Technology

These 3 Chip Companies Do a Ton of Apple Business: Are They in Trouble?

Lee Jackson

Published: April 28, 2016 10:40 am

Last Updated: January 13, 2020 10:10 am

Even the best runs in the stock market must come to an end, or at least slow way down. Apple Inc. (NASDAQ: AAPL) reported very disappointing results this week, and for the first time in 13 years posted year-over-year revenue declines. There are myriad reasons why, most of which have been regurgitated ad nauseum by the financial press and media. One thing is for sure, if Apple is slowing down, some of its top vendors may be as well.

A new RBC research report notes that the weaker March quarter and lowered June quarter guidance paint a deepening negative outlook for the Apple supply chain, as the report raises more concern on the iPhone 6s cycle. One thing that is a positive for some of the vendors is they will have an increasing portion of the iPhone 7 cycle, and some on Wall Street feel that the demand will increase for the new phone.

RBC has covered the Apple vendors for some time. We looked through their report and were surprised at the percentage of business that three chip companies do with Apple.

Cirrus Logic

This company gets a staggering 65% to 70% of its revenue from Apple, according to RBC. Cirrus Logic Inc. (NASDAQ: CRUS) is a fabless semiconductor company that develops analog and mixed-signal integrated circuits for a range of consumer and industrial markets. It offers audio products, including codecs, analog-to-digital converters, digital-to-analog converters, active noise cancelling circuits, amplifiers and micro-electromechanical system microphones, as well as standalone digital signal processors. Those audio products are used in various mobile applications, such as smartphones, tablets, portable media players, wearables and accessories like headsets and headphones.

The company posted solid earnings this week, and was up big Wednesday despite the Apple headline overhang. The Thomson/First Call consensus price target for the stock is $43.89. The shares closed most recently at $38.11, up over 12% on the day.

Qorvo

This is the company that was formed from the merger of RF Micro Devices and Triquint Semiconductor. Qorvo Inc. (NASDAQ: QRVO) is a leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. Qorvo has more than 7,000 global employees dedicated to delivering solutions for everything that connects the world.

The company has among the industry’s broadest portfolio of products and core technologies. Some analysts are convinced that the higher RF content in new smartphones should offset quarterly unit volatility. They also think strategic mergers and acquisitions could help diversify the company away from mobile dependence and add longer life business cycle products.

The company gets a sizable 32% of revenue from Apple. The $54.82 consensus price target is still well above Wednesday’s closing shares price of $46.62.

Skyworks Solutions

This company made a nice move off the February lows, but rolled over recently. Skyworks Solutions Inc. (NASDAQ: SWKS) designs, develops, manufactures and markets proprietary semiconductor products, including intellectual property worldwide.

The product portfolio includes amplifiers, attenuators, battery chargers, circulators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, VCOS/synthesizers and voltage regulators.

The company posted very solid results in the previous quarter, with sales up 15% and earnings up a stunning 27% year over year. It will report fiscal second-quarter earnings after the close Thursday. Analysts are very positive on the stock as the iPhone 7 cycle begins. In fact, they expect the company to gain 10% to 15% higher content versus the last generation phone. Skyworks is reported to get just under 44% of its total revenue from Apple.

The consensus price target is $90.13, and the stock closed Wednesday at $72.32 per share.

None of these three companies were blistered nearly as badly as Apple was Wednesday. In addition, most of the second-quarter numbers for Apple are very low, so that is being factored in as well. Investors may want to check their portfolios for these stocks and maybe lighten up some if there are solid gains.