Why You Should Believe This Apple iPhone Rumor

One of Apple’s key wireless chip suppliers is Broadcom (NASDAQ:AVGO). While Broadcom doesn’t supply Apple with cellular modem chips, it does …

One of the ways that Apple (NASDAQ:AAPL) sought to reduce the cost structure of the iPhone XR relative to its pricier counterparts — while also providing an additional marketing point for those pricier models — was by giving the iPhone XR an inferior wireless antenna system. While both the iPhone XS and iPhone XS Max support gigabit LTE download speeds by way of a 4×4 MIMO antenna, the iPhone XR (which uses the same exact cellular modem chip as the XS and XS Max) is held back by a less-sophisticated 2×2 MIMO antenna.

That is set to change with this year’s successor to the iPhone XR, according to an analyst at Barclays (via AppleInsider). The analyst reports that the second-generation iPhone XR will incorporate a 4×4 MIMO antenna system, dramatically boosting cellular performance.

An Apple Store employee with a customer in an Apple Store.

Image source: Apple.

Here, I’d like to do two things: provide some additional evidence to support the analyst’s claim and explain why Apple would abandon its prior segmentation strategy.

The additional evidence

One of Apple’s key wireless chip suppliers is Broadcom(NASDAQ:AVGO). While Broadcom doesn’t supply Apple with cellular modem chips, it does provide Apple with Wi-Fi/Bluetooth combination chips as well as various radio frequency (RF) chips that are critical to a smartphone’s wireless subsystems.

Generally speaking, Broadcom benefits as customers like Apple adopt more advanced cellular technologies. More complex cellular subsystems need more sophisticated (read: more expensive) RF chips, translating to an increase in dollar content per iPhone for Broadcom.

Broadcom actually lost some RF chip share in the iPhone XR, which was the result of Apple opting to reuse the same “platform” from the iPhone 8 series in the iPhone XR, as Broadcom CEO Hock Tan explained on the company’s Sept. 6, 2018, earnings call.

“And when this happens, it does create an opportunity for a customer to temporarily use lower-performance alternatives in selected SKUs,” Tan said. “With the benefit of hindsight, this may be precisely what happened with this 2018 generation.”

At the time, Tan seemed optimistic that Apple would get back to upgrading the RF capabilities of its devices for the 2019 iPhones and that Broadcom was “well positioned to win back the platform.”

On Broadcom’s Dec. 6 earnings call, Tan said that the company is “confident” that it will, indeed, regain that share in the coming iPhone product cycle. This would seem to point to Apple endowing all of its upcoming iPhones with the best cellular capabilities that it can offer, necessitating Broadcom’s cutting-edge RF chips.

Why the change of heart?

Although it’s clear from Broadcom’s commentary that this doesn’t represent a last-minute decision on Apple’s part, I do think that if there were any ambivalence on Apple’s part with respect to what direction to go, the relatively poor sales of the company’s latest iPhone lineup would have relieved Apple of said ambivalence.

It’s clear that, in addition to coping with a less-than-ideal smartphone market as well as macroeconomic headwinds, Apple’s iPhone is simply losing ground in China to fierce competitors. If Apple wants to improve its competitive positioning in China, it likely needs to get more aggressive on the tech specs that it offers customers with products like the iPhone XR. (This may be driving Apple’s reported decision to endow the iPhone XR’s successor with a dual camera system instead of the single camera that the current model has.) Moreover, with many other smartphone makers planning to offer 5G-capable smartphones this year while Apple will not, the least it can do is to make sure that its latest iPhones all support the same LTE Advanced capabilities.

It will be a while before Apple releases these new iPhones and even longer before we have a good read on how they perform in the marketplace. But, at the very least, I think what Barclays had to say about the wireless capabilities of the iPhone XR’s successor passes muster and is supported by both Broadcom’s statements as well as basic business sense.

