Being an Apple (NASDAQ:AAPL) supplier can be something of a double-edged sword. Since Apple is hugely successful in the markets in which it participates, winning Apple orders can be anything from a solid revenue boost (typically the case for already large and successful suppliers) to a fundamental game-changer (the case for small suppliers that hit it big with Apple).
Unfortunately, since Apple plays hardball with suppliers, and since Apple is known for aggressively bringing technologies in-house, revenue from Apple generally isn't as "sticky" as revenue from other, less powerful customers.
To that end, I'd like to go over three Apple suppliers that are at risk of losing significant Apple business in the years ahead: Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM), and Dialog Semiconductor (NASDAQOTH:DLGNF).
On April 2, Bloomberg reported that Apple management had green-lit an initiative, known as Kalamata, to replace Intel-based processors inside of Apple's Mac computers with Apple-designed processors.
The shift is expected to begin in the 2020 time frame at the earliest, so Intel is unlikely to see the impact from this transition for at least a few more years. However, when all is said and done, Intel stands to lose around $3 billion in annual revenue when and if Apple transitions entirely away from Intel processors in its Mac products.
Considering that Intel generated $62.8 billion in revenue during 2017 and is expected to generate even more than that in 2018, the loss of Apple isn't going to crush Intel's financial performance, but it'll certainly sting.
For years, Apple relied on Qualcomm as the exclusive supplier of cellular modems in its iPhone and iPad product lines. Beginning in 2016, Apple shifted a significant portion of its cellular modem orders away from Qualcomm and toward Intel.
Although Apple split its cellular modem orders between Qualcomm and Intel during the iPhone 7 product cycle as well as the current iPhone 8/iPhone X product cycle, KGI Securities analyst Ming-Chi Kuo -- an analyst with a strong track record in publishing information about future Apple products -- believes Qualcomm will be entirely cut out of the iPhone models that'll launch later this year, with Intel winning the entirety of the orders.
Just as is the case with Intel potentially losing the Mac, Qualcomm losing the remainder of the iPhone modem business isn't likely to prove a crippling blow to Qualcomm, but it too will sting.
3. Dialog Semiconductor
Another chip maker that's potentially on the chopping block is Dialog Semiconductor. Dialog Semiconductor produces power management chips that go into Apple's iPhones and other products. Such chips impact the power efficiency of a mobile device.
Nikkei Asian Review reported a while back that Apple is designing its own power management chip in a bid to supplant the chips currently made by Dialog Semiconductor. There are also some pretty clear hints directly from Apple that it is indeed working on such a chip.
Dialog Semiconductor has said that it expects to continue supplying power management chips to Apple through 2020 (via Reuters), so a significant revenue decline isn't imminent for the company. However, it does seem inevitable that Apple will cut Dialog out in favor of an in-house solution.