The launch of an Apple iPhone always garners a lot of attention. After all, the company has sold over 200 million of the devices each year for the past three calendar years.
With the latest generation of the smartphone supporting a number of new artificial intelligence (AI) features, expectations for iPhone 16 sales are high. J.P. Morgan, for example, is expecting iPhone sales to rise more than 12% to 250 million units for Apple's fiscal 2025.
While this should help Apple, some of its suppliers could benefit even more.
Arm Holdings
One of the big winners from strong iPhone 16 sales will likely be Arm Holdings(NASDAQ: ARM). With its technology in 99% of smartphones, Arm benefits from any increase in global smartphone sales.
The iPhone 16's new A18 chip is based on Arm's newest V9 architecture. The iPhone 15 launched last year, meanwhile, was powered by its A16 chips and A17 chips for its Pro models, which were both based on Arm's older V8 architecture. This is important because Arm has said that its V9 architecture carries almost double the royalty rate compared to its V8 architecture.
As such, Arm is set to benefit from not only increased iPhone unit sales, but also from much higher royalties. This makes it one of the biggest iPhone 16 winners.
Broadcom
While investor attention around Broadcom(NASDAQ: AVGO) has mostly been around its data center networking equipment and customized AI ASIC (application-specific integrated circuit) chips, the company is also set to benefit from the iPhone 16. This is good news for Broadcom as much of its business outside of AI and its recent VMWare acquisition have struggled.
However, the entire iPhone 16 lineup will incorporate the new Wi-Fi 7 standard, which will be powered by Broadcom's integrated RF modules. Broadcom also provides other wireless components to Apple, so any increase in iPhone sales should benefit Broadcom's sales.
Broadcom will likely remain more of an AI infrastructure story than a smartphone story, but an improvement in some of its other struggling businesses could go a long way in helping its stock as well. Its wireless revenue grew only 1% last quarter to $1.7 billion and is expected to be flat year over year in the current quarter, but the iPhone 16 looks poised to power this part of the business soon.
Image source: Getty Images.
Qualcomm
Apple and Qualcomm(NASDAQ: QCOM) have not always had the best relationship, with the iPhone maker deciding at one point back in 2017 to stop paying it royalties. Meanwhile, there has been speculation of Apple looking to replace some of the Qualcomm's G5 modems next year. The two companies signed an extension to use its modems until 2027, and there have been reports of Apple struggling to produce its own 5G modems, so at this point that is still just speculation.
For now, though, Apple is using Qualcomm's latest Snapdragon X75 modem in its iPhone 16 Pro models and reportedly its X70 modem in its regular models. Tech blogs have already praised the improved download speeds that stem from the new modem. Analysts also believe that the company took some share in providing RF content to the iPhone 16 at the expense of Skyworks Solutions.
It should also be worth noting that while Qualcomm is most associated with smartphones, the company has been making nice strides in other areas, including autos, IoT (Internet of Things), XR (extended reality) glasses, and in the PC (personal computer) market with the launch of Copilot+ PCs. The company is also collaborating with Saudi Arabia's national oil company Aramco on connectivity, AI, and advanced computing solutions for industrial and enterprise use cases.
Cirrus Logic
Perhaps no company is more tied to Apple than Cirrus Logic(NASDAQ: CRUS), which derived 87% of its revenue from its largest customer last fiscal year. The company provides a number of components to the iPhone in the areas of audio, haptics (sense of touch), camera, and battery.
Given its ties to Apple and the iPhone, the more devices Apple sells, the better it is for Cirrus. Meanwhile, analysts believe the company will benefit from a number of new iPhone 16 features, including the new camera control buttons as well as the tetraprism lens now incorporated in its Pro model after only being available on the Pro Max model last year.
While an investment in Cirrus carries a risk given its huge concentration in one single customer, the company has been able to continually get new components into the iPhone, proving itself to be one of Apple's most valuable suppliers.
Taiwan Semiconductor Manufacturing
Apple's semiconductor and component suppliers aren't the only ones set to benefit from potential increased iPhone sales. Taiwan Semiconductor Manufacturing(NYSE: TSM), or TSMC for short, has already been benefiting from the huge buildout of chips being used in the AI infrastructure, but its largest customer remains Apple.
Apple used TSMC's latest 3-nanometer technology to produce chips for its iPhone 15 Pro models, but this year it will use the technology in the production of the chips for all of its iPhone 16 models. While the new technology is initially a negative for margins, TSMC benefits as it scales the process. Meanwhile, the company is already looking to add 2nm production capacity next year.
As TSMC is able to shrink the size of chips, it can help boost the power of the chips while also lowering their power consumption. It can also fit more chips on a wafer, helping increase its capacity. The company remains one of the best-positioned in the chip sector given AI demand, and it should get a further boost from increased iPhone sales as well.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, Cirrus Logic, and Skyworks Solutions. The Motley Fool has a disclosure policy.
