Dividend Investing Ideas Center
Forget Apple Stock, Invest in Apple's Suppliers (AAPL)
Jared Cummans Dec 19, 2014
Apple (AAPL ) has long been known in the financial world for its excellent supply chain management. With some of the most popular technology devices currently on the market, Apple has pieces and components supplied by companies all across the world, leaving the company dependent on a number of firms and their outputs. While AAPL is one of the most popular tickers in the investing realm, making a play on its suppliers is a strategy that is often overlooked.
Investing in the suppliers of a major company like Apple comes with a fair amount of upside. Demand for Apple’s devices is as high as it has ever been, meaning that the company is dependent on hefty orders from its suppliers, ensuring big-time revenues for those firms. It also helps the Apple suppliers drive attention to themselves, as they can tout that they supply the cameras in every iPhone and iPad, for example. Of course, a drawback comes from pricing wars or a change to the development of Apple’s products, as either of those can lead to the tech giant seeking a new supplier [see also Apple’s Worst Day Ever].
Below, we highlight some of to biggest Apple suppliers to invest in:
3M (MMM )
Minnesota Mining & Manufacturing, famous for its Scotch Tape and Post-It Notes, plays a significant role in the production of iPhones and iPads. The company provides Apple with touch screen films for both of the aforementioned products, making it a significant player in Apple’s product line [see also The Ten Commandments of Dividend Investing].
Alcoa (AA )
When it comes to MacBooks and the iProduct line, Alcoa is a name that probably does not enter the minds of many investors. However, as Apple began an initiative to be more green with its output, Alcoa has found its way into the mix, supplying aluminum casings for a number of devices [See AAPL’s dividend history here].
Corning Inc. (GLW )
Something of a lesser-known company when to some of the big names on this list, Corning manufactures and sells glasses, ceramics, and related materials all over the world. The company has also provided its “Gorilla Glass” for the iPhone over the years. Investors should note that rumors have been swirling that Apple will move forward with a different glass with its upcoming iPhone, so this firm could see its name cut out of the supply chain.
Intel Corporation (INTC )
Intel is one of the biggest chip makers in the world, having its hand in numerous computers and other devices that require CPUs. As such, it comes as little surprise to see its chips make their way into Apple’s MacBook lines, including the i7-4950HQ processor that launched in the third quarter of 2013.
SanDisk Corp. (SNDK )
SanDisk has its hands full when it comes to Apple products. For iPhones and iPads, SanDisk provides memory storage cards; flash memory storage accounts as a whole account for approximately 25% of SanDisk’s revenues each year. On the computer side, it was recently discovered that Apple started using SanDisk SSDs (solid state drives) in its Retina MacBooks, a component that had long been dominated by Toshiba and Samsung.
Seagate Technology (STX )
This one has been played a little closer to the vest, as there is not an abundance of information on precisely what Seagate supplies Apple. It is confirmed, however, that Seagate provides hard drives in some iMacs.
Sony Corporation (SNE )
Sony is in one of the most interesting spots as an Apple supplier, as it appears that its role in iPhones and iPads may surge with the next round of the aforementioned devices. Sony provides various camera components, including CMOS (complementary metal-oxide semiconductor) sensors for Apple. The two companies are in talks to include Sony products in the front-facing camera in new devices (Sony has previously only been used in the rear-facing camera), which could effectively double Sony’s supply each year.
Below, we outline the trailing five year returns from the stocks on our above Apple suppliers list:
The Bottom Line
Investing in the suppliers of a major company can make for a unique play and comes with its set of ups and downs. Though Apple used to keep its suppliers relatively secret, it has more recently provided the public with a list of all of its suppliers, which you can find here.
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