As the holiday season is setting in, more people will be looking to buy consumer electronics. Starting from Black Friday in November, the demand for mobile phones, gaming consoles, laptops, and accessories is likely to surge. One of the most sought-after products in this period is going to be Apple’s iPhone 12. Launched on October 13th, the product has caught everyone’s fancy. Powered by the 5G technology, the iPhone 12 has the potential to strengthen AAPL’s position in the premier phone segment, which it already leads.
According to a Bloomberg report, Apple (AAPL) is prepping up for the mass production of more than 75 million 5G-enabled iPhones. This indicates that there is a huge demand for iPhones despite the COVID-19 crisis. Meanwhile, AAPL analyst Ming-Chi Kuo stated that the standard-sized iPhone 12 and iPhone 12 Pro will be immensely popular with each capturing 30%-35% of the market.
Overall, there is a huge buzz around the iPhone 12 on Wall Street. Analysts believe that it could usher the biggest sales cycle for the company since its launch in 2014. As many of AAPL’s customers haven’t upgraded their products since the iPhone 8 era, the 5G factor could lead to a mass upgrade opportunity.
For the third quarter that ended June 2020, iPhone accounted for 44.3% of AAPL’s total sales. The iPhone sales also increased 1.7% year-over-year to $26.42 billion.
AAPL is one of the major customers for most of the chip companies. The quantum of production and demand for premium quality components spells benefits for chip suppliers. Notably, with each iPhone upgrade, the quantity of semiconductor increases.
Thus, a few of the leading iPhone suppliers like Taiwan Semiconductor Manufacturing Company Ltd. (TSM), Broadcom Inc. (AVGO), QUALCOMM Incorporated (QCOM), and NXP Semiconductors N.V. (NXPI) stands to reap tremendous benefits from the iPhone. With AAPL scheduled to announce its fourth-quarter results October 29th, these stocks could see a decent rally.
Taiwan Semiconductor Manufacturing Company Ltd. (TSM)
The world’s third-largest semiconductor manufacturer, TSM, is a supplier of components for the iPhone 12. It is the only foundry that manufacturers most of the A-series chips in iPhones and iPads. In fact, TSM is the only manufacturer of AAPL’s A14 series processors used in the iPhone 12 and the latest iPad.
TSM’s revenue of $12.1 billion in the third quarter that ended September 2020 surpassed market estimate by 1.8%. The company’s smartphone revenue rose 12% sequentially to $5.6 billion on the back of strong demand driven by 5G smartphones, HPC (high-performance computing), and IoT (Internet of Things) applications. TSM expects its revenue for the fourth quarter ending in December 2020 to see sequential growth amid strong demand for 5-nanometer technology and 5G smartphone launches.
The street expects 12.7% growth in TSM’s revenue to $11.7 billion. Meanwhile, EPS is estimated to grow at 7.9% next year.
On a year-to-date basis, TSM surged 49.2% to close at $86.70 yesterday. In the past six months, the stock rallied 62%.
How does TSM stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
You can’t ask for better. The stock is also ranked #1 out of 86 stocks in the Semiconductor & Wireless Chip industry.
Broadcom Inc. (AVGO)
AVGO supplies semiconductor components to a wide array of industries including networking hardware, data center, broadband, wireless, storage solutions, and industrial markets. It is a sustainable 5G network solution provider. The company is one of the largest chip providers for iPhones. In 2019, it garnered about 20% of its income from AAPL, while the revenue share in 2018 was 25%. Radio-frequency front end module, Bluetooth, and Wi-Fi are some of the components that it supplies to AAPL for the iPhones.
On January 23rd, AVGO announced that it would…
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