Qorvo: Reports of Apple’s Imminent Modem Launch Raise Concerns Around Qorvo’s RF Content
We maintain our fair value estimates for wireless chipmakers under our coverage, given a Bloomberg report that Apple’s long-rumored development of an internal baseband chip, or modem, is imminent. Our fair value estimate for narrow-moat Qualcomm remains at $180, narrow-moat Skyworks Solutions at $95, and no-moat Qorvo at $85.
Apple’s modem plans are generally unsurprising and baked into our estimates for Qualcomm. Apple will bring a lower-end modem into the iPhone SE in 2025 before striving to bring a modem on par with Qualcomm’s capabilities into the iPhone 18 series introduced in late 2026 This is in line with Qualcomm’s expectations of having only 20% share with Apple with the iPhone 18 series expected to be sold during its fiscal 2027.
We’re not surprised that Apple is also working on some radio frequency, or RF, content in future iPhones, also gaining share away from Qualcomm. The biggest surprise to us is that the report also mentioned some share loss for Qorvo, and we observed Qorvo’s stock fall 5% upon the news.
The report describes an Apple RF front end, or RFFE, system, and our best guess is that this RFFE will mostly pertain to the transceiver, which is often provided by the modem supplier (currently Qualcomm). The mention of Qorvo suggests, however, that perhaps some antenna tuning content might be at risk. Still, we suspect that Qorvo will retain some content in iPhones in the years ahead, but perhaps any potential upside might be capped off.
The report mentions that Apple’s RF relationships with Skyworks and Broadcom remain intact. This statement is consistent with our view for Skyworks and the RF filter space in general, as we struggle to see the advantages of Apple bringing this content in-house.
All three stocks appear undervalued to us on Dec. 6, and although Qorvo is now the cheapest of the three, we’re hesitant to proclaim the selloff as overdone, since it remains unclear as to how much share loss the company may face in the years ahead.
No comments:
Post a Comment