Apple (NasdaqGS: AAPL) and South Korean conglomerate Samsung have an intense rivalry in the battle for smartphone supremacy. Samsung gets to have its cake and eat it too because the company is also a chip supplier to Apple for iPads and iPhones. However, legal wrangling between the two companies has strained the relationship and Apple is taking its chip business elsewhere.
Samsung will continue providing chips to Apple for the next year, but after that, Taiwan Semiconductor (NYSE: TSM) will supply semiconductors for use in iPads and iPhones. Credit Suisse estimates orders from Apple will account for about 8% of TSMC’s total revenue in 2014, report Lorraine Luk and Min-Jeong Lee for the Wall Street Journal.
Just some ETFs have gotten a boost from Samsung’s smartphone supremacy, the same could be true down the road for a pair of ETFs with significant weights to Taiwan Semi. The iShares MSCI Taiwan ETF (NYSEArca: EWT) features Taiwan Semi as its largest holding with a 21.8% weight while the stock is the second-largest holding in the Market Vectors Semiconductor ETF (NYSEArca: SMH) with an allocation of 13.5%. [Samsung and South Korea ETFs]
In addition to the 2014 top-line bump, Credit Suisse estimated that Apple could account for 15% of Taiwan Semi’s 2015 revenue if the California-based company purchases at least 60% of its chips from the world’s largest contract semiconductor producer, according to the Journal.
The potentially good news for Taiwan Semi comes not only as chip stocks have been helping prop up the broader tech sector, but also as Taiwanese stocks have proven more durable than other emerging markets shares. In the past month, EWT, which has over $2.7 billion in assets under management, is down just 2.5% while the iShares FTSE China 25 Index Fund (NYSEArca: FXI) is off nearly 10%. [Some Emerging Markets ETF Buck Outflow Trend]
Before getting too excited about Apple’s potential impact on Taiwan Semi, investors should note that Apple has scores of suppliers and due to previous supply chain issues pertaining to marquee products, it would not be surprising to see the company look to contract its chip needs out to several providers after severing ties with Samsung. That could include Intel (NasdaqGM: INTC), the world’s largest semiconductor maker, and the largest holding in SMH with a weight of 19.6%.
Investors may also want to consider the iShares PHLX Semiconductor ETF (NasdaqGS: SOXX). SOXX is the top-performing major semiconductor ETF over the past 12 months with a gain of 29%. Intel and Taiwan Semi combine for 16% of the fund’s weight.
iShares PHLX Semiconductor ETF
ETF Trends editorial team contributed to this report. Tom Lydon’s clients own shares of Apple.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.