This column has been updated with information on Broadcom's July quarter earnings report and related wireless chip sales guidance.
As Apple Inc. (AAPL - Get Report) surged in early August after beating estimates and issuing guidance that suggested fears of major iPhone 8 shipment delays were overblown, several historical iPhone/iPad suppliers naturally went along for the ride.
But those looking to invest in Apple suppliers ahead of the launch of the next flagship iPhone, and the upgrade "super-cycle" that it's expected to drive, should keep in mind that the iPhone 8 is expected to yield some big changes in how much chip content many suppliers provide.
In addition, it looks as if some new names will be added to Apple's supplier list, and that one or two historical suppliers will get shut out of the iPhone 8.
Broadcom Ltd. (AVGO - Get Report) , which has long been supplying RF power amplifier modules, Wi-Fi/Bluetooth combo chips and GPS chips for iPhones, is shaping up to be a big iPhone 8 winner. On its April quarter earnings call, the company signaled the iPhone 8 would provide it with a 40% dollar-based content increase relative to the iPhone 7, via its use of 8 Broadcom products.
Broadcom saw a post-earnings selloff on August 25, as its slightly above-consensus October quarter guidance left markets wanting more after a big 2017 run-up. But while the company reported seeing some weakness in the enterprise hard drive and Chinese telecom equipment markets, it also forecast that its wireless chip sales would rise 30% to 40% sequentially thanks to the iPhone 8 ramp. In addition, Broadcom expects wireless sales to be roughly flat sequentially in a January quarter that has typically seen seasonal declines.
The fact smartphone RF subsystems continue to become more complex -- this is both due to growth in the number of frequency bands supported by phones, and the use of more advanced 4G standards than enable things like gigabit peak download speeds -- has been driving content gains for Broadcom at both Apple and Samsung. That's thanks partly to the company's status as the leading maker of the advanced FBAR filters used in many 4G amplifier modules. Demand for more powerful Wi-Fi radios containing multiple transmitters and receivers (MIMO) has also been helping.
But the biggest driver behind the 40% content gain might be the Apple's use of a Broadcom chip to enable the much-rumored wireless charging abilities of its upcoming phones. In February, JPMorgan reported Apple and Broadcom have been working on a wireless charging system that will provide "best-in-class performance" for two years. Around the same time, KGI Securities reported that the iPhone 7S models launching in tandem with the iPhone 8 will also support wireless charging.
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RF chip rival Skyworks Solutions Inc. (SWKS - Get Report) , which got close to 40% of its March quarter revenue from Apple, should also see its content grow with this year's iPhone refresh. But the company's gains might be relatively smaller and driven by rising RF complexity. On Skyworks' July 20th earnings call, CEO Liam Griffin said his company "[feels] really good" about where it stands content-wise with Apple (referred to as "our largest customer").
Qorvo Inc. (QRVO - Get Report) , which issued soft guidance last week, might also see RF content gains with the iPhone 8 and 7S. However, the company's mobile sales skew more towards Samsung and Chinese OEMs than Apple.
Long-time iPhone/iPad Gorilla Glass supplier Corning Inc. (GLW - Get Report) could see the amount of glass it supplies per iPhone double with the iPhone 8, if reports that the iPhone 8 will have a glass back panel (rather than an aluminum panel) prove accurate. The fact Apple recently invested $200 million in Corning, and that its Specialty Materials business (dominated by Gorilla Glass) is expected to see low-to-mid teens Q3 sequential growth following a strong Q2, might bode well for the company's second-half iPhone sales.
Optical component vendors Finisar Corp. (FNSR - Get Report) and Lumentum Holdings Inc. (LITE - Get Report) appear set to act as iPhone suppliers for the first time. Both are expected to supply lasers that will let the iPhone 8's cameras support 3D depth-sensing, which in turn enables things such as face-detection and augmented reality effects. Initial reports suggested only the front camera would have this feature, but a July Fast Company report indicated Apple also wants the rear camera to have it. Himax Technologies Inc. (HIMX - Get Report) , meanwhile, will reportedly supply wafer-level optics (WLO) components to help the cameras support 3D depth-sensing.
Power Integrations Inc. (POWI - Get Report) might also be a new iPhone supplier: In June, Rosenblatt Securities reported the company will supply a power-conversion IC used to enable the wired rapid-charging abilities of next-gen iPhones, and in doing so displace chips from NXP Semiconductors NV (NXPI - Get Report) and ON Semiconductor Corp. (ON - Get Report) . NXP will still likely remain Apple's NFC radio supplier, and ON, which on its last earnings call said its "content in major smartphone platforms continues to grow with each generation," might still be a power management chip supplier.
On the flip side, the iPhone 8's widely-reported use of an OLED display rather than an LCD could lead long-time display driver IC supplier Synaptics Inc. (SYNA - Get Report) to get shut out. Synaptics issued light September quarter guidance on August 3rd, and said on its call it expects fiscal 2018 (ends in June 2018) driver sales to be hurt by "the migration and timing of the high-end smartphone market towards OLED displays." Since Samsung's high-end phones have long used OLEDs, that's quite likely a reference to Apple, which last year was reported to developing an OLED driver IC that will be manufactured by Taiwan Semiconductor Manufacturing Co. (TSM - Get Report) . TSMC is also expected to remain Apple's app processor and fingerprint sensor manufacturer.
For many suppliers, the iPhone's incredible sales volumes make it a one-of-a-kind design win opportunity. Apple sold 212 million iPhones in fiscal 2016 (it ended in September), and is expected on average by analysts to sell 217 million in fiscal 2017 and 246 million in fiscal 2018. In a new note, KGI Securities' Ming-Chi Kuo forecast Apple will produce 45 million to 50 million iPhone 8 units this year -- supply shortages are expected early on -- along with 35 million to 38 million iPhone 7S units and 18 million to 20 million iPhone 7S-Plus units.
And for many suppliers, business has been fairly steady from year to year. Though Apple is known for demanding cutting-edge performance from many ordered parts and driving a hard bargain on pricing, it has also been quite loyal to many preferred suppliers, partnering with them on iPhone designs one year after the next.
But as the iPhone 8's expected supplier mix shows, the adoption of technologies such as OLEDs, 3D depth-sensing, wireless charging and wired rapid charging can shake things up. And the continuation of long-term trends such as rising RF complexity also make their presence felt. Those phenomena bear close watching when trying to gauge which suppliers make for the best iPhone 8 plays.