David Zeiler: There will be winners for investors as a result of the slow-motion split between Apple Inc. (NASDAQ:AAPL) and Samsung Electronics (PINK:SSNLF), but the stocks to buy are neither of the warring parties.
Instead, as the tech giants unwind a relationship in which Samsung supplied Apple with billions of dollars’ worth of components for its popular iPhones and iPads, the real winners are the suppliers rushing to fill the void.
The once-cozy relationship began to sour a couple of years ago when Samsung began to introduce smartphones and tablets that Apple felt too strongly resembled its own.
Shortly afterward, Apple began filing patent lawsuits. Samsung countersued. The fight grew into a global war, with 50 separate patent suits in 10 countries spread over four continents.
The relationship grew frostier in 2011 as Samsung became the dominant vendor of smartphones based on Google Inc.’s (NASDAQ:GOOG) Android operating system and started taking market share from the iPhone. Get A Free Trend Analysis For Apple Inc. Shares Here!
In 2012, Apple started shifting more and more component purchases to other suppliers, a process that has accelerated in recent months.
Samsung’s invoices to Apple have included memory chips, batteries and display screens in addition to the manufacture of Apple-designed processor chips found in the iPhone and iPad.
Samsung, in fact, provided 26% of the component costs of the iPhone 4, so there’s plenty of new money suddenly available at the Apple trough.
Let’s take a look at some stocks to buy as a result of the Apple-Samsung divorce.
Stocks to Buy: Taiwan Semiconductor
One of the more recent deals Apple has made, and perhaps the biggest in the switch away from Samsung, is an agreement with Taiwan Semiconductor Manufacturing Co. Ltd (NYSE:TSM) to fabricate the latest iPad processor chips, the A6X.
The deal eventually is expected to include the manufacture of other A-series chips for the iPhone and iPod Touch lines.
TSMC already manufactures about half of all the processors used in smartphones worldwide, so it clearly has the capacity and know-how to accommodate Apple’s needs.
Credit Suisse analyst Randy Abrams said today (Thursday) that he expects Apple chip orders will contribute 5% of TSMC’s revenue in 2013. Abrams upgraded his rating on this stock to “Outperform” from “Neutral” in December.
In the memory category, the winners appear to be a private company, SK Hynix Inc., Elpida Memory Inc. and SanDisk Corp. (NASDA:SNDK).
Elpida, which has a long relationship with Apple, is in the process of being acquired by Micron Technology Inc. (NASDAQ:MU). The acquisition will make Micron the second-largest maker of memory chips, behind Samsung, and one of the better stocks to buy in this group.
Research firm Trefis said this week that more business from Apple, both as part of the transition away from Samsung and rising sales of iPhones and iPads, presents “SanDisk with a huge opportunity to leverage Apple for growth going forward.”
Finding stocks to buy among Apple’s new battery suppliers is a bit more challenging. Starting in November, Apple replaced Samsung-supplied batteries in its iPad and MacBook laptops with batteries from Amperex, a subsidiary of Japan-based TDK Corp. (TTDKY), and privately held Tianjin Lishen Battery. Get A Free Trend Analysis For Apple Inc. Shares Here!
As for displays, The Wall Street Journal reported last September that for the iPhone 5, Apple dropped Samsung altogether in favor of screens from Sharp Corp. (ADR: SHCAY) and LG Display Co. (NYSE:LPL).
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