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Skyworks Solutions (SWKS) has stepped on the gas in the second half of 2013. After being weighed down by negative news surrounding Apple's (AAPL) previous generation iPhone, Skyworks is making a comeback. The company retained its position inside Apple's new iPhone 5s and 5c, and gave investors more reasons to cheer by posting strong fourth-quarter results recently.

Skyworks also issued a decent guidance as it expects strong sales of analog chips that allow machines to connect to the internet, driven by clients such as General Electric (GE). In addition, management is anticipating robust demand from China as customers in the region upgrade to budget smartphones from 2G devices. In short, Skyworks is poised to benefit from different quarters. That's why, investors should hold on to it even though it's trading close to its 52-week high.

Driven by Apple

Apple contractor Foxconn had accounted for 36% of Skyworks' revenue in fiscal 2013, and this is a huge positive for a few simple reasons.

First, according to Canaccord Genuity analyst Michael Walkley, Skyworks and RF Micro Devices have probably won the main antenna switch spot in the latest iPhones from Peregrine Semiconductor. Next, Apple's new iPhones are seeing robust demand, which is probably the reason why Cupertino is tapping new manufacturing partners so that it can ramp up production.

According to AllThingsD, Apple has enlisted the services of Taiwanese contract manufacturer Wistron to boost its production capacity for the holiday period and the New Year. Same goes for the new iPad mini, for which Apple has turned to Compal Communications.

Apple has reportedly raised orders for the iPhone 5s and expects strong sales of the iPads in the holiday quarter. Now, since Skyworks has also been a long-time supplier of chips for Apple's tablets, it should continue to benefit from a bump in sales of iDevices.

The iPhone 5s has been in great demand and helped Apple gain market share in the U.S. in the quarter ended in September. In addition, Apple had a strong order backlog for the iPhone 5s when it reported earnings in late October. Now, demand should ideally increase further in the holiday quarter, and the launch of the iPhone in 35 more countries should help in this regard.

Chinese growth

According to Skyworks' management, 80% of cell phone users in China are currently on a 2G phone. The company expects such customers to upgrade to the latest technology going forward. Now, Skyworks has been in partnerships with the likes of Spreadtrum and MediaTek in the past. These chip makers are in a great position in Chinese smartphones.

For example, MediaTek commands almost half of the Chinese smartphone business and recently unveiled an eight-core mobile processor. MediaTek is quite optimistic about the Chinese smartphone market. Management expects smartphone shipments to hit 450 million this year and grow to 500 million-600 million units next year. Hence, Skyworks should benefit from Chinese smartphone growth on the back of its partnerships with key chip makers, along with smartphone makers such as Lenovo.

Benefiting from General Electric

According to Cisco, there will be 50 billion connected devices by the end of the decade. Skyworks believes that it has the right products to benefit from this growth in connectivity. Skyworks is already making some moves to tap this growth. It recorded design wins in the healthcare industry in the previous quarter, and counts important players such as GE Medical, Boston Scientific, and Medtronic as partners.

The partnership with General Electric, in particular, could turn out to be quite fruitful. As Skyworks CEO David Aldrich pointed out, General Electric recently stated that it will integrate machine-to-machine communications across its entire industrial portfolio. This will include jet engines, locomotives, turbines, and medical devices, and represent millions of GE products.

General Electric is expanding the Internet of Things to industrial applications, calling it the "Industrial Internet." It recently launched 14 new products as a part of its Industrial Internet initiative, as it looks to make machines smarter. GE expects this initiative to boost GDP by $10 trillion-$15 trillion over the next couple of decades. Hence, Skyworks could stand to gain substantially from this initiative of GE. The healthcare industry in the U.S. was 17.5% of GDP in 2010 and analysts estimate that as much as 43% expenditure went towards unnecessary procedures and administrative wastes, which could have been saved.

GE is looking to benefit from this as it intends to use Industrial Internet to reduce this waste. For instance, St. Luke's Medical Center is employing GE software to manage and analyze patient and equipment data. This has resulted in a 51 minute reduction in bed turnaround time and reduced patient wait times.

Spending on Industrial Internet is expected to exceed $500 billion by 2020. This is certainly a big opportunity and GE is looking to profit from it. Investors have an option to tap this huge opportunity in a cheap way. GE has a P/E of 20 while the forward P/E is an even more impressive 14.7. Analysts expect GE's earnings to grow at an annual rate of 10% for the next five years. However, GE might exceed this target as it is leading the Industrial Internet revolution and along with it, Skyworks can benefit as well.

Conclusion

At a forward P/E of around 9, Skyworks Solutions is very cheap. The company has zero debt and is looking well-placed to profit from growth in connectivity around the globe. So, despite having gained over 30% this year and trading near 52-week highs, Skyworks Solutions still looks like a good buy.

Source: 3 Convincing Reasons Why This Stock Is A Great Buy