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Apple Suppliers Lower 2019 Forecast After ‘Extraordinary’ Drop in Chinese iPhone Demand

(TSMC), a contract chipmaker, had reduced its revenue forecast for January-March quarter. Apple had also revised its first quarter earning guidance …

The drop in the Chinese demand for iPhone models is forcing many Asian Apple suppliers to cut their 2019 forecasts, a Japanese media report claims. As the trade war between US and China continues to cast a wide shadow on the global economy, Nidec, a supplier of vibration motors, has announced that the company is expecting a major drop in their yearly revenue. The announcement comes just a day after Taiwan Semiconductor Manufacturing Co. (TSMC), a contract chipmaker, had reduced its revenue forecast for January-March quarter. Apple had also revised its first quarter earning guidance earlier this month.

According to a report in Nikkei Asian Review, Japan-based Nidec, whose vibration motors are present in all iPhone models, has reduced its full year profit outlook by over 25 percent. The company saw a mostly great 2018 until the tide shifted in November.

“We have faced extraordinary changes,” said Shigenobu Nagamori, Chairman, Nidec, to the reporters at a press conference.

“Orders, sales and shipments in all business segments around the world saw major shifts,” he added.

It will be the first time in six years that Nidec will see its yearly operating profit decline as well as the first drop in sales in nine years.

On Wednesday, TSMC, which is the sole supplier of chips for Apple’s iPhone models, said that it expects a 22 percent drop in its revenue from January to March this year. The 22 percent drop is significantly higher than the roughly 13 percent decline the market was expecting. The company blamed the decline on “sudden drop in demand” for high-end phones. In addition to Apple, TSMC also supplies chips to Huawei’s HiSilicon Technologies, Qualcomm, Nvidia, Broadcom, MediaTek, and AMD.

TSMC also stated that it is cutting its $11 billion capital spending plans for this year and implementing a hiring freeze.

Earlier this month, Apple announced it is reducing the revenue outlook for the first quarter of this year. The company is seeing weaker demand for new iPhone models in China and other markets. One analyst blamed this on the pricing of the new model and predicted that the Cupertino-based company will drop the price of iPhone XR in China in the coming months.

Meanwhile, a Bloomberg report on Wednesday indicated that Apple is planning hiring reductions in select divisions following the declining iPhone sales.

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Suppliers slash 2019 forecasts as iPhone faces ‘extraordinary’ drop in Chinese demand

Nikkei’s report comes on the heels of TSMC announcing this morning that it was forecasting its biggest quarterly revenue drop in a decade. Now …

Slowing iPhone sales are dragging down Apple suppliers in Asia. Nikkei reports today that Apple suppliers are drastically reducing their 2019 forecasts due to an “extraordinary” drop-off in Chinese smartphone demand.

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Nikkei’s report comes on the heels of TSMC announcing this morning that it was forecasting its biggest quarterly revenue drop in a decade. Now, Nidec has announced that it has cut its full-year profit outlook by over 25 percent. Nidec is Apple’s supplier of a small but important part of the iPhone: the vibration motor.

Nidec chairman Shigenobu Nagamori told reporters today that the company has “faced extraordinary challenges” over the last several months. The executive added that “orders, sales, and shipments” in all of its business segments are down.

“We have faced extraordinary changes,” Nidec Chairman Shigenobu Nagamori told reporters at a Thursday news conference. The Kyoto Prefecture-based manufacturer performed strongly for the half through September, with net profit rising to new highs.

The tide shifted in November, however. “We saw big slumps in November and December,” Nagamori said. “Orders, sales and shipments in all business segments around the world saw major shifts,” he explained.

As for 2019, Bernstein Research analyst Mark Li said that he expects iPhone shipments to fall 13 percent from 2018. For TSMC specifically, Li sees growth of 0.5 percent in 2019, but a return to higher growth in 2020:

“We think the current major slowdown at TSMC is mainly due to lackluster iPhone sales, and we forecast that TSMC could only grow some 0.5% for all 2019, but would resume growth of around 9% for 2020,” Li said.

Earlier today, TSMC – the sole supplier for A-series chips used in Apple devices – revealed that it was forecasting its biggest quarterly revenue drop in a decade. The chipmaker attributed the slump to “a sudden drop in sales of high-end smartphones.”

