This Miss Is Apple's Fault

When investors found out that TriQuint Semiconductor (Nasdaq: TQNT  ) had won a bigger piece of the iPhone cake from Apple (Nasdaq: AAPL  ) , TriQuint shares skyrocketed. That made sense -- iPhones are high-volume products and TriQuint stole revenue share in the iPhone 4S from fellow radio-chip suppliers Avago (Nasdaq: AVGO  ) and Skyworks Solutions (Nasdaq: SWKS  ) . "Of the three, TriQuint should see the largest boost to its sales from its inclusion in the phone," explained fellow Fool Eric Bleeker.

So imagine my surprise when TriQuint offered timid fourth-quarter guidance last night, at least partly due to weak orders from Triquint's "largest customer." A quick glance at a recent 10-K filing reveals that customer's identity: Hon Hai Precision Industries subsidiary Futaihua Industrial (Shenzhen), a part of the manufacturing conglomerate that assembles many of Apple's products. So yeah, we're talking at least partly about Apple here.

Like audio-chip provider Cirrus Logic (Nasdaq: CRUS  ) and camera-sensor builder OmniVision Technologies (Nasdaq: OVTI  ) , among other Apple suppliers, TriQuint bends over backwards not to mention Apple by name, so we have to follow these bread crumb trails instead. "I'm sorry," CEO Ralph Quinsey told a nosy analyst last night, "I'm not going to answer any specific questions about our largest customer relationship based on an agreement we have with the customer."

The reduced demand from Apple turns out to be in legacy products, chips meant for older models of Apple gear. So TriQuint may feel great about its iPhone 4S business but underestimated the lost business as iPhone 3GS, iPhone 4, and old iPad orders are winding down.

Of course, the disappointing guidance for adjusted earnings of about $0.07 per share on roughly $220 million in sales isn't all Apple's fault. Management also pointed fingers at "softness in the macro environment" plus weak orders from China. We can't help but keep an eye on the global economy, but you ought to make a mental note to track the Chinese mobile market a bit closer. Everybody wants to rule the Chinese markets these days, so some research in that area should pay off handsomely. Adding China Mobile (NYSE: CHL  ) and China Telecom to your Foolish watchlist will give you an instant leg up in that quest.

If you're interested in a surefire winner in the mobile wars, no matter who wins iPhone sockets or crushes rival phone brands, this free video report has got the goods. Click here right now to learn how smartphones are set to replace credit cards, and how you can invest in the revolution.

Fool contributor Anders Bylund owns shares of OmniVision but holds no other position in any of the companies mentioned. The Motley Fool owns shares of Cirrus Logic, TriQuint Semiconductor, China Mobile, and Apple. Motley Fool newsletter services have recommended buying shares of China Mobile and Apple, and have also recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


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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 27, 2011, at 3:15 PM, deemery wrote:

    Your headline was flame-bait. Please show more respect for your readers.

  • Report this Comment On October 27, 2011, at 3:45 PM, 1984macman wrote:

    I agree with deemery. Your own article states how this is the merest conjecture on your part. Besides, if investors haven't done their homework on where the "legacy" chips come from, and figured that there would be less of them, then how in the three-toed monkey's belly-button is that Apple's fault??!

    Finally, there's the issue of just how many iPhone 4s's Apple will sell. From what I can tell reading at asymco.com, it looks like they're going to double last year's sales - again! I'd say investment in TriQuint is very far from misplaced, which is the inference of your article.

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