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Apple (AAPL) to Boost iPhone Production: 4 Suppliers to Gain

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Apple (AAPL - Free Report) is reportedly planning to increase production of iPhones in the first half of 2021 on strong demand for its 5G-enabled iPhone 12 as well as older iPhone 11 and iPhone SE. Per a Nikkei Asia report, the Cupertino-based company expects to ship 95-96 million iPhones, indicating an increase of roughly 30% year over year.

Moreover, Apple is now anticipated to build 230 million iPhones for 2021. Per IDC data, Apple has shipped roughly 116 million iPhones in the first nine months of 2020. However, the company’s shipment volumes declined 10.6% year over year in third-quarter 2020 due to a month’s delay in launching its first 5G-supported iPhones.

Nevertheless, iPhone 12 sales are expected to be driven by pent-up demand amid the holiday season. This Zacks Rank #3 (Hold) company expects iPhone revenues to grow in the first quarter of fiscal 2021 despite shipping iPhone 12 and 12 Pro four weeks into the quarter, and iPhone 12 Mini and 12 Pro Max seven weeks into the quarter.

Markedly, Apple is facing stiff competition in the 5G-enabled smartphone space currently dominated by the likes of Samsung, Huawei, Vivo, Xiaomi and Oppo. In such a scenario, the Apple’s 2021 shipment projection is encouraging for suppliers as well as investors.

Notably, IDC expects strong demand for 5G-supported devices to help global smartphone shipments to grow 9% in 2021 after an estimated 10% decline in 2020. IDC expects 5G smartphones to grab 50% of the global markets by 2023. This definitely bodes well for Apple and other 5G smartphone device manufacturers.

Further, Apple is rumored to bring some always-on display feature to high-end iPhones in 2021, which per renowned analyst Ming-Chi Kuo, cited by 9TO5 Mac report, is expected to be launched on schedule (by September 2021).

4 Suppliers Poised to Gain From Boost in Production

Undoubtedly, Apple’s plan to boost iPhone production benefits its suppliers. Here we discuss four of them - Qorvo (QRVO - Free Report) , Cirrus Logic (CRUS - Free Report) , Skyworks (SWKS - Free Report) and Synaptics (SYNA - Free Report) . Investors’ optimism is likely to get a boost with regard to these suppliers, which depend on the iPhone maker for significant portions of their top-line growth.

Qorvo, a provider of radio frequency (RF) chips, is well-poised to benefit from the increase in production ramp-up of Apple’s iPhones. This Zacks Rank #1 (Strong Buy) generated 33% of its fiscal 2020 revenues from Apple. You can see the complete list of today’s Zacks #1 Rank stocks here.

Solid uptake of Bulk Acoustic Wave (BAW) filters, with the reopening of economies, is expected to boost top-line growth. Moreover, expanding portfolio of 5G base solutions amid accelerated deployment of 5G bodes well.

The Zacks Consensus Estimate for fiscal 2021 earnings has moved up 22.4% to $8.64 per share over the past 60 days.
 

Qorvo, Inc. Price, Consensus and EPS Surprise

 

Qorvo, Inc. Price, Consensus and EPS Surprise

Qorvo, Inc. price-consensus-eps-surprise-chart | Qorvo, Inc. Quote

 

Cirrus Logic supplies audio chips to iPhones. Hence, the production ramp-up bodes well for this Zacks Rank #1 company. Notably, Apple accounted for roughly 75% of its fiscal 2020 sales.

Cirrus Logic is benefiting from higher sales of smart codecs and amplifiers in wired and wireless headphones. Apart from the mobile market, rising demand for boosted amplifiers in tablets and laptops is a key driver. Growth opportunities in voice biometrics and closed-loop controllers are likely to be the key catalysts.

The Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $4.36 per share, having moved 33.7% north in the past 60 days.
 

Cirrus Logic, Inc. Price, Consensus and EPS Surprise

 

Cirrus Logic, Inc. Price, Consensus and EPS Surprise

Cirrus Logic, Inc. price-consensus-eps-surprise-chart | Cirrus Logic, Inc. Quote

 

Skyworks, another RF component supplier, is well-positioned to benefit from accelerated 5G deployment and increasing demand for 5G handsets. In fiscal 2020, Apple accounted for 51% of Skyworks’ net revenues.

This Zacks Rank #2 (Buy) company’s Sky5 product portfolio facilitated several 5G smartphone launches. Moreover, Skyworks continues to gain component share Samsung, VIVO and Xiaomi apart from Apple.

Moreover, Skyworks’ diversified portfolio positions it well to capitalize on momentum witnessed across telemedicine along with remote work, online learning, and video streaming, triggered by coronavirus crisis.

Notably, the Zacks Consensus Estimate for Skyworks fiscal 2021 earnings has moved up 10% to $7.48 per share over the past 60 days.
 

Skyworks Solutions, Inc. Price, Consensus and EPS Surprise

 

Skyworks Solutions, Inc. Price, Consensus and EPS Surprise

Skyworks Solutions, Inc. price-consensus-eps-surprise-chart | Skyworks Solutions, Inc. Quote

 

Further, Synaptics, which is a display component supplier of Apple, is expected to benefit from ramp-up in iPhone production.

This Zacks Rank #2 company is well poised to capitalize on its market-leading position for both touchpads and secure fingerprint sensors amid upbeat trends in PC shipments. Moreover, the company’s digital audio solutions are witnessing strong demand with premium headsets that primarily serve enterprise customers.

The consensus mark for the company’s fiscal 2021 earnings is pegged at $6.86 per share, having been revised 12.6% upward in the past 60 days.

 

Synaptics Incorporated Price, Consensus and EPS Surprise

 

Synaptics Incorporated Price, Consensus and EPS Surprise

Synaptics Incorporated price-consensus-eps-surprise-chart | Synaptics Incorporated Quote

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