In just a few months, Apple (NASDAQ:AAPL) is expected to launch three new iPhone models -- direct successors to the current iPhone 7 and iPhone 7 Plus phones that are currently in the market as well as a more premium model packed with interesting features and functionality that won't be present in the "standard" models.
There have been many unofficial leaks about the new iPhone models, indicating some of the new features and functionality that'll be in the phones as well as potential supply chain winners in the new phone.
In this column, I'd like to go over a confirmed winner from Apple's next-generation iPhone models: Broadcom (NASDAQ:AVGO).
A big content increase
Here are three clear ways that an Apple supplier can benefit from the ramp up of a next-generation iPhone:
- Share gain: Apple often has multiple suppliers for a given iPhone component, a practice that lowers Apple's risk while at the same time giving it bargaining power. One way that a supplier can boost its Apple-related business performance, then, is to increase its share of Apple's orders for a given component.
- Content growth: With each generation, Apple adds more features and capabilities to its phones. If a component supplier can provide Apple with differentiated components that add substantial new features, there's a chance that it can get paid extra for that component relative to what it provided into a prior-generation phone.
- Broad iPhone growth: To the extent that a next-generation iPhone outsells the previous one in the marketplace, a component vendor that has managed to keep its share (as a percentage of total new iPhone units shipped) and dollar content flat should enjoy revenue growth.
Given that the upcoming iPhone models are, in aggregate, widely expected to outsell their predecessors, investors in Apple suppliers should already expect reasonable year-over-year growth in component revenue.
What's interesting, though, is that Broadcom CEO Hock Tan signaled on the company's June 1 earnings call that the company expects the next-generation flagship smartphone from its "large North American smartphone customer" to drive "a substantial increase in [Broadcom's] total dollar content" from what he says are the eight Broadcom products that will be in the device.
What does this content increase mean for the consumer?
The "substantial increase" in Broadcom dollar content in the new iPhone likely means that the new device will see significant improvements in both cellular capabilities as well as a boost in Wi-Fi/Bluetooth capability.
It also appears to confirm the rumors that Apple will use a Broadcom wireless charging solution.
In terms of cellular capabilities, I expect that the main addition will be carrier aggregation on the uplink, which should translate into faster upload speeds. Given that the new devices will likely use Intel's (NASDAQ:INTC) XMM 7480 modem for some models and a Qualcomm (NASDAQ:QCOM) MDM9645 for others, I don't expect an improvement in peak download speeds from the 450 megabits per second that the iPhone 7/7 Plus are capable of.
As far as Wi-Fi/Bluetooth capability is concerned, the same source (research from J.P. Morgan) that suggested that the new iPhone models would use a Broadcom-based wireless charging solution also claims that the new iPhone will support Bluetooth 5.0 connectivity.
I wouldn't be surprised, then, to see Apple adopt the same Broadcom connectivity chip that's currently used in the Galaxy S8 (which includes Bluetooth 5.0 capability).
All told, this increase in content means better wireless performance (always a plus for a device that's so heavily dependent on connectivity to be useful) and wireless charging, which, if implemented correctly, could be a convenient feature.