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Why iPhone Suppliers Rallied After Hours

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In after-hours trading on Wednesday, a handful of Apple iPhone suppliers are having a nice afternoon. A few companies have reported earnings, which is leading to some optimism among the group and could also spell good news for iPhone unit sales in the near term.

Baseband main flame
(Nasdaq: QCOM  ) posted third-quarter results, with revenues of $4.6 billion and net income of $1.2 billion, or $0.69 per share. Continued adoption of 3G and 4G technologies is boosting its business. It's not all sunshine and rainbows, though, as the company has had to tone down its device shipment estimates for the year and expects demand to be "more back-end loaded" as new gadgets are released for the busy holiday shopping season.

The mobile-chip giant was forced to cut the top end of guidance for the full year from $19.7 billion to $19.1 billion. The low end stood pat at $18.7 billion. The same story played out with Qualcomm's profit forecast, reducing its best guess from $3.56 per share to $3.47.

CEO Dr. Paul Jacobs said the company continues to ramp up supply of 28-nanometer chips, which have been bottlenecked by primary manufacturing partner Taiwan Semiconductor Manufacturing all year long. The company has reportedly broadened its horizons by tapping additional manufacturers United Microelectronics and Samsung, and he expects a strong December quarter.

Qualcomm's 28-nanometer baseband chip is expected to ship in the next iPhone, supporting virtually every wireless standard known to man, including China Mobile's unique network, paving the way for an eventually partnership between the iPhone maker and the world's largest wireless carrier.

Despite the reduced guidance, investors are clearly focusing on the positives, such as higher expected average selling prices on devices and strong licensing revenue, sending shares higher by as much as 7% after hours.

Heading skyward
Skyworks Solutions
(Nasdaq: SWKS  ) posted a healthy third quarter, registering both a top- and bottom-line beat. Revenue grew 9% to $389 million, and adjusted profit came in at $0.45 per share. CEO David Aldrich said the company is "set for a strong back half of 2012." The company also cited "new program ramps" and its broad product lineup as contributing factors to a rosy outlook. The company expects record revenue next quarter of $415 million to $420 million, with adjusted earnings per share of $0.50 to $0.51.

The iPhone carries a power amplifier module from Skyworks, and investors may be hopeful that the strong guidance is being boosted by a possible win in the next-generation iPhone, which should be launched near the end of the year, coinciding with Aldrich's expectations of a "strong back half."

Shares have headed skywards by 12% and have tapped fresh 52-week highs in extended trading following up the results.

Don't forget us!
Other iPhone component plays are riding the optimism, including Avago Technologies, up 2.3%, and TriQuint Semiconductor (Nasdaq: TQNT  ) , up 5.6%, both of which also supply power amplifier modules for Apple. Broadcom (Nasdaq: BRCM  ) , supplier of the Wi-Fi and Bluetooth chip, is also up nicely, gaining 4.1%, while Cirrus Logic (Nasdaq: CRUS  ) , maker of audio codecs, is up 2.3%.

The figures suggest that Apple might similarly be forecasting a strong "back half of 2012" for its sixth-generation iPhone and is characteristically beginning to lock down supply in advance. Assuming that these companies at least retain their spots, they also stand to ride Apple's coattails to riches.

Apple's iPhone has changed the smartphone industry, much to the benefit of its component suppliers. Its disruptive ways are why Apple may have more room to run. Sign up for this brand-new premium Apple research service to get all the details you need on the iPhone maker.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Qualcomm, Triquint Semiconductor, Apple, Cirrus Logic, and China Mobile. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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Evan Niu

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.

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