It’s Thursday and semiconductor stocks are in turmoil. As of 1:45 PM ET, shares of Advanced micro-devices (NASDAQ:AMD) have already lost 5.3%, Qualcomm (NASDAQ:QCOM) is down 5.8%, and Skyworks Solutions (NASDAQ: SWKS) is particularly hard on the chin – down 7.5%.
I accuse Apple (NASDAQ:AAPL) for all of the above.
Investors in chips stocks today only have a choice between bad short-term news and possibly worse long-term news, I’m afraid. In the short term, the bad news is this:
iPhone 13 smartphones are in short supply this holiday season, according to a report from an analyst at KeyBanc Capital Markets, passed on by The Fly. In fact, the demand for the devices has outstripped supply since Thanksgiving. And despite reports that things got better earlier this month as the delta-COVID-19 pandemic turned into an ommicron COVID-19 pandemic, KeyBanc analyst John Vinh now notes that “the majority of stores” he’s surveyed, reports that they have no iPhone 13 Pro or Max phones in stock.
Admittedly, he concludes that this news is ultimately only neutral for companies like AMD, Qualcomm, and Skyworks that supply chips for Apple devices — but neutral isn’t good. While suppliers can presumably be able to charge Apple premium prices in a time of limited chip supply, logically lower iPhone sales still means fewer chips are sold to build those Apple products.
At the same time, keep in mind that at some point Apple will get angry about its inability to get all the chips it wants. This, coupled with the company’s already affirmed belief that it can design better chips in-house than it can buy from third-party chipmakers, creates a longer-term risk that semiconductor companies may lose Apple (and ultimately companies other than Apple) as trusted customers.
In that regard, we note that Bloomberg reports today that Apple has begun hiring engineers skilled in building wireless communications chips, with the aim of “eventually” replacing vendors. broadcom and Skyworks with wireless chips that Apple designs in-house.
Now you might not think that bad news for Skyworks would necessarily affect companies like AMD and Qualcomm — and today Skyworks is actually doing worse than the others. One reason: Apple’s decision to design its own wireless chips seems to be part of the same story that saw Apple disappear Intel as the favorite chip supplier last year.
Increasingly, it seems that Apple — and eventually other companies — may decide it’s better to design their chips in-house than buy off the shelf. In the long run, that’s a threat to all dedicated semiconductor companies.
And that’s why pretty much everyone dealing with the chip industry today is going under.
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