Jabil Circuit (NYSE: JBL)
Jabil is one of the world’s largest contract electronics manufacturing services companies, providing comprehensive electronics design, manufacturing, and product management services to global electronics and technology companies. Jabil has also expanded its offerings to include logistics, supply-chain management, and return and repair services. Jabil operates in two segments: Electronics, Manufacturing Services and Diversified Manufacturing Services.
Jabil benefits from broad industry tailwinds such as mobility, cloud, and big data. The Internet of Things should provide further growth opportunities for Jabil. Supply chain software should be a lucrative niche for Jabil to expand in. Jabil is unique in that it is the major US-based chip provider for top US cellphone makers, Apple (24% of Jabil revenue), Sony (7.31%), LG (7.3%), GE (6.45%), and HP (5.95%), per Bloomberg.
Qualcomm (NASDAQ: QCOM)
The company’s key patents revolve around CDMA and OFDMA technologies, which are standards in wireless communications that are the backbone of all 3G and 4G networks. Qualcomm is the clear market leader in wireless chips, with a leading market share position in 4G LTE chipsets and relationships with every prominent smartphone maker. Qualcomm collects royalty income on the majority of 3G and 4G handsets sold, since it holds most essential patents used in these networks. Aside from the current legal challenges with Apple, Qualcomm’s royalty revenue should grow along with the overall smartphone market, even as much of the market growth will come from entry-level phones.
Samsung (OTC: NNSSF)
Samsung’s strong and diversified product portfolio has made it one of the most profitable electronics manufacturers in the world. , Samsung obtained 8,500 U.S. patents in 2016, the most of any company operating in the U.S. Profits for Q1 2017 were the best since 2013 due to solid earnings from its memory chip segment. Strong display and chip sales were more than enough to pad the company from losses associated with the Note 7.
Samsung further announced that it would not introduce the controversial holding company structure and rejected demands from Elliott Management. The stock hit all-time high, amid a lower risk profile. Q2 will see the glimpse of the release of the powerhouse Galaxy S8, equipped with fast charging, a curved AMOLED screen, edge-to-edge display, a dual camera lens, and no buttons. Although Apple has never been the “first mover” type, the S8 will have a significant head start and pose a serious threat to the iPhone 8 which will be later released in the year.
Apple (NASDAQ: AAPL)
Samsung and Apple still remain, by far, the two largest smartphone makers in the world (22.8% vs. 14.9% global market shares). They are followed by three Chinese vendors Huawei (9.8%), OPPO (7.4%) and Vivo (5.2%), per IDC Q1 2017 report. As Samsung’s global shipments have slowed down in Q1 2017, iPhone shipment rose 0.8% mainly due to iPhone 7 and 7 Plus. Though, benefiting from the paper-thin profit local competition in the already saturated Chinese smartphone market and flash-memory scandal of Huawei, smartphone sales of Samsung and Apple is expected to rebound in the second quarter.
On the other hand, Apple still has a commanding lead in the U.S. smartphone market. Apple maintains a 44.6% market share, Samsung’s 28%, LG’s 10.3%, Motorola’s 4.3%, and HTC’s 2.3%, per comScore’s MobiLens smartphone U.S. market share report. Apple’s US dominance is expected to continue with the highly anticipated iPhone 8.