Semiconductor companies Broadcom Inc. (AVGO), Cirrus Logic Inc. (CRUS), Cypress Semiconductor Corp. (CY) and Skyworks Solutions Inc. (SWKS)—all key links in Apple Inc.’s (AAPL) supply chain—could benefit from the tech giant’s lineup of new iPhones, according to Barron’s. The iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max were all released on Tuesday.
- Key suppliers of microchips set to benefit from iPhone sales.
- New camera, video capabilities, and AI features to help boost sales.
- Basic iPhone model to sell $50 below last year’s basic model.
- Slowing iPhone sales has led Apple to seek other revenue sources.
What It Means for Investors
While many Wall Street analysts aren’t expecting any financial fireworks from the new launch, there are still a few reasons why the four semiconductor stocks mentioned could get a boost. If Apple is able to beat those expectations then the boost could be even greater.
For one, Apple has delayed the introduction of 5G into its phones, meaning Broadcom and Skyworks “are well-positioned to benefit from content gains in the new phones given increasing LTE and pre-5G bands, WiFi 6, and enhanced cellular capabilities in the iPhone 11,” says KeyBank Capital Markets analyst John Vinh.
Cypress, as the supplier of the USB-C chip used in the rapid-charging port now included with the iPhone 11 Pro/Max, will also likely benefit from strong sales of the new iPhones. While not as significant, a new audio playback feature in the iPhones will likely mean more business for Cirrus Logic, said Vinh.
Overall, however, Vinh is only really bullish on shares of Broadcom, giving the stock an Overweight rating and price target of $330, which implies a nearly 10% upside. The other three stocks were given neutral ratings of Sector Weight, according to Barron’s.
Sales of this year’s lineup of iPhone 11s could slightly outstrip last year’s sales of the iPhone XS/XS Max/XR based on an analysis of Apple’s supply chain performed by Wedbush Securities. Apple’s suppliers appear to be planning for a sale of 75 million iPhone 11s during the phone’s initial launch period, but have capacity to supply as many as 80 million units if needed.
Helping to drive iPhones sales this year will be some key additional features, including the new triple camera technology with its wide-angle lens and perspective correction, as well as some next-generation AI capabilities. The video capability of the iPhone 11 Pro, which introduces real-time recropping technology, will also be a major selling feature.
However, many consumers are likely to wait for next year’s models when the highly-anticipated 5G technology is expected to be introduced. Indeed, some think the most attractive feature of this year’s iPhone is the lower price. The iPhone 11 will start selling at a price of $699, which is $50 below the phone it is replacing, the iPhone XR. The higher-end phones will still start at $999 and $1099.
If customers pre-order with Walmart starting this Friday, they’ll be able to pick up an iPhone for even cheaper. The mega-retailer announced that it would take $50 off of all iPhone 11 models when customers preorder directly through Walmart. That means $649 for the iPhone 11, $949 for the Pro, and $1,049 for the Pro Max.
A boost in iPhone sales this year will help to relieve some of the pressure on Apple after years of slower sales. This has pushed Apple to seek greater revenues from other hardware products like its headphones and watches. But it has also motivated the company to make a stronger push in subscription revenues from videogame and online video streaming services.