On Sept. 12, Apple (NASDAQ:AAPL) announced a trio of new iPhones. The highest end of the bunch was the iPhone XS Max -- a supersized version of the iPhone XS, which is itself a direct successor to last year's ultra-premium iPhone X. The iPhone XS Max seems to be off to a good start, with TF Securities analyst Ming-Chi Kuo reportedly saying that "demand for [iPhone] XS Max is better than expected (3-4 times that of XS)."
Here, I'd like to go over two Apple suppliers that were either entirely cut out of the iPhone XS Max or saw their content within the device significantly reduced relative to prior-generation models: Qualcomm (NASDAQ:QCOM) and Dialog Semiconductor (NASDAQOTH:DLGNF).
Back on its July 25 earnings conference call, Qualcomm management admitted to investors that it wouldn't be supplying cellular modem chips in any of the new iPhones. A recent tear-down report from TechInsights confirmed that Qualcomm isn't inside of the iPhone XS Max. The cellular baseband processor and RF transceiver spot, which were split between Qualcomm and rival Intel (NASDAQ:INTC) in the prior-generation iPhone 8-series and iPhone X devices, seem to have gone entirely to Intel this year -- as expected.
Qualcomm isn't completely out of the iPhone supply chain, though. Qualcomm management told investors that it will "continue to provide modems for Apple legacy devices." This means a portion of Apple's older iPhone 7-series and iPhone 8-series devices that continue to be sold will have Qualcomm chips inside. (Apple sources cellular baseband and RF transceiver solutions from both Intel and Qualcomm for the iPhone 7-series and iPhone 8-series products.)
Dialog loses a spot
Dialog Semiconductor has long provided the main power management IC, or PMIC, to all of Apple's iPhones. However, in a disclosure on May 31, Dialog told investors that it had been "provided with a reduced share of the volume forecast for the main Power Management IC (PMIC) for the 2018 smartphone platform."
"This is the first time one of our custom PMICs for the smartphone platform is being dual sourced and is estimated to reduce the FY 2018 revenue by approximately 5%," Dialog's statement read.
On the company's Aug. 2 conference call, Dialog CEO Jalal Bagherli explained that, "we have two chips in the upcoming cycle, one is across all three [iPhones] and one is across two models."
TechInsights' tear-down of the iPhone XS Max revealed an Apple-branded main PMIC, suggesting that this is the iPhone in which Dialog lost the main PMIC spot.
While Dialog is almost certainly providing the main PMIC in the iPhone XR -- the iPhone that's expected to be the fastest-selling of the three that Apple announced this year -- recall that Kuo said the iPhone XS Max is dramatically outselling the iPhone XS (something that analyst Jun Zhang with Rosenblatt Securities echoed when he said that "we believe iPhone XS Max sales were about 4-5x iPhone XS sales over the weekend"). To the extent that buyers choose the iPhone XS Max over the standard iPhone XS, Dialog's Apple-related revenue is set to suffer.