With iPad fever raging, many wanted to know which enterprising businesses were tapped by the big Apple to manufacture the components that made up the immensely popular device. Thanks to the iPad teardown, many investors now know just who these companies are. Some are well-known companies, such as Qualcomm and Texas Instruments, but my interest was piqued more by the lesser-known entities, whether or not they have contracted with Apple before. So I did a little digging to see how they have been faring in the recent past, as well as how they're doing now that they have been unmasked.
Avago Technologies (Nasdaq: AVGO) has been percolating pretty well over the past year or so, beating Street estimates on earnings and revenue even before last October's iPhone teardown identified its amplifiers as being part of that device. The analog chip maker is currently being looked at by Apple to supply parts for its newest iPhone, along with Skyworks and TriQuint.
Skyworks Solutions (Nasdaq: SWKS) has seen its value rise 76% in the last three months after experiencing a few bumps in the road last year. First, Deutsche Bank noted concerns about the company's margins being squeezed in China, then Apple reduced its iPad orders to its vendors. Confidence in the company has been restored, however, and the recent iPad teardown found the company to be a supplier of multiple components, and it is expected to do the same for the new iPhone.
TriQuint Semiconductor (Nasdaq: TQNT) supplied the quad-band power amplifier module for the new iPad and, along with Avago, saw its stock surge in the past several weeks, right along with Apple's excellent Q1 results. The other semiconductor company to supply the iPad with chips, Fairchild (NYSE: FCS), has made a comeback recently from a lackluster 2011, with disappointing earnings and revenue reports being delivered on a fairly regular basis. The company's sales picture is looking better, however, and the revelations regarding the company's contribution to the iPad certainly couldn't have hurt.
Omnivision Technologies (Nasdaq: OVTI) had a very depressing 2011, battling rumors of a contract loss with Apple, then losing value due to questions about decreasing iPhone orders. The company reduced guidance for 2012, suffering more investor punishment, until it was revealed that it indeed had supplied the front and rear camera sensors for the new iPad. Shares are up more than 54% over the past three months, and in other good news, the company has stepped up capacity at Taiwan Semiconductor.
What's next for these companies?
Any of these five companies are worth serious consideration as an investment vehicle, though I think TriQuint, Skyworks, and Avago are especially interesting, and not only because they may have already been tapped for the next Apple iPhone. These three are also involved in supplying components for the 4G Long Term Evolution cell-phone market, which is set to expand exponentially this year.
Despite the ups and downs of some of these companies, I would bet that Apple isn't going to contract with companies that manufacture poor quality components, or seem to be in danger of folding in the near future. In these cases, it certainly looks like dips should be considered by investors to be opportunities, rather than causes for alarm.
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