Is Apple’s supply chain entering an M&A frenzy?

These are not Apple scientists — they are building jet propulsion systems, but it’s probably a little like this at this option Photo by Laurel and Michael Evans on Unsplash

As Apple’s market share continues to increase the company’s supply chain may become a target for major entities seeking growth and investors seeking to secure a slice of the company’s increasingly profitable supply chain.

Follow the money

Just in case Nvidia’s attempt to acquire ARM isn’t enough, two recent stories should also help illustrate this trend:

TSMC:

Counterpoint has claimed Apple is purchasing over 50% of TSMC’s entire run of 5nanometer chips this year – and will likely grab a big piece of the fab’s 3nm chip production when that ramps up. TSMC apparently shipped 80 million A14 Bionic chips to Apple in 2020 and is expected to supply chips made on a more advanced version of its 5nm production process this year in the next Apple processor. This all matters, in part because the Apple connection means TSMC is becoming one of the most advanced chip manufacturers in the world, some might claim. Particularly as those processors are also now used in Macs.

Dialog:

Accelerating sales of Apple hardware means accelerating sales of Apple components, and this is prompting investors and large companies seeking to purchase their way toward growth to invest in Apple’s supply chain, the most recent example of which being the move by Japanese chipmaker Renesas Electronics Corp. to purchase Dialog Semiconductor for $5.9 billion in cash, a 20% premium on current prices.”The transaction we announced today represents our next important step in catapulting Renesas’ growth plan,” Hidetoshi Shibata, President and CEO of Renesas, said.

Intriguingly, given all the focus on the Apple Car, both Renesas and Dialog in August agreed to cooperate on the development of automotive computing, even while a shortage of semiconductors impacts the car industry.

The take-away?

Apple’s growing market share and its tight (yet profitable) deals across its supply chain, combined with softness in other maker’s markets, is contributing to a problem in which competitors can’t get the components they need. That’s a nice problem for Apple to have to some extent, but implies that aggressive acquisition attempts to seize strategic elements in the AAPL supply chain may take place as competing firms reach for oxygen.

It is worth noting that Dialog shares tottered in 2018 on claims Apple was about to develop its own power management chips for iPhones. The two firms later reached a deal with Apple hiring in many Dialog engineers, but while Apple made up 55% of the company’s revenue at the end of 2020 this is expected to fall to 40% by the end of 2021 – might Apple be preparing to flick the switch with an in-house GPU in iPhone 13? Rumors are made of such conjecture.

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