Expectations are high for Apple's (AAPL -0.81%) iPhone 12. Wedbush analyst Daniel Ives claims the iPhone 12 will mark Apple's "most significant product cycle" since the iPhone 6 in 2014, while Cinda Securities expects the new lineup to hit 230 million to 240 million shipments in 2021, which would surpass the iPhone 6's 222.4 million shipments.

Support for 5G networks, which was missing from last year's iPhones, is expected to drive more upgrades as carriers promote their 5G plans. And a wider range of models at lower price points should amplify that growth.

Those rosy expectations lifted Apple's stock roughly 80% over the past 12 months and buoyed its top suppliers. One of those suppliers is Skyworks Solutions (SWKS -0.55%), a wireless chipmaker that generated 56% of its revenue from Apple in fiscal 2020 (which ended in October) -- up from 51% in 2019 and 47% in 2018. Does that high exposure to Apple make Skyworks a good play on the iPhone 12? 

The iPhone 12 Pro.

Image source: Apple.

What does Skyworks Solutions do?

Skyworks produces wireless chips for the mobile, automotive, home automation, wireless infrastructure, and industrial markets. It typically generates more revenue per connected device as network speeds increase.

For example, Skyworks estimates that each 5G phone will require about $25 in front-end chips, up from $18 per 4G device, $8 per 3G device, and $3 per 2G device. Skyworks also benefits from the expansion of the Internet of Things (IoT) -- which links other devices like cars, drones, smart home appliances, industrial machines, and wearables -- to each other and the internet. Skyworks' long-term goal is to reduce its dependence on the maturing smartphone market and sell more wireless chips for other end markets.

In the past, Skyworks provided power amplifier modules (PAM), diversity receive (DRx) modules, and other types of chips for Apple's devices. In the iPhone 12, it bundles many of those chips together in its Sky5 RF (radio frequency) module, which also powers Samsung and Huawei's 5G phones.

How fast is Skyworks growing?

In fiscal 2019, Skyworks' revenue and adjusted earnings fell 13% and 15%, respectively, as sluggish smartphone sales, exacerbated by U.S. sanctions against Huawei, offset its stronger sales of IoT and analog chips.

A network of wireless connections across a city.

Image source: Getty Images.

In fiscal 2020, Skyworks' revenue dipped less than 1% to $3.38 billion, mainly due to its loss of Huawei's business (which accounted for 10% of its sales back in 2017 but dropped to about 3% by the fourth quarter of 2020) and disruptions from the COVID-19 pandemic.

As a result, Skyworks' adjusted gross margin contracted 40 basis points year over year to 50.2%, and its adjusted operating margin dropped 80 basis points to 33.7%. Its adjusted earnings dipped less than 1% as buybacks partly offset its 3% decline in net income.

Those numbers are unimpressive, but Skyworks expects its business to turn a corner in the first quarter of 2021 as its revenue rises 16%-19% year over year and its adjusted earnings grow about 23%. CFO Kris Sennesael attributes that growth to "content gains and product ramps across multiple 5G-enabled smartphone platforms" as well as "increased demand" across its other end markets.

Skyworks didn't provide any guidance for the rest of the year, but analysts expect its revenue and adjusted earnings to rise 17% and 23%, respectively, as robust orders from top customers like Apple and the broader growth of the 5G market offset its loss of Huawei's orders.

Analysts expect Skyworks' revenue and earnings to rise 9% and 14%, respectively, in fiscal 2022 as it grows its content share in 5G devices and expands its presence in the auto and infrastructure markets.

Is it the right time to buy Skyworks' stock?

Skyworks' stock has risen about 25% over the past 12 months, but it's underperformed Apple and the benchmark Philadelphia Semiconductor Index, presumably due to its tepid growth and exposure to Huawei.

However, Skyworks looks poised for stronger growth in 2021, and its stock is reasonably valued at 21 times forward earnings. Apple, which is expected to generate slower revenue and earnings growth than Skyworks over the next two years, has a higher forward P/E ratio of 31.

Skyworks also pays a decent forward dividend yield of 1.4%, and it remains committed to the ongoing buybacks that have reduced its share count by about 13% over the past five years.

Based on those facts, I believe it's the right time to buy Skyworks. It remains a good play on Apple, the broader 5G market, and the expanding IoT market, which will gradually boost its sales to non-smartphone markets. Investors should be wary of Skyworks' overwhelming dependence on Apple, but there's no reason to believe that the chipmaker will lose its top customer anytime soon.