Qorvo, Qualcomm, Jabil: Which Suppliers Are Winning The iPhone 12 Cycle?

The stock prices of Apple (NASDAQ: AAPL) suppliers have fared well since the launch of the 5G iPhone 12 in mid-October. The new handsets have seen robust demand with multiple models remaining out of stock globally. This is a positive development for Apple’s suppliers, considering that the 5G devices are apparently more expensive to produce with more advanced semiconductors and components. Our indicative theme on Apple Component Supplier Stocks – which includes a diverse set of companies that supply components for iPhones and other Apple devices – is up by about 20% over the last two months on an equally weighted basis, compared to the S&P 500 which was up by about 12% over the same period. Jabil Circuit – a company that makes encasements for iPhones – has been the strongest performer in recent weeks, with its stock rising by about 35% since late October, driven by an earnings beat and higher Revenue guidance for the fiscal year. Qorvo – a semiconductor player that supplies RF solutions – has also done well, rising by over 30% since late October.

[Updated 11/5/2020] Apple Suppliers Poised To Gain Big From iPhone 12

The iPhone 12 lineup is likely to drive a big upgrade cycle for Apple, considering the 5G radios, new screen size options, and refreshed industrial design. While Apple stock – which is up about 55% this year – looks slightly overvalued in our view, Apple suppliers could see more upside from the new devices. Shipments of the new iPhones are likely to be higher compared to last year and components could also be pricier considering the increased costs associated with 5G. There is already some evidence that suppliers are benefiting from the new devices. Earlier this week, Apple’s 5G modem supplier Qualcomm QCOM published a strong set of Q4 results, driven in part by 5G chips used in the new iPhone, while Skyworks – a supplier of radio frequency components – also posted strong quarterly numbers. Our indicative theme of Apple Component Supplier Stocks – which includes a diverse set of companies that supply components for iPhones and other Apple devices – is up by about 16% year-to-date, on an equally weighted basis, compared to the S&P 500 which has gained about 7%. Qualcomm, up 46% year-to-date, is a major driver of the theme’s return this year. On the other hand, Jabil Circuit was the worst performer, down roughly -17% this year. Below is a bit more about these companies.

Qualcomm sells application processors, modems, and licenses wireless technology to key handset manufacturers. The company is seen as a leader in 5G technology and could be a big beneficiary as the broader smartphone market transitions to the new technology over the next few years. The stock is up by about 46% year-to-date.

Qorvo, Inc., is a semiconductor player that supplies RF solutions focused on cellular, Ultra-wideband, and Wi-Fi to manufacturers of mobile products such as smartphones, wearables, and tablets. The stock is up by about 15% year-to-date.

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Skyworks Solutions, manufactures semiconductors for use in radio frequency systems and components such as switches and amplifiers. It’s likely that more complex requirements for 5G iPhones will drive demand for the company. The stock has rallied 15% this year.

Jabil Circuit, is a manufacturing firm that makes encasements for Apple’s iPhones and iPad. Jabil stock is down -17% this year, as the Coronavirus impacted the company’s electronic manufacturing services business.

Corning produces specialty glass, ceramics, and related materials. The company has been the key supplier of the glass used on iPhones, including the tougher “Ceramic Shield” glass used on the iPhone 12. The stock is up 15% this year.

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