swks

will the samsung phone problem be a problem or a boon for swks?

Those Note 7s will need to be replaced… so more phones will be manufactured.

Will SWKS benefit? Who knows? Note 7 never had much a market, so I doubt this will materially impact SWKS bottom line — unless they were found culpable for the Note 7 problems.

My opinion is, long term it is a wash for SWKS, as whatever phones the customers that had Note 7’s switch to, SWKS should have product in those phones as well.

Short to mid term, I think it could help some, in that all the Note 7’s have been recalled so there should be a lot of people that end up “buying” double phones over the past couple and future months. So SWKS could see a small bump there.

To Apple, on the other hand, it should be a definite boon as they should get SOME of the customers that were Note 7 customers, but may like what they find with the iPhone, and stay customers.

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Hi schneidr.

“will the samsung phone problem be a problem or a boon for swks?”

I don’t think anyone outside the company can answer that with certainty. I, personally, would tend to believe that the most accurate answer is “neither”, with maybe a slight lean towards “boon”.

It is true that Samsung has recently been Skyworks’ second-largest customer. But I think that is more reflective of Samsung’s position in the smartphone marketplace than of the relationship between the two companies. Skyworks has products embedded in the phones of every manufacturer that matters. That doesn’t mean that Skyworks is inside every phone model that every manufacturer makes, but there’s a presence somewhere with every manufacturer. Skyworks will have greater concentration with certain manufacturers and lesser with others.

I don’t know whether Samsung was a high-concentration manufacturer or not. If they were well above average, then it probably hurts Skyworks a bit. But I don’t think Samsung’s Skyworks concentration is super high. Samsung, like its bigger rival in smartphones, probably has a multi-vendor supply chain for just about everything not produced in-house. I would guess that it is the smaller manufacturers who are more reliant on a pre-designed Skyworks package product. If the Samsung debacle pushes demand towards smaller manufacturers who are Skyworks customers, Skyworks benefits.

There is one larger smartphone manufacturer that does seem to a higher-than-average concentration of Skyworks content: Huawei. If I am not mistaken, they are a growing force in smartphones worldwide. To the extent Samsung loses business directly to Huawei, I’m pretty sure Skyworks benefits. But it’s not clear to me that Huawei is the biggest beneficiary of Samsung’s problems. Still, if you hear good things about Huawei’s smartphones, that reflects well on Skyworks.

I would guess that most smartphone users will see this as a company-specific problem. By that, I mean that they will shy away from Samsung and not from smartphones. Strong smartphone demand benefits Skyworks (although I tend to be happiest when demand for Skyworks’ non-smartphone products is even stronger than strong smartphone demand).

I know that wasn’t a definitive answer, but I hope it’s helpful and presents the dynamics in a useful way.

Thanks and best wishes,
TMFDatabaseBob (of companies mentioned, long: SWKS)
Coverage Fool
See what a “Coverage Fool” does here: http://www.fool.com/community/community-team.aspx
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Peace on Earth

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Hi RoyGeeBiv.

I can’t imagine that Skyworks would be found culpable for the Note 7 problems. Although I haven’t studied the matter deeply, my cursory understanding is that the problematic component was a battery manufactured by Samsung itself. Based on what I’ve read, culpability issues should stay within Samsung.

Thanks and best wishes,
TMFDatabaseBob (long: SWKS)
Coverage Fool
See what a “Coverage Fool” does here: http://www.fool.com/community/community-team.aspx
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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TMFDatabasebob,

I was reading this morning that the battery problem wasn’t the S-7 was a combination of design, production engineers and quality control.

It seems that the engineers needed to stuff and extra 400 milli amp hours into the phone to combat battery life complaints, but marketing design would not give them a lot of space. So the engineers stuffed it t in and the problem ran down to production engineering.

The production engineers were able to ge the phones built, but there was about 0.01 percent of the phones where the battery was getter squeezed tighter than the specs called for.

It seems that this squeeze would show up a the end of a charging session. It seems that the squeeze somehow made the battery smaller and the charger would detect only part of the battery and would try to keep charging it even though the battery was charged.

I don’t have the article in front of me, but that was the gist of it.

This is a typical corporate problem where everybody is pressured and expects that the other group will catch and solve the problem. This leads to a BP moment.

Cheers
Qazulight

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I can’t imagine that Skyworks would be found culpable for the Note 7 problems

I never said they were. I only posed that as the only possible way that SWKS could be materially affected by the Note 7 travails.

Bottom line: It’s doubtful that Samsung’s Note 7 woes would benefit SWKS.

Ok - on the first iteration of the issue, the phones were due to be simply replaced so actually it would have been good for chip suppliers as they would get double sales with the original and then the replacement. When Samsung pulled it completely then it effectively would disproportionately hurt the Samsung Note 7 suppliers more and benefit those that supply competitor brands.

As it happens there was an article on this last night. Since Note 7 was a Qualcomm processor and since Skyworks gets less business in a Qualcomm phone and disproportionately more with other processors then it would be net neutral if the Note 7 purchasers shifted to another Samsung/Qualcomm phone like the S7 but net beneficial if they shifted to a non Qualcomm phone like Apple.

The companies that are usually supplying the Qualcomm ecosystem would be hurt more - Qorvo, Broadcom/Avago etc.
http://marketrealist.com/2016/10/will-discontinuation-samsun…
Ant

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but net beneficial if they shifted to a non Qualcomm phone like Apple.

Can we quantify that in terms of earnings improvement?

Assume all Note 7 purchasers choose an iPhone 7 instead. Does that impact SWKS significantly?

If so, what might that look like?

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Assume all Note 7 purchasers choose an iPhone 7 instead.

Did Note 7 users get their money back or the choice of buying a different Samsung product that is not as likely to explode?

I’m pretty sure the 7 owners got a choice of one or more free Samsung replacements. I know one person who did.