STMicro’s reliance on Apple is a risk factor, UBS analyst warns

Semiconductor companies that provide Apple with chips for iPhones, iPads and Macs could sound like a protected wager for buyers but they also appear with an factor of threat, according to just one analyst who follows the sector.

UBS’s Francois-Xavier Bouvignies told CNBC Wednesday that his firm has a “neutral” score on French-Italian chip firm STMicroelectronics mainly because of the firm’s publicity to smartphones and Apple in specific.

Perform with smartphone corporations account for 30% of STMicroelectronics complete revenues, and the corporation has 25% exposure to Apple, Bouvignies said.

“For us, it really is sort of a possibility to have such exposure to a person customer, which is constantly tough to predict,” Bouvignies said.

Apple and STMicroelectronics did not quickly reply to a CNBC request for remark.

Apple has been bringing an growing amount of chip advancement in-home over the final couple a long time, hurting more compact players in the procedure.

The Cupertino-based mostly organization decided to minimize ties with British chip designer Creativeness Technologies in 2017 to build processing units for the Iphone and iPad in-property.

That news despatched the once-mentioned firm’s shares tumbling as much as 71%, due to problems it would greatly affect its potential. And it did. Creativeness Systems was subsequently bought to China-backed private equity customer Canyon Bridge Funds Associates for £550 million ($727 million).

Apple and Imagination Systems announced a new marriage in Jan. 2020.

A safer bet?

UBS mentioned it prefers German chipmaker Infineon over STMicroelectronics simply because it isn’t going to have the exact same degree of publicity to the smartphone industry, Bouvignies claimed.

Though STMicroelectronics has a neutral rating from UBS, Infineon has a purchase score.

Both companies, on the other hand, are poised to profit from the electrification of the motor vehicle, according to Bouvignies, who said the automotive industry accounts for 10% of the worldwide need for semiconductors.

“We would desire Infineon more than STMicro but it will however reward from the electrification of the car,” he stated.

Infineon is the world leader in the semiconductors that are made use of to take care of electric power in automobiles, in accordance to Bouvignies, who explained that the enterprise has about 30% of international current market share.

STMicroelectronics is investing major quantities of funds in the house as part of an energy to keep up, he additional.

Cars and trucks with interior combustion engines commonly use about $80 truly worth of semiconductors in the powertrain, but electric powered automobiles use about $550 worth, he said.