As someone who has followed Apple Inc. (AAPL), there’s a singular truth about the firm that you can bank on.
No matter what, the company just keeps on innovating, generating lots of cash along the way.
Of course, we all know how disruptive the iPod was for digital music. Same goes for the iPhone and the mobile revolution. And its MacBook laptop computers set the standard of performance in the space.
Turns out, that last item recently got a performance upgrade that also has helped the company maneuver through the global chip crisis.
And it’s all because of something hiding under the hood – a small piece of silicon the size of a postage stamp.
Of course, I’m talking about the company’s new M1 semiconductor based on its own design and one that allowed it to source internally, breaking ranks with Intel Corp. (INTC).
Today I want to reveal a great Apple supplier that’s a tech legend in its own right and that recently posted an earnings gain of a stunning 118%…
The Growth of the Chip Sector
Apple cut its teeth on designing its own chips in the iPhone and the just-cancelled iPod line.
While having Apple’s engineers design their own chips from the bottom up rather than buy ready-made ones from other companies, allowed the company to make huge strides in performance and battery life.
It put Apple’s smartphones at the top of the pack in terms of performance, size, and battery life. It makes sense, as large processor-manufacturers like, say, Intel Corp. make processors with a wide range of uses in mind. That means they’re making compromises, and no chip is focused on exactly what design-focused company like Apple wants.
That’s why in 2020, Apple moved away from using Intel’s processor’s in the MacBook line of laptops, in favor of its M1 chips.
Designed in-house, these M1 chips were based on Apple’s state-of-the-art smartphone chips, just sized up for the higher power capacity and performance needs of a computer.
Not to mention that Intel was at the time behind on chip technology, meaning that Apple’s own designs manufactured at a third-party chip fabricator could be smaller, faster, and more efficient than Intel’s.
The move ended a 15-year long partnership between Apple and Intel, a partnership that had made MacBook one of the most popular laptop brands around.
Now, I recently made the plunge into this world of Apple’s own chips when I got a new MacBook, powered by Apple’s own M1 Pro processor.
And I’m here to report that the hype is real: I love the laptop and am spending more time on it than on my Intel-powered Mac Mini that I used to favor.
I’m not a “power user” by any means, but I do edit some photos and videos, and it’s a breeze on the MacBook.
Turns out, Apple benefited from great timing in making the switch to its own chips. The Covid-caused supply crisis caused enormous issues for Intel, and for other laptop makers that depended on Intel for processor chips.
But because Apple was working with its own chips, made in bulk at factories where Apple had pre-purchased capacity way in advance, the company wasn’t as affected.
It’s part of the reason why I still believe in the company and continue to recommend the stock.
That said, there’s an Apple supplier that is becoming an earnings powerhouse that I also suggest you take a look at.
It’s all because of memory…
Don’t scoff, because memory is crucial to modern computing. Fact is, whether we’re talking about a laptop, a data center, or a supercomputer, if you want great performance, you need fast memory and lots of it.
Memory chips are the bits of hardware that allow you to have multiple applications running in the background while also having several Web tabs operating all at the same time – all without slowing down performance.
That’s why the memory chip sector was worth $120 billion in 2020 and is headed for $183 billon by the end of 2024.
And it’s why Apple is so ravenous for memory chips, especially from the company I want to talk about today.
The firm in question is Micron Technology Inc. (MU). Founded in 1978 in Boise, Idaho as a chip design company, Micron pivoted to making chips as it finished its first memory chip manufacturing plant in 1981.
Today, the company is the global technological leader in both of the main kinds of memory chips, DRAM and NAND. In fact, the firm holds 20% of the global market share in DRAM chips, and 11% in NAND.
It’s also the only U.S.-based maker of them, giving them a crucial leg up in an age where overseas manufacturers are struggling with the shipping and supply crisis.
That’s part of why Apple favors them as a supplier. The other reason is that Micron makes the most advanced, fastest, and most power-efficient memory chips on the planet. The firm makes it all happen through its 13 manufacturing sites and 14 customer labs located in the U.S., Europe, and Asia.
But with quickly rising demand for memory chips from everything from smartphones and 4K TVs to 5G towers and cars, even that’s not enough. That’s why Micron has announced a $150 billion program for new production and research plants.
To be sure, Micron’s earnings growth has not been as strong as I would have liked in recent years as the company has worked hard to revamp operations.
However, the pay-off came in the most recent quarter when the firm’s per-share profits soared by a stunning 118%.
Even if we cut that back by 75% to be extra conservative in today’s choppy market, we’d still see an earnings double in less than three years.
So, if you’re not comfortable buying in today’s market, then put this one on your watchlist so that you can move quickly when things turn around.
Cheers and good investing,
— Michael A. RobinsonTen hot stocks with massive upside potential [sponsor]
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Source: Strategic Tech Investor