思佳讯

Skyworks Solutions completed its acquisition of Qorvo on Oct. 5. Skyworks' original targets for the combined company are still mid- to high-single-digit annual revenue growth, 50%-55% adjusted gross margins, and 30%-35% adjusted operating margins.

Why it matters: We're pleased with the deal and think the combined firm will be a more established radio frequency (RF) chipmaker, while expanding outside of the smartphone market into a host of broad-based applications like satellites, industrial, automotive, and perhaps robotics. We continue to believe Skyworks' initial targets are achievable. Regarding revenue, assuming modest unit volume growth at key customer Apple, we anticipate stable pricing and content into future iPhones. We also model stable, modest revenue growth from the Android ecosystem. We don't yet anticipate the combined firm emerging as a data center or artificial intelligence buildout powerhouse. Still, as AI enables more edge devices that require connectivity to the cloud, the combined Skyworks may capture higher dollar content in these more complex devices.

The bottom line: We raise our fair value estimate for Skyworks to $80 per share from $67, mostly as we raise our estimates for medium- and long-term mobile revenue growth, especially from Apple. Higher memory chip prices spurred our fair value cut in July as we had concerns about iPhone sales volumes. Recent news and the introduction of the iPhone Duo suggest that unit sales volumes might be more resilient than we previously expected.

BLANK PAGE

Our fair value estimate is $80 per share, implying fiscal 2026 and fiscal 2027 price/adjusted earnings of 17 times and 18 times, respectively, for the joint firm.

Looking at our assumptions for Skyworks on a stand-alone basis, Skyworks has faced a tough stretch in recent years, with headwinds from soft demand for Android-based smartphones, Apple iPhones, and broad market devices causing revenue to fall 13% in fiscal 2023, 12.5% in fiscal 2024, and 2% in fiscal 2025. We model a 3% revenue decline in fiscal 2026, as Skyworks indicated that it would have 20%-25% less RF content in Apple’s upcoming iPhone 17 series. This 3% assumption is ahead of our prior estimate of an 8% revenue decline, as management has indicated that Skyworks has seen a favorable shift in Apple’s iPhone mix, leading to a smaller content headwind than previously expected.

Skyworks’ merger with Qorvo effectively occurred at the start of fiscal 2027. As we look ahead at the combined firm, we model 87% inorganic growth in fiscal 2027 but only modest organic growth for each of the two businesses. We anticipate a memory chip crunch that is leading to far higher prices across the electronics supply chain. Higher DRAM and NAND memory prices will lead to higher smartphone prices in the years ahead and will presumably weigh on unit volumes. In turn, Skyworks may still sell decent RF chip content per smartphone but may ship fewer units. For fiscal 2027, Skyworks indicated that its content in the Apple iPhone 18 series will likely be flattish.

In fiscal 2028, we model 3% growth for the joint firm. We model mid-single-digit growth on a midcycle basis thereafter, assuming memory prices improve in a couple of years. Much of the growth should come from Skyworks’ broad market business across Wi-Fi, automotive, industrial, and infrastructure applications.

Skyworks’ adjusted gross margins hovered in the 50%-51% range for several years but should slip to 45% in fiscal 2026. We model a nice recovery in fiscal 2027 to 49% with Qorvo in tow. We model modest adjusted gross margin expansion in the long run to the low 50% range, within management’s long-term target of 50%-55% for the combined firm.

Adjusted operating margin reached as high as 37% in fiscal 2022 but should fall as low as 21% in fiscal 2026. We model a flattish adjusted operating margin of 21% in fiscal 2027 but strong expansion thereafter to the low 30% range in the long run. This margin is in line with management’s long-term target of 30%-35% for the combined firm.

Skyworks has a no-moat Morningstar Economic Moat Rating, both in isolation and with recently acquired Qorvo in tow. Qorvo was also independently rated as no moat prior to being acquired by Skyworks.

We still believe that Skyworks, plus Qorvo, has accumulated valuable trade secrets that serve as intangible assets around the design, manufacturing, and packaging of a variety of radio frequency products. This expertise is difficult for silicon-based chipmakers to replicate and has prevented meaningful upstarts from entering the space. However, RF buying power is enormous (Apple has emerged as the buyer that matters most), and fewer smartphone providers in the Android ecosystem appear willing to pay for premium (and profitable) RF parts. Existing rivals like Broadcom, Qualcomm, and Chinese vendors are competing more aggressively with one another, making it more likely that we will see greater pricing pressure and even less stickiness for RF design wins in the future. Thus, we have less confidence in Skyworks’ ability to generate excess returns on capital to warrant a narrow moat rating.

Apple has emerged as by far the most lucrative customer in the RF space, and Skyworks has significant customer concentration, with 67% of fiscal 2025 revenue coming from Apple. Although RF supply to Apple was a stable oligopoly in years past, we now see RF players acting more desperately and are focused on stealing share from one another, all to Apple’s advantage. We now have less confidence that any Apple RF supplier will retain the same level of content they had just a couple of years ago.

RF leaders like Skyworks have decades of RF expertise in design, chip manufacturing, packaging, and testing. Chip manufacturing and packaging are rarely sources of expertise for digital or analog chipmakers, since most chips are silicon-based, and a robust foundry ecosystem (led by TSMC) exists. However, most RF products are based on more specialized materials (for example, power amplifiers are based on gallium arsenide), rather than the traditional silicon used in most digital processors. Thus, Skyworks' ability to manufacture and integrate a variety of RF parts into a single package has been difficult for many others to replicate.

RF innovation focuses on smaller packages, greater efficiency, and improved signal filtering and amplification. Whereas adding innovations to digital processors (say, a neural processing unit to run artificial intelligence models) might allow for better and more profitable end products, RF innovation would require hefty investments on the manufacturing front, all to achieve modestly better data signals or battery life. Thus, like sleepier parts of the semiconductor market like analog chips or microcontrollers, RF chips don’t strike us as an area where companies will invest billions of dollars to try to build a better mousetrap. Therefore, we don’t believe that smartphone makers like Apple will make the necessary investments to develop RF chips in-house.

Despite the difficulty in building RF products, these chipmakers still face the threat of pricing pressure from very powerful buyers, such as Apple. RF chipmakers also do not prosper from high customer switching costs, as product lifecycles in the smartphone industry are exceptionally short, so hard-fought design wins one year might not translate to a steady revenue stream in the long term.

Outside of smartphones, we think that Skyworks plus Qorvo’s broad market business, which should make up about 40% of revenue, has some relatively stickier design wins than in the RF market. It’s possible that this business might warrant a narrow moat rating on its own. However, we’ve seen volatility in this business, particularly in applications such as RF content used in Wi-Fi gateways and home routers; this doesn’t give us much confidence that the combined firm would generate outstanding returns on capital independently.

The need for greater data, reliable wireless connectivity, and energy efficiency bodes well for Skyworks’ product road map and the need for ongoing RF innovation.

More devices are seeking wireless, and even Wi-Fi, connectivity, which should provide Skyworks with market growth opportunities in the years ahead.

Skyworks has been a reliable supplier to Apple since the dawn of the iPhone, and it has room to recapture, if not gain, RF content in future iPhones.

Skyworks lost about 20%-25% of its RF content in the iPhone 17 lineup in late 2025 and 2026. It is questionable whether Skyworks can regain such content in the future.

The midrange of the Android-based smartphone market and the need for high-end 5G RF parts have not materialized as expected in recent years, leaving Skyworks with fewer lucrative RF opportunities in the smartphone market.

Skyworks' analog business focuses on underserved niche segments, such as electrical meters and keyless entry for automobiles. However, there are many larger competitors in the analog market.