If you follow the world of Apple (AAPL 0.18%) suppliers, then you might have heard of the following two chip companies: Skyworks Solutions (SWKS 4.14%) and Cirrus Logic (CRUS 2.03%)

These two companies build fundamentally different chips. Skyworks sells a range of chips designed to enable wireless communications. Most of its chips go into smartphones (and last fiscal year, a whopping 47% of its revenue came from sales to Apple), but the company has been trying to capitalize on new markets where wireless connectivity will be critical, such as automotive and the broader Internet of Things (IoT).

A logic board with a chip being removed by a pair of pliers.

Image source: Getty Images.

Cirrus Logic, on the other hand, mainly sells audio chips. Over the last nine months, 81% of its sales came from Apple in support of products like iPhone, iPad, and even its Mac lineup. Cirrus is looking to diversify its audio chip business by selling chips to the various Android smartphone makers, and it's also aiming to push into new markets such as smart-home applications. The company is also developing new product lines like chips that enable voice biometrics. 

These two have a lot in common -- they're specialized chipmakers that heavily depend on Apple -- but there are some differences, too. So which of these chip companies is the better buy? Let's take a closer look.

Comparing the two

Skyworks has a number of compelling growth drivers that should fuel its business for years to come. The company stands to benefit as smartphone makers like Apple transition from 4G LTE to 5G wireless capabilities, since such a transition is set to drive an increase in the amount of wireless content it can sell per smartphone.

In addition to the growth in dollar content per smartphone, Skyworks is also bullish about the opportunity to sell its chips into other applications like connected cars and smart cities. On the company's most recent earnings call, CFO Kris Sennesael explained that 27% of its revenue last quarter came from non-mobile applications while 73% came from mobile.

Translating that into more tangible numbers, analysts expect Skyworks' revenue to fall 8% in fiscal 2019 (this appears to be due to the weakness that Skyworks is set to experience thanks to Apple's iPhone declines) before growing 6.9% in fiscal 2020. Earnings per share (EPS) is expected to shrink from $7.22 in fiscal 2018 to $6.61 in fiscal 2019 (an 8.4% drop) before growing 12% to $7.40 in fiscal 2020.  

Cirrus Logic also has a credible long-term growth story. In a recent investor presentation, the company indicated that the total addressable market (TAM) for midrange audio chips will balloon to $900 million by 2021 from just $500 million in 2017 (and, remember, Cirrus Logic is trying to grow its share in this market, too). It also expects the markets for smart accessory audio chips, biometric voice chips, haptic drivers, and smart-home audio to balloon to a combined $2.5 billion by fiscal 2021 -- up from $620 million in 2017. 

So while Cirrus Logic relies heavily on sales of audio chips to Apple today, there seems to be a good opportunity for it to both grow its overall revenue and reduce its dependence on the iPhone maker in the years ahead. 

In the nearer term, analysts expect Cirrus Logic to struggle to deliver growth. Sales are expected to plunge 24% in fiscal 2019 followed by a much more moderate decline in fiscal 2020. Unless analysts are meaningfully underestimating the situation for Cirrus Logic, it might not be until fiscal 2021 that the company returns to revenue growth.

The EPS situation looks even more grim. After posting $4.27 in EPS in fiscal 2018, the company is expected to see EPS plummet to $2.38 in fiscal 2019 followed by another drop to $2.13 in fiscal 2020.

Check out the latest earnings call transcripts for Skyworks Solutions and Cirrus Logic.

Investor takeaway

Both companies have made credible cases for their long-term growth opportunities. Both Skyworks and Cirrus Logic are suffering from Apple's worse-than-expected iPhone product cycle, but the latter's greater dependence on Apple and the iPhone is leading to a more pronounced decline. Moreover, while Skyworks should benefit from Apple's transition to 5G fairly shortly (Apple is expected to launch 5G-capable iPhones in the fall of 2020 and even this year's iPhones are set to receive upgrades in wireless capability), Cirrus' growth drivers may take longer to materialize and have a real impact on its financial results. 

Given those dynamics, coupled with the fact that Skyworks trades at just 11.2 times fiscal 2020 EPS estimates while Cirrus Logic goes for about 19.6 times fiscal 2020 EPS estimates, Skyworks stock seems more attractive than Cirrus Logic does right now.