Apple Supplier Skyworks Drops 24% as iPhone Business Shrinks
Skyworks Solutions (SWKS), a key supplier to Apple (AAPL), witnessed a sharp decline in its stock price by over 23% on Thursday. This plunge was driven by the company's revelation that it is losing market share in the iPhone business to a competitor, believed to be Broadcom (AVGO).
Skyworks provides chips essential for wireless communication in Apple devices. In the December quarter, Apple accounted for approximately 72% of the company's $1 billion revenue, with 85% of that revenue coming from iPhone components.
Despite exceeding Wall Street analysts' expectations in its quarterly results on Wednesday, Skyworks CFO Kris Sennesael disclosed that Apple has begun dual-sourcing chips that were previously procured exclusively from Skyworks. Apple's shift to diversifying suppliers for the iPhone 17's radio frequency components is estimated to reduce demand for Skyworks' products by 20-25%.
Analysts from Stifel, Raymond James, and TD Cowen speculate that Broadcom is the second supplier to Apple. "Despite our comprehensive product offerings, we did not achieve the outcome we anticipated," Sennesael stated.
Skyworks had previously lost market share to Qualcomm (QCOM) in the Apple business last year. TD Cowen analyst Krish Sankar estimates Apple's recent move could reduce Skyworks' revenue by $600 million in 2025, a significant impact considering the company's 2024 revenue of $4.2 billion.
Analysts remain cautious, with Stifel's Ruben Roy downgrading Skyworks to a "Hold." Citi analyst Atif Malik predicts that Apple switching to its own 5G modems would benefit Skyworks, but maintains a "Sell" rating.
Further uncertainty arose on Wednesday with the announcement of a CEO transition at Skyworks. Former Intel executive Philip Brace will replace Liam Griffin as CEO. Analysts question the timing of this change given the near-term challenges faced by the company.