Apple iPhone Super Cycle Update!

In 2014 Apple released the iPhone 6 which included the first SoC built on a TSMC (20nm) process. This phone started what many call a “Super Cycle” of people upgrading. According to Apple, they now have more than 1 billion activated devices so this super cycle could be seriously super, absolutely.

The iPhone 6 was not only significantly faster than the Samsung based iPhone 5/5s, the form factor was also different. I still have an iPhone 5s and 6 in my desk for comparison. I now use a 6s which is the same form factor as the 6 and the follow-on iPhone 7. This year the iPhone 8 is rumored to have a much different form factor thus the call for a super cycle. I for one will buy an iPhone 8 as it is launched conveniently near my birthday.

The chatter amongst the Apple semiconductor supply chain continues to point to an Apple iPhone Super Cycle starting in Q3 2017 and continuing in the first half of 2018. Chip suppliers are working around the clock to satisfy Apple’s demand and the list of suppliers looks to mirror last year’s iPhone 7:

Cirrus Logic (CRUS): AAPL represents ~75% of sales
Skyworks Solutions (SWKS): AAPL represents ~40% of sales
Qorvo, Inc. (QRVO) AAPL represents ~35% of sales
Broadcom Ltd. (AVGO): AAPL represents 20% of sales
Qualcomm (QCOM): AAPL is 15-20% of sales
Intel (INTC): Took 50%+ of modem business (from QCOM)
WDC/SanDisk (WDC): AAPL represented 17% of SanDisk sales
Texas Instruments (TXN): Apple is ~10% of sales
Analog Devices (ADI): Apple accounts for ~5% of ADI sales
Maxim Integrated Products (MXIM): AAPL is <5% of sales
NXP Semiconductors NV (NXPI): AAPL is <5% of sales
TSMC (TSM): APPL is >17% of sales

The BIG question is the modem supplier. Last year Apple split the modem business between Intel and QCOM. This year the consensus is that Intel will get the majority of the iPhone modem business. Last year QCOM pushed out some questionable benchmarks indicating that their modem was faster than Intel’s when in fact, as far as the user was concerned, there was no speed difference. Apple, Intel, and the carriers took offense to this of course. QCOM and Apple also have an epic IP licensing battle raging so current wisdom is that Apple will continue to minimize QCOM’s chip count.

On the SoC side, the A10X in the latest iPad is benchmarking above and beyond the A10 that is in the iPhone 7. The A10 is built using the TSMC 16nm process and the A10X is TSMC 10nm. Apple claims that the A10X is 30% faster in CPU performance and 40% faster in GPU. The iPhone 8 will have also a 10nm SoC (A11) which is expected to be a lower power version of the A10X.

Apple has also already taped-out a TSMC 7nm version of the SoC (A12) for the 2018 iPhone and iPads. The process performance difference between 10nm and 7nm alone is expected to be 15-20% so expect even faster iPhones and iPads next year. Apple may even slip in a custom AI core for even more speed.

Apple is aggressively pushing performance to not just out benchmark the competition, but to also usher in a new era of performance hungry apps based on AI, AR, and VR. SoC processing power will split the difference between the haves and have nots in next generation smartphones and Apple is again at the forefront. One example is cybersecurity which will be heavily AI dependent. Another is AR games to follow-up the Pokemon Go phenom (Niantic made more than $1B on Pokemon Go in the first year alone and is still going strong).

Bottom line:In my opinion Apple and the semiconductor supply chain are in for a windfall for the next 3 quarters. Take a snapshot of the stocks listed above and let’s see how they do.