Cirrus Logic (NASDAQ:CRUS), Skyworks Solutions (NASDAQ:SWKS) and Qorvo (NASDAQ:QRVO) are among the companies most likely to be impacted from lower Apple (NASDAQ:AAPL) iPhone sales, Bank of America said on Thursday.
The investment firm, which downgraded the tech giant on worries over weaker consumer demand, cut its estimates for iPhone units between 5% and 10% for the next three quarters.
As such, that could hit anywhere between 10% and 15% of annual semiconductor demand and impact wide swaths of the chip market, as well as foundries like Taiwan Semiconductor (TSM) and GlobalFoundries (GFS), and semiconductor capital equipment and testing tools.
"Semiconductor demand is influenced heavily by discretionary consumer spending across PC, phone, autos, gaming, so sluggish iPhone demand could be symptomatic of further weakness in other end-markets," analyst Wamsi Mohan wrote in a note to clients.
The analyst added that the risk to Apple (AAPL) suppliers could be as low as 1% to 5%, but the tech giant's chip suppliers are driven by more content than iPhone units, so it could be assumed that the area is in a "perpetual" state of maturity and there is no growth.
Bank of America noted that Cirrus Logic (CRUS) has 80% of its exposure to Apple (AAPL), while Skyworks (SWKS) is estimated to be between 55% and 60% and Qorvo (QRVO) between 30% and 35%. This puts them in the "high risk" category, potentially losing between 3% and 5% of sales.
Companies with "moderate risk," or those only likely to see 1% to 2% downside in revenue, include Qualcomm (QCOM), and Broadcom (AVGO), as both generate between 20% and 25% of revenue from Apple. Sensor companies such as Coherent (COHR) and Lumentum Holdings (LITE) could see an impact of between 5% and 15% to revenue.
Those in the "low risk" bucket, or less than 1% of sales, include diversified semiconductor vendors such as Texas Instruments (TXN), Analog Devices (ADI) and NXP Semiconductor (NXPI), as they are believed to have less than 10% of exposure to Apple (AAPL).
Bank of America conceded that the valuations for most Apple (AAPL) suppliers already reflect some element of concern around demand and those who have higher exposure trade between 8 and 14 times earnings, or 20% to 40% below historical multiples. However, it's likely that the smartphone space stays in a "tough neighborhood," as the firm noted the sector is "on the other side of the 5G adoption curve."
Cupertino, California-based Apple (AAPL) confirmed earlier this week that it would produce some iPhone 14 units in India.