Apple itself lowered holiday quarter guidance a few weeks ago, causing a string of suppliers to do the same. Just yesterday, a report suggested that Apple is also planning hiring reductions in light of slowing iPhone sales.


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Apple Suppliers Cutting Sales Forecasts Amid ‘Extraordinary’ Decline in Chinese Demand

Taiwan Semiconductor Manufacturing Co (TSMC), which supplies the A-series chips used in the iPhones and other devices, is forecasting a 22 …
Major Apple suppliers in Asia have been cutting their 2019 sales forecasts and some have cited an “extraordinary” drop in Chinese demand, reports Nikkei.

Taiwan Semiconductor Manufacturing Co (TSMC), which supplies the A-series chips used in the iPhones and other devices, is forecasting a 22 percent drop in revenue for the January to March quarter. TSMC said there was a “sudden drop in demand” for high-end smartphones, also attributing its revenue decline to the U.S.-China trade war and economic uncertainty.


The same thing goes for Nidec, a company that supplies the vibration motor in the iPhone. Nidec has dropped its full-year profit outlook by upwards of 25 percent after slumps were seen in November and December.

“We have faced extraordinary changes,” Nidec Chairman Shigenobu Nagamori told reporters at a Thursday news conference as the company reversed a previous forecast of a record profit. […]

The tide shifted in November, however. “We saw big slumps in November and December,” Nagamori said. “Orders, sales and shipments in all business segments around the world saw major shifts,” he explained.

Apple has forecast its own decline in revenue, dropping guidance for the holiday quarter to $84 million, down from an earlier November estimate of $89 to $93 million.

Apple has asked its suppliers to cut iPhone XR, XS, and XS Max production by 10 percent for the next three months and has implemented its own reduction in hiring for certain divisions amid the slump.

The company is attempting to boost iPhone sales by dropping prices in China and offering increased trade-in values in the U.S. and other countries.

Tag: TSMC

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TSMC’s quarterly profit meets forecasts with 0.7% increase

Taipei. TAIWAN Semiconductor Manufacturing Co Ltd (TSMC) posted on Thursday a quarterly net profit that met market expectations, amid fears that …

Taipei

TAIWAN Semiconductor Manufacturing Co Ltd (TSMC) posted on Thursday a quarterly net profit that met market expectations, amid fears that sluggish demand for smartphones could hurt the world’s largest contract chipmaker’s bottom line.

The results of TSMC, whose clients include Apple, are being keenly watched after chip suppliers including Samsung Electronics recently flagged weak demand. Tech giant Apple also slashed its sales forecast due to slowing smartphone sales in China.

TSMC, which is also a key supplier for Qualcomm and Huawei Technologies, posted a net profit of NT$99.98 billion (S$4.4 billion) for the quarter ended December, 0.7 per cent higher than a year ago.

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That is roughly in line with the NT$98.94 billion average forecast drawn from 22 analysts, according to Refinitiv data.

Revenue rose 10.7 per cent from the previous quarter and 2 per cent from the same period of the previous year to US$9.4 billion.

That compared with the company’s own estimate of US$9.35-9.45 billion and the average US$9.37 billion estimate of 23 analysts polled by Refinitiv.

Analysts said sluggish global smartphone sales, whose chips have powered TSMC for a decade, would partially offset growth from TSMC’s leading position in the latest generation of chip-making technology.

“TSMC is another victim of weak iPhone demand and crypto bubble, and the gains through other customers just barely offset that,” Mark Li, an analyst at Sanford C. Bernstein, wrote in a note earlier this month.

“Weak iPhone and smartphone is a stiffer headwind and we’re turning more cautious on TSMC’s outlook this year,” he said.

Smartphones would continue to account for 40 to 50 per cent of TSMC’s revenue, company chairman Mark Liu told Reuters in an interview last year.

Some, however, remained optimistic on TSMC’s dominance in high-performance chips and expected the company to further capture market share in advanced areas such as 7nm manufacturing technology – which packs more transistors on smaller and more power-efficient chips. REUTERS

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