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Apple (AAPL) Supplier Murata Expects Spike in 5G Phone Demand

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Zacks Equity Research
·4 min read
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Apple’s AAPL supplier and the world’s biggest maker of smartphone ceramic capacitors, Murata Manufacturing expects demand for 5G handsets to rise sharply to reach half a billion units in the coming fiscal year according to Bloomberg.

As new rules put in place by the Commerce Department prevent foundries from shipping chips made with U.S. technology to Huawei, companies like Apple, Samsung, Oppo, Xiaomi and Vivo are looking to obtain enough components, allowing them to replace some of the phone production that Huawei will lose this year due to U.S. sanctions.

Although Apple is late in bringing 5G to its flagship iPhone devices, improved availability of 5G network in the United States from all major carriers and rapid 5G deployment in China can be a game changer for the company in 2021. Notably, shares of Apple have returned 75.7% over the past year, outperforming the S&P 500’s rise of 17.1%.

Markedly, Huawei Technologies expects 5G users to account for 20% of total mobile users in China and South Korea by the end of June 2021.

One Year Performance

Growth in 5G Smartphone Market Boosts Apple’s Prospects

IDC expects strong demand for 5G-supported devices to help global smartphone shipments to grow 9% in 2021 after an estimated 10% decline in 2020. IDC expects 5G smartphones to grab 50% of the global markets by 2023. This definitely bodes well for Apple and other 5G smartphone device manufacturers.

The iPhone's position in the 5G market is anticipated to grow 35% in 2021 from 31% market share in 2020, further cementing its position as the dominant 5G smartphone supplier with models like the iPhone 12 and iPhone 12 Pro, per a recent TrendForce report.

Apple is reportedly planning to increase production of iPhones in the first half of 2021 on strong demand for its 5G-enabled iPhone 12 as well as older iPhone 11 and iPhone SE. Per a Nikkei Asia report, the company expects to ship 95-96 million iPhones, indicating an increase of roughly 30% year over year.

Moreover, this Zacks Rank #3 (Hold) company is now anticipated to build 230 million iPhones for 2021. Per IDC data, Apple has shipped roughly 116 million iPhones in the first nine months of 2020. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Suppliers Poised to Benefit From Rising Demand for 5G iPhones

Apple’s 2021 shipment projection is encouraging for suppliers as well as investors despite competition in the 5G-enabled smartphone space currently dominated by the likes of Samsung, Huawei, Vivo, Xiaomi and Oppo.

Notable Apple supplier stocks, including Qorvo QRVO, Skyworks SWKS, Taiwan Semiconductor Manufacturing TSM, Synaptics as well as Broadcom are poised to benefit from the increase in production ramp-up of Apple’s iPhones.

Markedly, Qorvo generated 33% of its fiscal 2020 revenues from Apple. Solid uptake of Bulk Acoustic Wave (BAW) filters, with the reopening of economies, is expected to boost top-line growth for this provider of radio frequency (RF) chips. Moreover, expanding portfolio of 5G base solutions amid accelerated deployment of 5G bodes well.

Meanwhile, Broadcom’s strength in the RF chips portfolio positions it well to capitalize on increased iPhone demand. Acceleration in 5G deployment, significant production ramp-up and increase in RF content are favoring this company’s prospects for the near term.

Moreover, Taiwan Semiconductor — the world's largest dedicated integrated circuit foundry — is well poised to bank on the 5G boom backed by strength in robust 7-nanometer (nm) and 5-nm production processes. Apple utilizes Taiwan Semiconductor’s advanced chips, featuring low power consumption, high performance and compact size.

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