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Morningstar | Skyworks' RF chips are becoming increasingly important components in many popular smartphones.

Skyworks is a premier supplier of a variety of radio frequency components to smartphone makers and other electronics manufacturers. Although the company faces an intense competitive landscape, it should succeed in the coming years as the handset industry focuses on high-end 4G smartphones and future 5G devices, which usually require higher radio frequency, or RF, dollar content per phone.Skyworks earns more than 70% of its revenue from mobile products, mostly from a variety of products that switch, filter, and amplify wireless signals in smartphones. Given the rise of advanced 4G LTE-enabled smartphones, which use a wider variety of wireless spectrum and frequency bands than in prior generations of networks, RF content per phone has grown exponentially in recent years, lifting both Skyworks and its RF competitors. Yet 4G smartphone adoption still has room to expand, while 5G-connected devices are due to come on line in the next few years. We think both trends should provide a nice runway for Skyworks. Meanwhile, Skyworks is one of the few RF firms with the scale to supply hundreds of millions of RF products per year, giving it a leg up on new entrants.That said, Skyworks' RF prospects might not be rosy forever, given intense competition in RF chips and a customer base of only a handful of tech titans that could put pricing pressure on Skyworks and other RF chipmakers, especially if and when LTE networks mature. The company has significant customer concentration with Apple (39% of fiscal 2017 revenue), and it would be a damaging blow to the firm if it were to ever miss out on a future iPhone design cycle. We also don't see a winner-take-all situation in the smartphone RF space, as handset makers have split their business enough among these RF firms to prevent a single firm from dominating the market over time.We're highly encouraged by Skyworks' diversification into nonhandset end markets, especially as connectivity is becoming more ubiquitous in other industries such as automotive. Although the firm has seen robust growth from these end markets, we still suspect that the company's fortunes will remain tied to the wireless industry for quite some time.