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Radio frequency chip makers are set to gain as Samsung Electronics Co. Ltd and Apple Inc. unveil ever more sophisticated smartphones and tablets to battle for the No. 1 spot in the global mobile devices market.
Investors and analysts say they like shares of RF Micro Devices Inc., Skyworks Solutions Inc. and Avago Technologies Ltd – companies that make the chips that enable gadgets to send and receive data wirelessly.
Samsung unveiled its latest flagship phone, the Galaxy S4, in New York last week. The S4 can stop and start videos when someone looks at the screen, flip between songs at the wave of a hand and record sound to accompany pictures.
As manufacturers improve and add new features to phones, which are increasingly used to stream music, video and games, they are boosting the RF chip technology used in the devices.
“The RF content in handsets continues to go up,” said Stewart Stecker, a portfolio manager at AlphaOne Capital. “That’s good from an immediate to longer-term perspective for the entire RF supply chain.”
The importance of RF chips will increase as network operators deploy high-speed wireless technology known as 4G LTE (long-term evolution), analysts said.
LTE requires a much higher number of frequency bands, which increases the number of RF chips in a phone.
The global LTE market is expected to almost double this year, surpassing the $10 billion (€7.7 billion) mark, according to a March 13 report from telecom market research firm Infonetics Research.
“As you add LTE – that’s a whole other frequency – you need more radio, more RF equipment,” said Northland Securities analyst Tom Sepenzis.
Within the RF chip supplier group, analysts said those that have diversified their client base by supplying to Samsung, Apple, and other smartphone vendors such as China’s ZTE Corp. are best placed to take advantage of demand.
After chipping away for years at Apple’s market share, Samsung emerged as the No. 1 seller of smartphones last year, undercutting its main competitor with cheaper handsets and a wide range of products.
Samsung sold 64.5 million smartphones in the fourth quarter of 2012, compared with 43.5 million iPhones sold by Apple, data from market research company Gartner shows.
Qualcomm has nearly half of the global market for ‘baseband’ chips, which connect mobile phones to cellular networks, and therefore is also set to benefit from rapid LTE growth.
The S4 will use Samsung’s application processor in some regions and Qualcomm’s Snapdragon chips, which have LTE features, in others.