Some of the Street’s semiconductor analysts today weighed in with their thoughts on the benefits to the semiconductor industry of Apple‘s (AAPL) new iPad, unveiled yesterday.
Barclays Capital‘s wireless semiconductor analyst Blayne Curtis today reiterates an Overweight rating on shares of Avago Technologies (AVGO), which should benefit from the iPad’s use of “long term evolution,” or LTE, wireless technology should be a boon for the company:
The �new iPads� will now come in two LTE versions. The VZ version supports both CDMA and WCDMA (Bands 1/2/5/8) plus one LTE band (Band 13), while the AT&T version adds two LTE bands (Bands 4 & 17) � each band adding ~$1 in additional RF content. We look for more color when the first device teardowns appear around the launch (March 16), but our initial view is this change is incrementally positive for AVGO as we see them well positioned to secure a good portion of the RF content including the LTE bands and potentially some of the 3G content including the FBAR from essentially zero in the iPad2.
A couple of different reports trumpeted the advantages for Qualcomm (QCOM), which makes baseband processors for LTE.
ThinkEquity‘s Mark McKechnie reiterated a Buy rating on the shares and an $85 price target, writing that the LTE capabilities may push more units of the iPad this time around with wide-area wireless links built in, which is good for the baseband “attach rate,” which is good for Qualcomm.
Of the company’s likely supplier role, he writes:
QCOM is the likely baseband chip supplier — we estimate ~ $16 of content for QCOM at ~ 30% operating margins drives $4-$5 of chip operating profits per 4G iPad for QCOM More importantly, we estimate ~$10-$15 of royalty income for QCOM for every 4G iPad based on a 5% royalty rate on a $300 build price for the iPad3.
FBR Capital‘s Craig Berger reiterated an Outperform rating on Qualcomm shares, and a $77 price target, writing that “Apple’s new iPad includes LTE cellular chipsets from Qualcomm (in cellular models), with the market only partially discounting the use of these higher ASP [average selling price] basebands.”
Berger estimates that if Apple sells 65 million iPads this calendar year, and if 40% of those units have cellular connections, “assuming a $25 baseband average selling price for Qualcomm, the iPad could generate $650 million in incremental revenues and $0.10-$0.15 of EPS” for the year.
On a related note, B.Riley & Co. chip analyst Mike Crawford today reiterated a Buy rating on shares of Silicon Motion Technology (SIMO), noting that the company may benefit from further sales of its 4G chip to Samsung Electronics (005930KS), which has already used the part in several phones.
He thinks Samsung likes nurturing SIMO in order not to be beholden to Qualcomm:
Meanwhile, as we see it, the bear story is focused primarily on just one part of SIMO�s growing business�the fact that it is selling $5 parts to Samsung for its latest (4G) phones.� After a two-year collaboration with Samsung, SIMO�s FCI subsidiary developed a LTE transceiver that Samsung put in six LTE handsets… and SIMO subsequently has announced five more design wins with Samsung.� As for catalysts�keeping in mind that Samsung sold 20MM Galaxy S II�s in ten months�one of the biggest would be for one of those Samsung design wins to in fact be the Galaxy S III quad core (with Exynos 4) to be rolled out in 50 markets come the April/May timeframe.
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