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Why Apple's WWDC20 Is A Catalyst For These 9 Semiconductor Stocks

Shanthi Rexaline

Apple Inc. (NASDAQ: AAPL) kickstarted its virtual  Worldwide Developer's Conference Monday, and an analyst at BofA Securities sifted through the announcements to analyze their ramifications for the semiconductor sector.

Intel Logged Out of Macs: Apple's decision to replace Intel Corporation (NASDAQ: INTC)-based CPUs with custom ARM processors is a modest headwind to the chip giant, as Mac processors account for roughly 3.5% of Intel's sales, analyst Vivek Arya said in a note.

The analyst noted that support for Intel-based Macs will last for the foreseeable future.

Apple's plan to switch is a long-term negative but it is unlikely to be replicated in the remaining 90% of the PC market, given ARM-based PCs' struggle for establishing compatibility with the PC ecosystem dominated by x86-based applications, he said. 

Arya also feels adoption of new ARM-based PCs in late calendar year 2020 and the first-half of 2021 could be slow, as users wait for Apple to fix unforeseen compatibility issues.

Intel's transition to a data-centric focused firm, with data center now accounting for over 50% of total sales, can help it offset any long-term PC headwinds, he said. 

"We also expect Apple to continue to be a strong customer for INTC-based x86 servers (higher ASP/margins)." 

New Use Cases For Apple's U1 Chips: The U1 chip, incorporating ultra wideband technology, which allows transmission of data at low power, is likely to make an entry into the auto applications in a big way, Arya said.

The analyst also sees other long-term use cases such as:

  • car acting as a key for entry to secure locations
  • precise navigation of indoor parking lots
  • improved in-car safety
  • remote-controlled parking

The analyst said he expects UWB to enhance industrial applications such as asset tracking and health care and consumer applications such as mobile payments, connected home and AR/VR. 

The development of the UWB market will benefit NXP Semiconductors NV (NASDAQ: NXPI) and Qorvo Inc (NASDAQ: QRVO), Arya said. 

Other Beneficiaries

EDA Players: Arya expects electronic design automation players such as Synopsys, Inc. (NASDAQ: SNPS) and Cadence Design Systems Inc (NASDAQ: CDNS) to benefit as EDA tools become more critical to systems companies.

An Intel Rival: Advanced Micro Devices, Inc. (NASDAQ: AMD) is an indirect beneficiary, as the market perceives Apple's switch to internal chips for Macs as signaling dissatisfaction with Intel's technological progression, the analyst said. 

Handset Vendors: Broadcom Inc (NASDAQ: AVGO), Cirrus Logic, Inc. (NASDAQ: CRUS), QUALCOMM, Inc. (NASDAQ: QCOM), Qorvo and Skyworks Solutions Inc (NASDAQ: SWKS) are poised to benefit from device upgrades as new operating systems require increased DRAM/NAND capacity.

The PHLX Semiconductor Sector (NASDAQ: SOX) ended Tuesday's session up 0.22% at $1,987.73. 

Related Links:

Why KeyBanc Is Betting On Intel's Comeback

Morgan Stanley's Semiconductor Picks: Qualcomm, Qorvo, Lam Research Over Intel, Nvidia

Apple CEO Tim Cook at WWDC20. Courtesy photo. 

Latest Ratings for INTC

Date Firm Action From To
Jun 2020 Morgan Stanley Downgrades Overweight Equal-Weight
Jun 2020 KeyBanc Upgrades Sector Weight Overweight
Apr 2020 SunTrust Robinson Humphrey Maintains Hold

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