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Smartphone Weakness to Impact Skyworks’ and Qorvo’s Earnings

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RF suppliers

The semiconductor industry is at the start of the 5G (fifth generation) revolution. The 5G ecosystem will provide the connectivity needed to adopt AI (artificial intelligence) for real-time applications like driving, healthcare, and city management.

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Almost all analog, mixed-signal, modem, RF (radio frequency), and other connectivity chip suppliers are collaborating to develop solutions that meet 5G requirements. Among them are Apple’s (AAPL) RF chip suppliers Skyworks (SWKS) and Qorvo (QRVO). The two suppliers are set to report their steepest revenue declines in many years in the first quarter, as their key customer Apple has been hit by declining iPhone sales. Morgan Stanley analyst Craig Hettenbach claims that Skyworks and Qorvo earn 45% and 35% of their revenue from Apple, respectively.

Skyworks’ and Qorvo’s guidance

Skyworks expects fiscal 2019 second-quarter revenue to fall 11.3% YoY to $810 million, its sharpest decline in more than five years. Qorvo expects fiscal 2019 fourth-quarter revenue to rise by 0.8% to $670 million. On the other hand, Apple’s revenue is expected to fall 6% YoY. Skyworks’ revenue is expected to fall faster than that of Apple because of increasing RF content per iPhone.

For calendar 2019, analysts expect Skyworks’ revenue to fall 4.4% YoY to $3.6 billion and Qorvo’s revenue to rise 1.7% YoY to $3.1 billion. The weak revenue guidance comes as weak smartphone sales in the first half will likely mitigate the strong growth in the second half.

Skyworks, Qorvo, and 5G

The demand weakness in the smartphone market will impact Skyworks’ and Qorvo’s earnings in calendar 2019, but growth will pick up in 2020 as 5G roll-out gathers momentum. Skyworks has collaborated with Intel (INTC) and MediaTek separately to develop 5G solutions. On the other hand, Qorvo is acquiring programmable analog power solutions supplier Active-Semi International to expand its infrastructure and defense products offerings.

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