Broadcom (NASDAQ:BRCM) is one of the biggest beneficiaries of Apple’s (NASDAQ:AAPL) success, as the semiconductor company provides parts for iPhones and iPads. Last week, Taiwan Semiconductor Manufacturing Co. (NYSE:TSM), Broadcom’s biggest supplier, said third-quarter sales would exceed earlier forecasts because of rush orders from an unnamed customer, presumed by most analysts to be Apple, which is expected to release the iPhone 5 this fall.
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Many of Taiwan Semiconductor’s other clients have disclosed disappointing results, as the semiconductor industry has been plagued by weak demand, but Broadcom and other suppliers for Apple’s iPhone, iPad, and iPod Touch have been faring better than makers of parts for personal computers. Last week, Broadcom reaffirmed its third-quarter forecast, while other chipmakers like Texas Instruments (NYSE:TXN) and Altera Corp. have had to reduce their estimates as the economy stagnates. “The suppliers of Apple are doing well,” said Michael Burton, an analyst at Kaufman Bros. in New York. “The mobile space is in a very good place.”
Apple is expected to have sold 19.5 million iPhones and 12.5 million iPads by the end of the current quarter, according to RBC Capital Markets analysts Mike Abramsky. During the same 3-month period last year, Apple sold 14.1 million iPhones and 4.19 million iPads. Meanwhile, PC makers and their suppliers are taking a hit. Last week, researcher Gartner cut its projection for 2011 PC sales, saying shipments would rise 3.8% instead of 9.3% as previously forecast. On Tuesday, the International Data Corporation reported that worldwide PC shipments increased by just 2.7% during the second quarter, and projected they would grow just 2.8% for the entire year.
The fact that an unnamed company has requested rush orders, which are last-minute purchases intended to make up for dwindling inventory, has led industry analysts to the conclusion that the orders could only be for Apple. “Rush orders are likely not from a new or unknown product, but rather imply more needed capacity with a mature product offering,” said Richard Davenport, a Bloomberg supply chain analyst. Anil Doradla, a chip analyst at William Blair & Co, said that Taiwan Semiconductor’s order could have also come from Qualcomm (NASDAQ:QCOM), which also supplies Apple with chips for its iPhones.
Apple is expected to announce its new iPhone by the end of October, and will be expanding its availability in the U.S. to include Sprint (NYSE:S). Apple is also expanding in China, where sales grew sixfold last quarter. In fact, demand from Sprint and carriers in China could result in an “upward revision” to Broadcom’s recently reiterated forecast, according to Davenport. Broadcom’s stock has dropped 20% this year, but may be spared from many of the struggles other chipmakers are facing because of its relationship with Apple. “Apple could save the quarter for Broadcom,” said William Blair’s Doradla.