- the highest among its peers -- and
compares with the sector median of 65, indicating future
earnings look sustainable based on past performance.
"LinkedIn had a hiccup last year that was not their own
doing," Spencer said, referring to weak sector performance that
followed Facebook Inc's initial public offering last May.
"That gave us a chance to add to LinkedIn and we added quite
aggressively at that point."