Will Apple Supplier Skyworks Kick Off 2016 Chip M&A With Maxim Buy?
Apple ( AAPL ) supplier Skyworks Solutions ( SWKS ) ought to acquire Maxim Integrated Products ( MXIM ) to diversify from the slowing smartphone and radio-frequency market, Pacific Crest analyst Michael McConnell suggested Thursday. Maxim has long been takeover bait with sharks Analog Devices ( ADI ) and Texas Instruments ( TXN ) reportedly eyeing the $10.5 billion-market-cap chipmaker in October. But sources told Bloomberg that Maxim might not sell without a high premium. Skyworks could provide that premium, McConnell wrote in a research report. Maxim stock rose a fraction Thursday, to 36.78. Skyworks was flat. An offer of $44 per share would be a 20% premium to Maxim stock, McConnell points out. Acquiring Maxim would help Skyworks diversify beyond its 80% exposure to the struggling mobile market, McConnell wrote. Maxim has ties to the data center and automotive markets. Though Maxim makes the most sense — McConnell rates both a buy — Skyworks could also diversify by acquiring Macom Technology Solutions ( MTSI ) or Silicon Laboratories ( SLAB ), McConnell wrote. Is The RF Market Maturing? RF, Skyworks’ bread and butter, is slated for a compound annual growth rate of 11% over the next several years vs. historical 18% growth, McConnell wrote. Skyworks competes in the RF ring with Broadcom ( AVGO ) and Qorvo ( QRVO ), both Apple suppliers. The number of bands — a spectrum of RF — rocketed between 2005 and 2015, Brent Dietz, Qorvo director of corporate communications, told IBD. In 2005, there were two bands. By 2015, there were 43. McConnell sees little opportunity for continued band acceleration. And Dietz offered a similar growth view for the RF market — a $10 billion market opportunity with a 10%-15% growth rate. But Dietz notes that the RF content in smartphones has gapped up this century. Less complex 2G phones had about 80 cents worth of RF content. Today, most smartphones have about $16 worth of RF. To that point, Broadcom’s mobile RF content grows in excess of 20% every year, CEO Hock Tan said during the company’s Q1 earnings conference call. He expects 2016 to be no different. This year, Qorvo and Skyworks offered similar views of growing dollar content in marquee smartphones. Recent teardowns show that Samsung completely replaced three Skyworks chips in its Galaxy S7 and that Qorvo twice replaced Broadcom.