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Speculators betting against the growth of Apple (NASDAQ: AAPL ) may soon find themselves in troubled waters. According to a recent report by Digitimes, Apple's recent deals with China Mobile and NTT DoCoMo -- with a collective base of 821 million subscribers -- will propel the global demand for iPhones. The research firm expects iPhone shipments to double in 2014.
This, of course, presents a bullish outlook for Apple. But, iPhone's hardware and software suppliers, namely Micron (NASDAQ: MU ) , Jabil Circuit (NYSE: JBL ) , and Electronic Arts (NASDAQ: EA ) , also stand to benefit here. Do these stocks deserve a place in your portfolio?
Every computing device requires DRAM memory, and Apple devices are no different. The iPhone 5c and 5s are equipped with LPDDR2 and LPDDR3, or Low-Power-DDR3 memory modules, respectively, which are manufactured and supplied mainly by Elpida Memory -- owned by Micron Technology.
Preparing for the next iteration of iPhones, Micron has developed its latest LPDDR4 memory. Compared to LPDDR3 modules, these next-gen modules are reportedly about 60% faster and consume 40% less power.
The pure-play memory manufacturer has sent its LPDDR4 modules for sampling and testing purposes, after which these modules can be deployed in upcoming high-performance mobile devices like iPhone 6 and iPad Air 2.
Trefis estimates that Apple uses about 80% of Elpida's mobile DRAM manufacturing capacity, and according to Wilson Wang, sales to Apple represent about 13% of Micron's net sales. In light of this product roadmap and close corporate proximity, Micron seems well-positioned to benefit from surging iPhone sales.
Jabil Circuit is another prominent supplier. In addition to providing manufacturing services and product management solutions to a wide range of industries, the company manufactures electronic components and casings for iPhone units.
Investors should note that Apple single-handedly commands the growth of Jabil Circuit. Apple is Jabil's largest client, with sales to the former representing 19% of the latter's overall sales. This reliance was corroborated last year; dismal sales outlook of iPhone 5c caused a sell-off in shares of Jabil Circuit.
But, now that iPhone shipments are expected to grow at a blazing pace, Jabil Circuit should, in theory, benefit greatly.
Electronic Arts, on the other hand, takes care of the user engagement. The software and game publisher creates and distributes content for a wide range of platforms including gaming consoles, handheld devices, personal computers, tablets, and smartphones.
Last year, however, management reported that its revenue from Apple's App store exceeded any of its other retail distribution channels'. The game publisher currently derives about 51% of its revenue from digital sales. But, in spite of these numbers, investors shouldn't get too carried away.
This figure includes software purchases made on OS X and iOS devices. Excluding OS X sales, EA's digital revenue from smartphones and tablets stood at $110 million -- about 21.2% of the company's overall revenue. This figure, in turn, is comprised of sales on Android, iOS, Windows 8, and BB10 platforms.
While this diversified revenue stream adds stability to EA's top line, it also reduces EA's exposure to iOS devices. This, in turn, suggests that the game publisher's gains from surging iPhone sales will be fairly limited.
Foolish final thoughts
With the impending iPhone boom, the most obvious choice would be to invest in Apple. Investing in its manufacturers, however, would be a great way to hedge the risks and spread the rewards.
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