Apple is increasingly ditching its suppliers and moving elements of its production in-house, and analysts have identified the company they think is most at risk of being “insourced” next: Synaptics.
The Californian firm builds interface technologies, driver displays, and biometric tech, and is a partner of Apple.
But analysts at Pacific Crest took a look at Apple suppliers who could face being insourced in a research note sent to investors on Tuesday, and concluded Synaptics was deemed most likely.
It’s worth noting that Pacfic Crest’s analysts don’t seem to have any hard evidence that Apple is going to ditch Synaptics (like a leaked contract, say). They’re just identifying the company as being, in their view, at particular risk, given certain public information.
Why? They identify a few reasons. It would let Apple “optimise power and performance with its internal graphics engine,” for one. And it would also “lessen [Apple’s] reliance on Samsung for OLED displays.” Apple and Samsung are long-time frenemies — the former relies on the latter for hardware components, even as they fight bitterly for dominance of the high-end smartphone market.
Pacific Crest’s prediction comes after Imagination Technologies, another Apple supplier, announced in early April that Apple was insourcing design of the graphics processing chips it had previously licensed from Imagination. The supplier was reliant on Apple for more than half of its revenue, and the decision saw its stock drop by more than 75% as analysts questioned whether the business was could remain viable without Apple’s business.
And another Apple supplier, Dialog, recently saw its stock tank 36% over fears it could lose its key contract with Apple.
Pacific Crest rated RF Suppliers and Skyworks Solutions at “low” risk of being insourced, while Cirrus Logic was considered “medium to low.” But Synaptics was graded as being at “medium to high” risk.
Synaptics was a supplier for Apple back in the iPod click wheel era, but Apple subsequently transitioned away, according to The Motley Fool. More recently, Synaptics acquired Renesas SP Drivers, an Apple supplier, for $US475 million — making Apple a Synaptics customer once again.
Synaptics has a market cap of $US1.86 billion, and its stock was largely unchanged in after-hours trading. A spokesperson declined to comment.
The NASDAQ-listed firm’s stocks were trading at $US51.80 (£41.50) at the close on Tuesday:
Here’s what Pacific Crest said about Synaptics (emphasis ours):
“Synaptics (SYNA, Sector Weight) Risk: Medium to High. We see moderate to high risk of Apple looking to insource its display driver IC, given (1) as we previously noted, Apple has hired a significant number of former Renesas RSP engineers, and (2) we believe Apple has been developing its own internal OLED DDIC. We believe Samsung will use its own internal DDIC for the OLED iPhone and Synaptics for the next- generation LCD smartphones. Why would it make sense? By optimising and using its internal solution, Apple could optimise power and performance with its internal graphics engine. Additionally, it would lessen its reliance on Samsung for OLED displays. Conversely, if Apple were to use an internal solution, it would need to invest significant funds in ramping a support infrastructure, which is something Synaptics already has in place today.”
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