Skyworks Solutions (SWKS), a major supplier of chips for Apple (AAPL), may be gearing up for a major expansion move. According to a report from The Information, the chipmaker has held talks to acquire its longtime rival Qorvo (QRVO) in a potential deal valued at around $8 billion. Following the news, QRVO stock is up by 7.5% in pre-market hours, while SWKS is down 2.2% as of this writing.
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For context, Skyworks designs and supplies radio-frequency (RF) chips used in smartphones, Wi-Fi devices, and connected technologies. Meanwhile, Qorvo has a broader mix, supplying RF technology not only for smartphones but also for defense, aerospace, and wireless infrastructure.
What the Deal Could Mean for Both Sides
Skyworks mainly focuses on consumer electronics and relies heavily on Apple for revenue, while Qorvo has a broader footprint across both consumer and defense markets. A merger would combine their strengths and create a more powerful player in the radio-frequency chip industry, which is essential for smartphones and connected devices. Meanwhile, the deal would enable Skyworks to enhance its pricing power at a time when smartphone demand is slowing. It would also reduce direct competition.
For Qorvo, joining forces with a larger company could provide better financial stability as it deals with margin pressure and softer growth. Earlier this year, Qorvo disclosed that activist investor Starboard Value had built a 7.7% stake, pushing for changes after a period of weak share performance. QRVO stock has declined by 8% over the last 12 months.
Interestingly, these talks come after both companies warned that sales to their biggest customer (which they previously revealed was Apple) have been weakening as competitors win more orders.
What’s in It for Apple?
If the deal goes through, Apple could have a more streamlined supplier base but also face fewer alternative suppliers, which may limit pricing leverage. It could also improve innovation speed in radio-frequency chips, benefiting future iPhones and devices.
However, regulatory scrutiny is possible because two large competitors in a niche sector are combining.
Is Skyworks a Good Stock to Buy Now?
On TipRanks, SWKS stock has a consensus Hold rating among 15 Wall Street analysts. That rating is based on one Buy, 10 Holds, and four Sell recommendations assigned in the last three months. The average Skyworks’ stock price target of $69.0 implies a downside of 9% from current levels.
