In just a few months, Apple (NASDAQ:AAPL) is expected to launch its next-generation iPhone models. These new iPhones -- and the so-called "premium" iPhone with an OLED display -- are expected to help accelerate the pace of iPhone upgrade rates, helping to drive what is commonly referred to as a "super cycle."
Clearly, if Apple's new phones help drive such a super cycle, then Apple itself stands to reap the financial benefits. Apple wouldn't be the only beneficiary, though. In this column, I'd like to highlight three companies whose businesses could benefit from a strong upcoming iPhone cycle.
The A-series manufacturer
Each iPhone incorporates a diverse array of semiconductor products, or "chips." Arguably the most important chip inside the iPhone is the applications processor, which handles almost all the processing that a smartphone must do.
Apple designs its own applications processors, but it doesn't manufacture them; it outsources the manufacture of those chips to third parties. Historically, it has relied on Samsung (NASDAQOTH:SSNLF) and/or Taiwan Semiconductor Manufacturing Company (NYSE:TSM), or TSMC for short, to build its chips.
The A9 that powered the iPhone 6s series was manufactured by both Samsung and TSMC. The A10 in last year's iPhone 7, on the other hand, is believed to be manufactured solely by TSMC. The upcoming A11 is also believed to be built exclusively by TSMC.
So, to the extent that Apple's upcoming iPhone models enjoy success in the marketplace, TSMC should also benefit.
The modem maker
Apple had long relied on Qualcomm (NASDAQ:QCOM) exclusively for the stand-alone cellular modem chips in the iPhone. However, with the iPhone 7, Apple began dual-sourcing modems -- some from longtime supplier Qualcomm and some from chipmaker Intel (NASDAQ:INTC), which had struggled for years to achieve some degree of success in the smartphone chip market.
If Intel manages to simply maintain its current share of the modem orders in the upcoming iPhone models, then it should benefit from the following:
- Increased unit shipments of Apple's latest iPhone year over year; and
- Revenue from sales of discounted iPhone 7 series models (Intel does not supply chips into this year's discounted iPhone 6s series phones).
Cellular modems make up a relatively small portion of Intel's overall business, but considering that Intel's mobile efforts are infamous for losing substantial amounts of money, anything that can help Intel's mobile business get closer to the black should be welcome news to its stockholders.
Yet another chipmaker
A final Apple supplier that stands to benefit from this year's iPhone models is chipmaker Broadcom (NASDAQ:AVGO). Broadcom is a longtime Apple supplier, having supplied connectivity combo chips (enabling Wi-Fi/Bluetooth functionality), RF chips, and even touchscreen controllers into Apple's iPhones for many years.
On Broadcom's most recent earnings call, management indicated that it expects to see a 40% increase in dollar content in the new iPhone compared to the previous one.
So, even if Apple's iPhone shipments are flat year over year (in other words, the expected super cycle doesn't happen), Broadcom's wireless business stands to enjoy robust revenue growth. And, to the extent that the new iPhone models drive unit growth for Apple, Broadcom should be well positioned to benefit.