Looking Beyond Apple to Find iPhone Profit Plays

Despite a disappointing sales total last quarter, the iPhone remains the most profitable smartphone in the world. Further, that disappointing sales total from last quarter was the result of pent-up demand from consumers waiting for Apple (Nasdaq: AAPL  ) to unveil the next iPhone. With the launch of the iPhone 4S and its record-setting sales totals, Apple should easily set new record for sales this holiday season.

However, buying shares of Apple is only one way to play the success of the iPhone. Another way is to buy the makers of the components inside the phone itself. The most expensive components, like flash memory and the touchscreen display, are commoditized and can be sourced from multiple suppliers. However, components like the baseband processor and radio frequency (RF) section of the phone can be highly specialized and sourced from a single company.

To help investors make more sense of the best ways to profit from the iPhone, I created a video series analyzing some of the most important and specialized components within the phone. In each video I look not only at the profit opportunity for the company supplying parts to Apple, but also how much it matters to the company's overall business.

Here's a rundown of the video series by component:

  • Baseband Processor
    The iPhone is known as the "world phone" because of a baseband processor supplied by Qualcomm (Nasdaq: QCOM  ) .
  • Audio
    Cirrus Logic (Nasdaq: CRUS  ) once again supplies the audio codec inside the phone.
  • Processor
    While Apple designs the A5 processor powering the iPhone, the company licenses its processor architecture from ARM Holdings (Nasdaq: ARMH  ) . While ARM licenses processor designs to many segments and more than 6 billion processors based on its designs were sold last year, the high-end processor designs licensed by Apple and other smartphone makers are increasingly driving ARM's results.
  • Radio Frequency
    Skyworks (Nasdaq: SWKS  ) , Avago (Nasdaq: AVGO  ) , and TriQuint (Nasdaq: TQNT  ) all won RF spots in the new iPhone. Of the three, TriQuint should see the largest boost to its sales from its inclusion in the phone.
  • Touchscreen controller
    Texas Instruments (NYSE: TXN  ) supplies the touchscreen controller. However, TI's also an enormous chip company that won't see very much material effect from the small cost of each touchscreen controller.
  • Wi-Fi
    Broadcom (Nasdaq: BRCM  ) returns to its spot supplying Wi-Fi components inside the iPhone. Despite Broadcom's large size, the total content cost of its iPhone components multiplied against the unit size of iPhone shipments yields a pretty sizeable part of the company's sales total.

We hope you enjoyed the video series on iPhone profit plays. To stay updated on more analysis on the iPhone and the component plays inside it, follow me on Twitter, @bleekertech, or add any of these companies to our new My Watchlist service. It's free and will deliver all the Fool's best news and analysis on all your favorite companies in one central place. Get started today!

Eric Bleeker owns shares of Cirrus Logic. The Motley Fool owns shares of Qualcomm, Cirrus Logic, TriQuint Semiconductor, Texas Instruments, and Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 24, 2011, at 11:14 AM, TMFRhino wrote:

    Hey curly,

    Didn't do an OmniVision video because the camera situation still isn't resolved so didn't want to give any erroneous situation with the Sony/OVTI split and front facing camera stiuation. I have nothing against OVTI, just letting the dust settle a bit before I touch on that.

    Best,

    Eric

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1574989, ~/Articles/ArticleHandler.aspx, 11/28/2014 2:34:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement