could get a substantial earnings boost if the company moves ahead on plans to bring production of additional iPhone components in-house, Evercore ISI analyst Amit Daryanani asserts in a research note Wednesday.
Daryanani points out that Bloomberg in a series of recent stories has said that Apple (ticker: AAPL) intends to bring design of modem chips, Bluetooth, and Wi-Fi components, and even displays, in-house. Doing that would be consistent with Apple’s push for tighter control and integration of the user experience in all of its products, like the shift to in-house processors from Intel (INTC) parts in its Mac lineup.
“Historically, Apple has demonstrated a strong track record of bringing chip design in-house which has benefited both product functionality and gross margin,” the Evercore analyst writes in a research note. “Internally developed silicon solutions for Apple include the A-series processor used in iPhones/iPads, the processor used in the Watch, and more recently, the M-series CPUs in MacBooks. We would not be surprised if this trend toward insourcing continued to drive gross margin tailwinds over time.”
The analyst thinks Apple could potentially save $13 to $25 per device from internal development of additional phone components. He estimates that Apple pays about $26 per device for the wireless modem; if they can produce them as efficiently as incumbent supplier Qualcomm (QCOM), he says there is a potential to save $9 per device. Daryanani thinks the company pays about $5 per unit to
(AVGO) for Wi-Fi/Bluetooth combo chips; he sees a potential savings there of $3 per device. And he estimates that Apple pays $85 per device for displays; he thinks the potential savings there could be as much as $14, if the company can produce them as efficiently as
‘s display unit.
Daryanani, who recently added Apple to the firm’s “Tactical Outperform List” ahead of the company’s upcoming December-quarter earnings report, maintains his Outperform rating on the stock with a $190 target price.
Meanwhile, several other analysts weighed in on Apple shares on Wednesday ahead of earnings.
Credit Suisse analyst Shannon Cross, who maintains her Outperform rating on Apple stock with a $184 target price, wrote a note about Apple’s announcement Tuesday of new MacBook Pros and Mac Minis and updated processors. She notes that the company’s pace of innovation in the processor segment seems to be accelerating, with the debut of the M2 Max and M2 Pro processors coming just seven months after the launch of the original M2.
Canaccord Genuity analyst T. Michael Walkley keeps his Buy rating on Apple stock, but trims his target price to $170 from $200. He expects the company’s results to show a “sluggish start” to fiscal 2023 ending September, citing the potential impact on high-priced devices from softening consumer spending. While he thinks that iPhone sales remain strong in North America, he contends that “overall consumer demand is slowing for smartphones.”
Apple stock is down fractionally at $135.70.
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