There are plenty of technology companies that have their components in Apple (NASDAQ:AAPL) iPhones, but a handful of them are using their expertise in mobile devices to transition into the burgeoning Internet of Things (IoT).
Investors looking for tech stocks that have a future beyond just mobile devices -- take a look at these three companies delving into the IoT.
Sensing movement in the Internet of Things
InvenSense (NYSE:INVN) provides the micro electro-mechanical system (MEMS) gyroscopes for motion tracking in the iPhone 6 lineup. In its third quarter 2015 earnings, Apple made up 45% of InvenSense revenue.
But the company is also betting big that its MEMS will play a huge role in the IoT as well. That is good news -- according to IHS, the "explosive expansion of the Internet of things is driving rapid demand growth" for micro electro-mechanical systems.
That may be why the company introduced the M3 system-on-a-chip at the Consumer Electronics Show last month, which combines a 6-axis motion sensor with digital motion processors, proprietary software, an ARM CPU, and embedded flash -- all into a 3x3 millimeter space.
CEO Behrooz Abdi had this to say about the chip:
In addition to mobile, this single-chip IoT device has applications in many market segments including wearable, smartphone, the smart home, gaming, drones, industrial, and automotive and lends itself well to anchoring compelling modular IoT solutions with full connectivity and memory powering exciting new vertical markets.
Invensense has been a bear in the market over the past 12 months -- down 25% -- with some of the negative movements coming from investors unhappy with the drop in gross margins. But for those looking for a long-term IoT play that has the tech chops to produce top notch components for Apple, don't write this company off just yet.
Strong connections for Apple and IoT
Behind strong cellular connections is Skyworks Solutions (NASDAQ:SWKS), which makes the analog and mixed signal semiconductors for the iPhone and iPad. Apple uses Skyworks radio frequency technology to boost signals from its mobile devices to telecom carriers.
Skyworks is not the sole provider of these chips in Apple devices, but its share of components in those devices is growing. About 20% to 25% more Skyworks technology is in the new iPhone compared to the iPhone 5S, according to Oppenheimer & Co. analyst, Rick Schafer.
But just as with Invensense, Skyworks is branching out into IoT possibilities as well.
Future connected devices will "require high levels of integration and will need customized solutions produced in massive scale and attractive cost points. All of these attributes play directly into Skyworks' core strengths. In this way, Skyworks is a conduit into the Internet of Things," CEO David Aldrich said on a recent earnings call. Aldrich added that the IoT is one of four major trends driving growth at the company this year.
Some question the possibility of more growth for the company, with its stock already up 155% in 2014. While the company still has a lot of room to run in the Internet of Things, investors should watch pricing pressure from major OEMs, as well as increased radio frequency competition from Qualcomm.
Much more than mobile payments
NXP Semiconductors(NASDAQ:NXPI)scored a big win a few months ago when Apple decided to use the company's near-field-communication chips to power the new Apple Pay system. Two NXP chips enable NFC payments and also secure them.
That is a big deal for NXP, as Apple has made its payment system a key feature of both the iPhone 6 lineup and the forthcoming Apple Watch. But future prospects extend far beyond the iMaker.
NXP is one of the first companies to mass-produce chips for vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communication systems. And just last month Audi -- a leader in connected vehicles -- said that NXP technology outpaced previous tests with other V2X equipment.
NXP chips, along with a Delphi antenna, communicated potential hazards between two vehicles -- all while traveling over one mile apart at high speeds.
And that is just part of its IoT pursuits. Between wearble technology like the Apple Watch, connected cars with Audi, and additional connected home technology, NXP has shown that the company is much more than a mobile chipmaker.
Plenty more to come
There are plenty of other companies making mobile technologies right now that will ultimately use their expertise in the IoT, but these three companies are proof that now is the time for tech companies to make the transition. Investors looking for tech investments should keep a close eye on which players are poised to use their mobile know-how for the growing Internet of Things.