Why Skyworks Solutions Fell 10% in January

Fears of an iPhone slowdown and increasing competition from Qualcomm spurred an investor sell-off.

Chris Neiger
Chris Neiger
Feb 14, 2016 at 7:14AM
Technology and Telecom

Image source: YCharts.

What: Last month, shares of Skyworks Solutions (NASDAQ: SWKS) fell 10.3%, according to S&P Global Market Intelligence data. Investors were influenced by early rumors that Apple (NASDAQ: AAPL) would cut production of its iPhones, as well as a growing fear that Qualcomm (NASDAQ: QCOM) is becoming a stronger competitor in the radio frequency chip market. 

So what: Skyworks' radio frequency (RF) power amplifiers are used in the current iPhone 6s lineup and the company makes between 35% and 40% of its revenue from Apple, according to estimates from Oppenheimer & Co. analyst Richard Schafer. So any negative change in iPhone demand weighs pretty heavily on the company.  

But Apple's iPhone slowdown wasn't the only thing that caused Skyworks' slide. Rival Qualcomm formed a joint venture with Japan-based TDK Corp. in January to create their own radio frequency chips. 

That could eventually add some serious competition to Skyworks' RF chips, but it'll take a while for the joint venture to have an impact on Skyworks. But the long-term potential threat was enough to spur a sell-off for some investors.

Now what: Apple said it will see negative iPhone growth in the coming fiscal Q2. But as Skyworks' stock has already fallen on the slowing iPhone demand rumors, shares shouldn't fall on any more on that news. 

And going forward, Skyworks stock could actually rebound on future iPhone news. Anticipation is growing for the rumored iPhone 7, likely to debut this September, and Skyworks' tech will probably have a spot in the device. 

Skyworks investors will need to keep watching what the new Qualcomm and TDK Corp. partnership brings. Once production ramps up, Qualcomm's new endeavor could steal away some of Skyworks' RF business, though the joint venture won't likely hurt Skyworks' RF business in the short term.