The old saying "the squeaky wheel gets the grease" doesn't necessarily apply to two high-tech companies that typically receive very little press, unlike one major customer, which is scrutinized in every way possible by the minions in the media and investing world.
NXP Semiconductors NV (NASDAQ:NXPI) and Micron Technologies (NASDAQ:MU) are suppliers to Apple, (NASDAQ:AAPL), and the chip companies currently depend somewhat on the iPhone maker for success. Going forward, it's possible investors will continue to benefit from the partnerships cultivated in the past as well as from potential new markets.
NXP components are used in many different types of smartphones, including the current iPhone. Many analysts think Apple's new handset, due for a fall release, will be every bit as successful as previous launches, and NXP investors could benefit if its parts are selected to be used in the new device. We probably won't know for certain until a teardown is conducted.
Morgan Stanley projects that even without iPhone sales baked in, NXP revenues will triple by the year 2017. With an estimated 2015 P/E of just 12.5, all that potential growth may not yet be priced in the stock. There could be plenty of room for investors to profit. And if NXP is again selected for the iPhone it could be a no brainer.
In addition to supplying integrated circuits for smartphones, the Netherlands-based NXP provides chips for other potential growth industries.
After a series of data breeches at major retailers -- including at Target Corporation last year -- the push to improve security of customer data has moved up in importance. NXP, co-inventor of the technology and the number one supplier of chips in the business, makes near-field communication, or NFC, components that might be the wave of the future in securing domestic credit and debit card transactions. The number of mobile POS transactions are expected to increase by more than a 3:1 factor by 2018, up from 3 billion.
NXP could also do more business with Apple in retail as the Cupertino-based company might be planning a foray there too. The company has filed a patent that uses NFC to initiate transactions from mobile devices. There might be another NXP chip inside a future iPhone or smart watch. If Apple and NXP do indeed partner in a new industry, there could be even more success beyond what is already forecast.
Micron, known for DRAM and NAND memory devices, could also benefit from the new iPhone. The company bought up Elpida -- a longtime Apple supplier last year -- and the deal could pay off for some time to come. Micron got the benefit from sales of the LPDDR3 DRAM used in the best-selling iPhone 5s. Reports from Digitimes and AppleInsider speculate that Apple will stick with Micron for future production. Again, we won't know for sure until the teardown. The upgraded LPDDR4 reportedly would draw less power and result in improved iPhone battery performance, which will be an important selling point of the new device.
If Micron continues as a major Apple supplier, it could lead to further gains in the stock. Shares have more than doubled in the past year, partly as the result of the Elpida acquisition, which increased Micron's factory capacity by 45% and moved it into the No. 2 position in the industry. Shares could appeal to tech-orientated value investors with a P/E barely in double-digit territory.
NXP Semiconductors and Micron Technologies are flying below the radar and could be even more successful than current estimates call for if potential markets do open up and its parts are selected by iconic tech giant Apple for the new version of the iPhone. Investors could really clean up if the teardown suggests that is the case.