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These 5 stocks could be the biggest iPhone 16 winners, and none of them are Apple

Apple’s suppliers appear well-positioned to benefit from increased iPhone sales.

Launching a Apple The iPhone always attracts a lot of attention. After all, the company has sold more than 200 million devices each year for the past three calendar years.

With the latest generation smartphone supporting a host of new artificial intelligence (AI) features, expectations for iPhone 16 sales are high. JP Morgan, for example, expects iPhone sales to grow more than 12% to 250 million units for Apple’s 2025 fiscal year.

While this should help Apple, some of its suppliers could benefit even more.

Arm holds

One of the big winners of strong iPhone 16 sales will likely be Arm holds (ARM 5.88%). With its technology in 99% of smartphones, Arm benefits from any increase in global smartphone sales.

The iPhone 16’s new A18 chip is based on Arm’s newest V9 architecture. The iPhone 15 released last year, meanwhile, was powered by its A16 chips and the A17 chips for its Pro models, which were both based on Arm’s older V8 architecture. This is important because Arm said its V9 architecture has almost double the royalty rate compared to its V8 architecture.

As such, Arm will benefit not only from increased iPhone unit sales, but also from much higher royalties. This makes it one of the biggest iPhone 16 winners.

Broadcom

While the attention of investors around Broadcom (AVGO 1.90%) has been largely around its data center networking equipment and custom AI ASIC (application-specific integrated circuit) chips, the company is also set to benefit from the iPhone 16. This is good news for Broadcom, as much of its non-AI businesses and recent VMWare acquisitions have struggled.

However, the entire iPhone 16 line will incorporate the new Wi-Fi 7 standard, which will be powered by Broadcom’s integrated RF modules. Broadcom also supplies other wireless components to Apple, so any increase in iPhone sales should benefit Broadcom’s sales.

Broadcom will likely remain more of an AI infrastructure story than a smartphone story, but an improvement in some of its other struggling businesses could go a long way toward helping its stock as well. Its wireless revenue rose just 1% last quarter to $1.7 billion and is expected to be flat year-over-year in the current quarter, but the iPhone 16 looks poised to fuel that part of the business soon .

Artistic rendering of semiconductor chip.

Image source: Getty Images.

Qualcomm

Apple and Qualcomm (QCOM 1.67%) they haven’t always had the best relationship, with the iPhone maker deciding at one point in 2017 to stop paying royalties. Meanwhile, there have been speculations that Apple is looking to replace some of Qualcomm’s G5 modems next year. The two companies signed an extension to use their modems until 2027, and there have been reports that Apple is struggling to produce its own 5G modems, so that’s just speculation at this point.

For now, however, Apple is using Qualcomm’s latest Snapdragon X75 modem in its iPhone 16 Pro models and apparently its X70 modem in its regular models. Tech blogs have already praised the improved download speeds that come from the new modem. Analysts also believe that the company took part in providing RF content to the iPhone 16 at its expense Skyworks Solutions.

It should also be noted that while Qualcomm is most associated with smartphones, the company has made great strides in other areas, including cars, IoT (Internet of Things), XR (augmented reality) glasses, and computing ( personal computer). ) with the launch of Copilot+ PCs. The company is also working with Saudi Arabia’s national oil company Aramco on connectivity, AI and advanced computing solutions for industrial and enterprise use cases.

Cirrus Logic

Perhaps no company is more closely related to Apple than Cirrus Logic (CROSS -0.62%)which got 87% of its revenue from its biggest customer last fiscal year. The company supplies the iPhone with a number of components in the areas of audio, touch (sense of touch), camera and battery.

Given its ties to Apple and the iPhone, the more devices Apple sells, the better for Cirrus. Meanwhile, analysts believe that the company will benefit from a number of new iPhone 16 features, including the new camera control buttons, as well as the tetraprism lens now incorporated in its Pro model, after it was only available on the Pro Max model last year last.

While an investment in Cirrus carries a risk given its huge concentration in a single customer, the company has been able to continually introduce new components into the iPhone, proving to be one of Apple’s most valuable suppliers.

Taiwan Semiconductor Manufacturing

Apple’s semiconductor and component suppliers aren’t the only ones to benefit from the potential increase in iPhone sales. Taiwan Semiconductor Manufacturing (TSM 0.62%)or TSMC for short, has already benefited from the huge expansion of chips used in AI infrastructure, but its biggest customer remains Apple.

Apple used TSMC’s latest 3-nanometer technology to produce chips for its iPhone 15 Pro models, but this year it will use the technology in producing chips for all of its iPhone 16 models. While the new technology is initially negative for margins , TSMC benefits as it expands the process. Meanwhile, the company is already looking to add 2nm production capacity next year.

Because TSMC is able to shrink the size of the chips, it can help increase the power of the chips while also reducing power consumption. It can also fit more chips on a wafer, helping to increase its capacity. The company remains one of the best-positioned in the chip sector given the demand for AI and should get an additional boost from rising iPhone sales as well.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Qualcomm and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, Cirrus Logic and Skyworks Solutions. The Motley Fool has a disclosure policy.

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