Shares of Skyworks Solutions (NASDAQ:SWKS) jumped 6% on Jan. 29 after the analog semiconductor maker posted strong first quarter earnings. Revenue rose 15.1% annually to $926.8 million, and non-GAAP net income climbed 27% to $1.60 per share. Analysts had expected $920 million in revenue and earnings of $1.58 per share. The chipmaker's non-GAAP gross margin also expanded from 46.7% a year earlier to 51.4%.

Source: Skyworks.

Skyworks' numbers looked solid, but its guidance was soft. For the second quarter, the company expects earnings of $1.24 on revenue of $775 million, which came in below the consensus estimate of $1.33 in earnings on $817.8 million in revenue.

Yet that softness wasn't surprising, since Apple (NASDAQ:AAPL), one of its top customers, already issued light guidance for its current quarter. Other iPhone suppliers, including Skyworks rival Qorvo (NASDAQ:QRVO), also recently slashed their sales estimates. Looking ahead, Skyworks faces two tough challenges which might cause its stock to extend its 15% decline over the past 12 months.

1. Its dependence on Apple
Skyworks Solutions makes RF chips for all tiers of smartphones. Its SkyOne Ultra front end module is installed in premium devices such as Apple's iPhone 6s and Samsung's Galaxy S6. Its One Mini front end module can be found in many low- to mid-range smartphones.

Skyworks doesn't disclose how much of its revenue comes from Apple, but in its 10-K filing for fiscal 2015, it admits that "one customer accounted for greater than 10% of our net revenue" during the year. If that customer is Apple and the actual percentage is close to 10, concerns about Skyworks' dependence on Apple could be overblown. But last year, Oppenheimer & Co. analyst Richard Schafer estimated that Apple orders actually generated 35% to 40% of Skyworks' sales.

Going forward, this lack of clarity regarding Apple's orders can hurt Skyworks stock. Last quarter, Apple's iPhone shipments rose just 0.4% annually, and the company expects total revenue to fall 8.6% to 13.7% annually during the second quarter. However, Skyworks isn't Apple's only RF chip supplier -- its rivals Qorvo and Avago also supply various RF chips for the iPhone.

Apple's iPhone 6s. Source: Apple.

2. Enter Qualcomm and TDK
Skyworks has long faced competition in the RF chip market from rivals such as Qorvo. However, Skyworks' "best in breed" reputation has kept its chips installed in top-tier smartphones such as the iPhone.

But in mid-January, Qualcomm (NASDAQ:QCOM), the largest mobile chip maker in the world, formed a new RF joint venture with TDK called RF360 Holdings. The JV will create new RF filter and front end solutions for mobile devices, drones, robots, and other connected devices. The deal is expected to close by early 2017, and Qualcomm will have the option to buy out TDK's interest within the first 30 months. The two companies will also team up in new areas such as sensors and wireless charging.

Qualcomm's interest in this market is troubling for Skyworks. Qualcomm is already the largest mobile application processor and wireless modem manufacturer in the world. If Qualcomm also adds its RF chips, sensors, and wireless charging tech into single reference designs, the solution could be considered more cost-effective for margin-hungry smartphone OEMs. While Apple is unlikely to use an all-Qualcomm reference design, many low to mid-range OEMs could do so and throttle demand for Skyworks' One Mini modules.

The road ahead
The bears believe that Skyworks' dependence on Apple and the arrival of bigger rivals could sink its stock, but the bulls believe that the company can successfully diversify its business and continue growing.

Skyworks' customer list already includes heavyweight companies such as Cisco Systems, Ericsson, and General Electric. These companies are all investing heavily in the Internet of Things, which consists of everyday objects connected to each other and the cloud. Cisco estimates that the number of connected devices will double from 25 billion in 2015 to 50 billion in 2020. As that market grows, Skyworks can diversify its business away from mobile devices. Upgrades from 3G to 4G will also bolster its sales, since 4G devices require more RF chips than 3G ones.

Analysts expect Skyworks to grow its annual earnings by 22% over the next five years, which gives the stock a cheap five-year PEG ratio of just 0.5. However, Apple's decline and Qualcomm's challenge could still weigh down those earnings and temper analyst expectations.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.