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BRAZIL – 2021/12/06: In this photo illustration the Qorvo logo seen displayed on a smartphone and on … [+]
SOPA Images/LightRocket via Getty Images
Our Theme of Apple Component Supplier Stocks, which includes a diverse set of companies that supply components for Apple’s devices, has declined by about 28% year-to-date, underperforming both the S&P 500 (down 23%), and Apple stock (down about 17%). While technology names, in general, have taken a hit due to rising interest rates and concerns about the broader economy, Apple supplier stocks fell recently amid reports that demand for the latest iPhone 14 handsets, which were launched earlier this month, remains weaker than expected. Per Bloomberg, Apple has asked its suppliers to hold off on plans to raise production of the iPhone 14 series by as many as 6 million units over the second half of the year. According to the report, Apple now aims to produce about 90 million handsets for the period, roughly flat versus last year. Moreover, Apple has essentially kept prices for its new iPhones flat over the last few years, while investors were actually expecting a price hike this time around. This could translate into some pricing pressure for component vendors as Apple tries to protect its margins.
While these are negative developments for Apple’s suppliers, there could be some trends that could help the stocks in our theme as well. Demand for the pricier top-end iPhone 14 Pro models – which saw more substantial upgrades – is apparently stronger than for the standard versions and this could help partially offset weaker volume growth. Separately, the broader industry transition to 5G wireless networks is also likely to help Apple’s suppliers, who are largely focused on wireless chipsets and related semiconductors. For example, Android device vendors have been looking to equip more of their mid-range and lower-end models with 5G capabilities.
Within our theme, Qorvo, a semiconductor vendor best known for supplying radio frequency components, ultra-wideband, and WiFi solutions for consumer electronics products, has been the weakest performer, with its stock falling by about 47% year-to-date. On the other side, Texas Instruments
stock has been a relative outperformer in our theme, declining by just about 14% year-to-date.
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