Apple Inc. 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 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 NXPI and Qorvo Inc QRVO, Arya said.
Other Beneficiaries
EDA Players: Arya expects electronic design automation players such as Synopsys, Inc. SNPS and Cadence Design Systems Inc CDNS to benefit as EDA tools become more critical to systems companies.
An Intel Rival: Advanced Micro Devices, Inc. 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 AVGO, Cirrus Logic, Inc. CRUS, QUALCOMM, Inc. QCOM, Qorvo and Skyworks Solutions Inc SWKS are poised to benefit from device upgrades as new operating systems require increased DRAM/NAND capacity.
The PHLX Semiconductor Sector 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.
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