Supplier Fallout From Apple's A10 Switch

In a new report, SemiWatch Advisors analyst Robert Marie discusses the mounting evidence that Taiwan Semiconductor Mfg. Co. Ltd. (ADR) TSM has won all of Apple Inc. AAPL’s A10 business for fall 2016. On the surface, this revelation may seem like bad news for SAMSUNG ELECTRONIC SSNLF, but Marie sees a possible silver lining for Samsung in QUALCOMM, Inc. QCOM.

Marie cites an article published recently in the Korean Electronic Times News that Samsung has lost all of Apple’s A10 business. Apple’s A9 processor business was shared by both TSMC and Samsung. The Korean article follows months of rumors that TSMC wiuld be Apple’s sole iPhone 7 A10 supplier.

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Marie acknowledges that it’s never great news when a company like Samsung loses its largest customer in its only strong business unit, but he believes the loss could open the door for an even better opportunity.

“Given that Apple beats the heck out of its suppliers perhaps it could be a blessing in disguise IF Samsung can replace Apple’s business with other business such as Qualcomm (which appears to be the case),” he explains.

For now, Marie doesn’t see much upside for semiconductor stocks, even in light of the large market sell-off to start 2016. He points out that the industry is particularly sensitive to consumer spending trends and confidence.

Disclosure: the author holds no position in the stocks mentioned.