Samsung Galaxy S 4: 3 Chip Stocks That Will Benefit
Samsung unveiled the Galaxy S 4 to much fanfare, hosting the event at Radio City Music Hall, putting on a song and dance (literally), to a crowd of well over 1,000 people. The South Korean technology heavyweight is increasingly putting the heat on Apple (AAPL) and other competitors. While Samsung is the primary beneficiary, chip stocks such as Qualcomm (QCOM), Broadcom (BRCM), and Skyworks Solutions (SWKS) may benefit as well.
The new phone, which is set to be available on 327 carriers in 155 countries by the end of April, offers a 5-inch screen, and is Samsung's thinnest phone yet, at just 7.9 millimeters. It weighs 130 grams, slightly less than the 133 grams the S 3 weighs.
A reported breakdown by GSMInsider shows the majority of the chips inside the Galaxy S 4, and it's no surprise that Qualcomm is inside. Qualcomm is the leading mobile chip manufacturer, and seemingly has chips in every mobile phone and tablet, including the iPhone, and now, the S 4. The Qualcomm chip will help allow the S 4 to run its operating system, Android 4.2.2, codenamed Jelly Bean, run apps, surf the web, and everything else a smartphone is accustomed to doing.
According to the breakdown, the Qualcomm ESC6270 chip is the phone, which provides GSM connectivity. William Blair analyst Anil Doradla is convinced that Qualcomm stands to benefit from the Samsung Galaxy S 4. "Qualcomm’s leadership position leads us to believe that it will be a key beneficiary as a supplier," Doradla wrote in his note. He noted that Qualcomm should benefit from both baseband technology and a stand-alone application processor. That should lead to upside surprises over the next few quarters. Qualcomm shares
Raymond James analyst Tavis McCourt notes that the Samsung Galaxy S4 may indeed have a Qualcomm Snapdragon 600 as the primary processor for the US and other countries. At the event, Samsung revealed the phone would run on a 1.9-GHz quad-core processor or a 1.6-GHz octa-core processor, depending on the country, but did not say who the manufacturer of the chip is.
Analysts polled by Thomson Reuters expect Qualcomm to earn $4.50 per share on $24.03 billion in revenue for the fiscal year. Shares of Qualcomm have gained 5.04% since the start of the year, far behind the 7.6% gain in the Nasdaq.
McCourt assumes that 60 million to 70 million Samsung Galaxy S4 units will be sold this year, and that should benefit Broadcom, which had chipsets in the Galaxy S 3.
Raymond James analyst J. Steven Smigie noted that in the Galaxy S 3, Broadcom's BCM4334 single-chip dual-band combo was inside, which supported wireless connectivity, supporting 802.11n, as well as Bluetooth and HS & FM receiver. The breakdown by GSMInsider shows another Broadcom chip inside the phone, the BCM4752 chip. Broadcom is rated Market Perform at Raymond James.
Analysts polled by Thomson Reuters expect Broadcom to earn $2.77 per share on $8.44 billion in revenue for the fiscal year. Shares of Broadcom have risen 4.32% year-to-date, far behind the 7.6% gain seen in the tech heavy Nasdaq.
Skyworks Solutions is another chip company that should benefit from the Galaxy S 4, as it enters the market come this spring.
Though shares sold off following the announcement of the phone, the Woburn, MA.-based semiconductor rose in anticipation off the announcement, which bodes well for its prospects. Skyworks has chipsets in the iPhone, and now the Galaxy S 4, and the increase in 3G and 4G smartphone demand will allow Skyworks to deliver strong financial results, says JMP Securities analyst Alex Gauna, who raised his price target to $40 from $34. "We expect Skyworks to hold or improve its overall cellular market share in 2013, and believe the company is in a particularly good position to gain ground at Samsung through design wins within all of the newly unveiled Galaxy SIV platforms, among others," Guana wrote in his note.
2013 is poised to be a big year for Skyworks, which is seeing an improved financial outlook, thanks to continued enhancements to smartphones, including imaging, display, and power management. Guana noted that the company is more confident now about its ability to achieve non-GAAP operating margins of at least 30% over the next few quarters, which should drive higher earnings over time.
Full year earnings estimates may prove to be light if the Galaxy S 4 sells as well as everyone thinks it will. Analysts polled by Thomson Reuters expect Skyworks to earn $2.14 per share on $1.79 billion in revenue.
Shares of Skyworks Solutions have risen 7.1% year-to-date, just lagging the 7.6% gain in the Nasdaq.